By: Atty. Jeremy O. Panganiban
In recent years, I have encountered clients who are unaware and oblivious of vital information, both before, and after buying a condominium unit in the Philippines that has serious repercussions and legal ramifications. So here are some of the things that you must know before investing your money in Philippine condo units:
- Check out the layout plan of the unit; and model unit
When buying during the pre-selling stage, it is important that you must have an idea as to what the unit will look like when built/completed. At this point, brochures and other paraphernalia showing the layout plan must be availed of. You must also scrutinize and visit the model unit.
To protect yourself, keep the brochures/documents pertaining to the plans, and take photographs of the model unit, if you must, because these will be very useful the moment that the unit which you bought does not meet your expectations and does not conform to the plans shown to you.
In regard to this, I have a client who priorly bought a penthouse which was still to be built who assumed that it will have an unobstructed view of the city scape. However, to his dismay, when the project was completed and he was given a tour of the unit he chose, the penthouse’s design obstructed his view of the skyline. This placed him in a predicament where he already paid the down payment and had the unit amortized. Yet, he decided not to take the unit anymore since it did not suit his expected preference.
2. Ask for the taxes and expenses that accompany the purchase of the unit
Except
for the reservation fee, down payment and installment payment, buyers are
usually not cognizant and are not apprised of the nature and rates of the taxes
and expenses involved in buying their preferred unit. For buyers of condo units
sold for the first time, a withholding tax of 5%-6%; a 1.5% documentary stamp
tax, and a 0.75% to 0.85% transfer tax are imposed. Not to mention, under
current tax laws (Tax Reform for Acceleration and Inclusion Act), if the
selling price is more than P2.5 million
(Philippine Currency) for house and lot, or more than P1.5 million (Philippine Peso) for lot only, a 12% value added tax
is passed on by the developer to the buyer. Add to this is a 2% to 5% business
tax for developers which are corporate entities which is again passed on to the
buyer. Then the buyer also has to shoulder the registration fees for the
transfer of title in his/her name.
These taxes are commonly not disclosed and are collectively described as miscellaneous expenses. In this light, you must scrutinize the terms of payment and ask what you are paying for.
3. Look for the previous Certificate Authorizing Registration
In case of resale, before you buy the condo unit from the first owner, request for a copy of the previous Certificate Authorizing Registration. This is essential in order to determine whether the price of the resale is higher or lower than the first sale. Moreover, the Bureau of Internal Revenue sometimes demands a copy of it. You might encounter a problem if you do not have a copy since the payment process will be stalled without the previous Certificate Authorizing Registration in your possession. However, once the process is completed, you will be given a new Certificate Authorizing Registration, which you must safely keep for future use in the event you decide to sell the unit you purchased.
4. Get to know the association dues and maintenance dues
Once
there is a turn over of the unit, the buyer who is now described as a unit
owner automatically becomes a member of the condominium corporation/association
who has certain obligations to meet. One of the obligations is paying the
monthly association dues which range from P5,000.00
to P10,000.00 depending on the value of
the unit purchased or the nature of the project (low-end, mid-end, high-end).
Sometimes, the association or condominium corporation collects special
assessments which the unit owner must also pay.
Failure to comply with the concomittant obligations especially that of paying the association dues may result in expulsion of the unit owner as a member of the association/condominium corporation and, worse, a lien on the unit will be constituted, and its eventual auction sale could ensue and the buyer will then lose owning the unit unless he redeems it within 6 months to 1 year from the date the certificate of sale is registered with the Registry of Deeds.
In this connection, the buyer must examine the master deed, and declaration of restrictions of the project during pre-selling; and get a good grasp of the by-laws as well of the condominium corporation once it is formed.
5. Pay the real property tax in advance which is due in March of every year
There is one more tax which buyers must prioritize, that is, the real property tax. To begin with, you must pay the real property tax before the end of December of the year preceding its due date because there is a 10% to 20% discount given by certain local government units. What is more, I learned that a client did not pay the real property tax for 5 years on the subdivision lot she bought which almost led to its inclusion for tax delinquency sale. Once the sale pushes through the parcel of land concerned will become the property of the local government unless the lot owner redeems it within 1 year from the date the certificate of sale is registered with the Registry of Deeds.
While non-payment of this tax seems fatal, the amount of the tax due is however negligible and easy to pay, so I advise you to update its payment regularly and on time to avoid the problem of losing your property or, better yet, pay it in advance to avail of the discount. Furthermore, real property tax covers not only private lands but also extends to condo units that is why you must request from the developer or the processor of your papers not only the owner’s copy of your Condominium Certificate of Title but also a Declaration of Real Property commonly known as tax declaration. This document will be the basis in determining the amount of, and in paying, the real property tax for the condo unit.