Basic Q&A on the Magna Carta for Homeowners and Homeowners’ Association

This Primer is based on Republic Act No. 9904 (An Under RA 9904, an association refers to the Act Providing for a Magna Carta for Homeowners and homeowners’ association and is defined as a non- Homeowners’ Associations, and for Other Purposes ), stock, non-profit corporation registered with the HLURB Board Resolution No. 877, Series of 2011 Housing and Land Use Regulatory Board (HLURB), or (Implementing Rules and Regulations of Republic Act one previously registered with the Home Insurance No. 9904, Otherwise Known as The Magna Carta for Guarantee Corporation (now Home Guaranty Homeowners and Homeowners Associations ), and Corporation) or the Securities and Exchange Revenue Memorandum Circular No. 9-2013 of the Commission (SEC), organized by (a) owners or Bureau of Internal Revenue. purchasers of a lot in a subdivision/village or other residential real property located within the jurisdiction of the association ; or (b) awardees, usufructuaries, legal Preliminaries occupants and/or lessees of a housing unit and/or lot in a government socialized or economic housing or relocation What is the Declaration of Policy of Republic Act project and other urban estates ; or (c) underprivileged No. 9904? and homeless citizens as defined under existing laws in the process of being accredited as usufructuaries or Pursuant to Section 2 of RA 9904, it is the policy of awardees of ownership rights under the Community the State: (1) to uphold the rights of the people to Mortgage Program (CMP), Land Tenure Assistance form unions, associations, or societies , and (2) to Program (LTAP) and other similar programs in relation recognize and promote the rights and the roles of to a socialized housing project actually being homeowners as individuals and as members of the Implemented by the national government or the LGU . society and of homeowners’ associations . Who is a homeowner under RA 9904? These declared policies are in fulfilment of the constitutional principles directing the State to A homeowner refers to any of the following: (1) an encourage, promote and respect nongovernmental, owner or purchaser of a lot in a subdivision or community-based and people’s organization in village ; (2) an awardee, usufructuary, or legal serving their legitimate collective interests in our occupant of a unit, house and/or lot in a participatory democracy. government socialized or economic housing or relocation project and other urban estates ; or (3) an How will these declared policies be implemented informal settler in the process of being accredited by the State? as beneficiary or awardee of ownership rights under the CMP, LTAP, and other similar programs . To this end, the State shall endeavor to make available resources and assistance that will help Who is an association member? homeowners’ associations fulfil their roles in serving the needs and interests of their An association member refers to a homeowner who is communities in complementing the efforts of local a member of the association where his/her housing government units (LGUs) in providing vital and unit or lot is situated and those defined in the basic services to our citizens, and in helping articles of incorporation and bylaws of the implement local and national government policies, association. programs, rules and ordinances for the development of the nation. What is meant by “basic community services and facilities” under RA 9904? What does a homeowners’ association (HOA) mean? Basic community services and facilities refer to services and facilities that redound to the benefit of

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all homeowners and from which, by reason of subdivision, except in cases where the subdivision practicality, no homeowner may be excluded such consists of two (2) or more phases. as, but not limited to: security ; street and vicinity lights ; maintenance, repairs and cleaning of streets ; How will the HLURB decide if two (2) or more garbage collection and disposal ; and other similar association are registered in one and the same services and facilities . subdivision?

In case two (2) or more associations are registered Registration of Homeowners’ Association or applying for registration within the same subdivision, the HLURB shall decide which Under RA 9904, are HOAs required to be association shall be registered pursuant to the registered? procedures for adjudicatory mechanism as provided in the Implementing Rules and Regulations YES, every association of homeowners shall be (hereinafter referred to as “Rules”). required to register with the Housing and Land Use Regulatory Board (HLURB) only . This Using the adjudicatory mechanism in the registration shall serve to grant juridical registration of associations, what is the procedure personality to all such associations that have not to be followed by the HLURB? previously acquired the same by operation of the General Corporation Law or by any other general In case two or more associations are organized law. within the same subdivision/village and both applied for registration with HLURB in accordance Are there other kinds of association that are with this Rules, the HLURB shall register only one required to register with the HLURB? association in accordance with the following procedures: Yes. All associations whose purpose, among others, is to promote and protect their mutual interests and a) The association which submitted first its assist in their community development as registration papers and complied with all the homeowners are considered homeowners requirements of the HLURB shall be registered; association and are mandated to register with b) In case there are two (2) associations registered HLURB. with the SEC or HIGC, then the association which was registered earlier shall be What happens to those HOAs who are already recognized; and, registered in other government agencies and in c) In case one (1) of the associations is registered existence before the passage of RA 9904? with the SEC and the other with the HLURB, the one earlier registered shall prevail and the Associations previously registered with the Home registration of the other shall be revoked, Insurance Guarantee Corporation (HIGC) or the provided the requirements under Rule 5, Securities and Exchange Commission (SEC) shall Section 24 are submitted within a period of one be respected and recognized: Provided that they (1) year of the effectivity of this Rules. register with HLURB; and in which case no penalty shall be charged to the said HOAs. Nothing in the Rules shall prevent the HLURB from taking into consideration other factors in Can two (2) HOAs be established and registered determining whose association shall be registered in a single subdivision project? and recognized.

NO. As far as practicable, only one (1) HOA shall What is the procedure for registration of new be established and registered with HLURB in each HOAs?

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An association shall, upon payment of the 2. Notarized list of officers and members stating prescribed fees, submit to the proper Regional the nature of their occupancy, whether as Office of the HLURB its Articles of Association , owner or tenant; duly notarized and signed on each and every page 3. Certified true copy of the original or transfer thereof by all the incorporators consisting of not certificate of title issued not later than thirty less than five nor more than fifteen (15) natural (30) days before the date of application; persons. 4. Duplicate original copies of the notarized letter of intent to sell, contract to sell, deed of What other documents must be submitted to the absolute sale, or memorandum of agreement HLURB? between the landowner and association; 5. List of beneficiaries as certified by the proper The Articles of Association shall be accompanied settlement office of the local government unit by the following documents: (LGU) or Urban Poor Affairs Office (UPAO); 6. Certification that it is the only proposed 1. Notarized Undertaking by the association to: association that is seeking to apply for a (a) change the name of the association in the Community Mortgage Program (CMP) loan in event that another person, firm or entity has order to acquire the parcel/s of land; and, acquired a prior right to the use of the name or 7. Alteration approval of subdivision plan from one similar thereto; and (b) comply with the the local government units (LGUs) for rules and regulations; homeowners associations intending to avail of 2. Information Sheet; community mortgage program (CMP) if located 3. List of the members of the association with the within existing subdivision projects. members’ corresponding signatures; 4. Certification as to the existence or absence of What are the additional requirements if the any other association in the subdivision/ applicant comes from a housing project of the village; and the name and address of the National Housing Authority (NHA)? nearest association, if any; 5. Authorization by the incorporators for the In such a case, the applicant shall, in addition to the representative of the association to transact/ documentary requirements mentioned in Rule 5, follow-up its registration application with the Section 22, submit a Certification that it is the HOA HLURB; and recognized by NHA. 6. Approved Subdivision/Development Plan indicating the area covered by the association. What are the additional requirements if the applicant intends to segregate from a mother What are the additional requirements if the association? applicant is a self-help housing project or one undertaken under the Group Land Acquisition In such a case, the applicant shall, in addition to the and Development program (GLAD), Community documentary requirements mentioned in Rule 5, Mortgage Program (CMP), or other similar land Section 22, submit the following requirements: tenurial assistance programs? 1. A Sworn Statement that (a) the area of the project In such cases, the applicant shall, in addition to the or the membership of the existing association documentary requirements mentioned in Rule 5, has reached a size or number that renders it Section 22, submit the following: extremely difficult or impracticable to provide efficient delivery of services to all its members; 1. Location plan and vicinity map of the project, (b) The applicant’s members are residents of a whether on-site or off-site, duly signed and contiguous area; or (c) The existing association certified by a geodetic engineer; is serving several or all phases of a subdivision project and the petitioners are residents of one

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phase or two or more contiguous phases of said An association that fails to register within a period project: Provided, that , where the facilities of the of one (1) year from the effectivity of the Rules shall subdivision project are commonly shared by all have no legal standing to sue before the HLURB or the phases of a subdivision project, the existing avail of its support services . and proposed associations shall have the right to use the facilities but shall proportionately It may nevertheless be sued before the HLURB by share in the expenses for its maintenance and its members or other interested parties and the the earnings derived or losses incurred from the officers may be held personally liable for the operation thereof; and, provided, further, that the obligations and liabilities incurred by the remaining members of the existing association association. reside in a contiguous area. 2. A Written Agreement between the mother and What happens if all the required documents separating associations defining the obligations submitted to the HLURB are in order? and liabilities among them with respect to: i. The use, maintenance, repair, replacement, Upon finding that the requirements for registration modification and improvements of common are in order, and that the Articles of Association areas and facilities; and By-laws contain the provisions required by the ii. Access to or passage through the Rules, the HLURB shall issue a Certificate of subdivision/village gates, main Registration to the applicant. The issuance of the interconnecting and other roads, alleys and Certificate of Registration shall confer upon the sidewalks within the subdivision; association a juridical personality separate and iii. Delivery of basic community services; and distinct from those of its members . iv. Such other matters necessary for the proper governance and operation of both What happens if there are deficiencies in the associations. submitted documents for registration or such documents are defective? What is the procedure for HOAs previously registered with the HIGC or SEC? If the application for registration is incomplete, the same shall be returned to the applicant. If any of The HLURB shall issue a certificate of registration the documents submitted are defective, the to an association previously registered with the Regional Office shall notify the applicant of the SEC or HIGC upon compliance with the following: defective submissions.

1. The applicant association shall submit certified If the applicant fails to comply with the true copies of the Certificate of Registration, requirements stated in the notice of deficiency Articles of Association and By-laws previously within sixty (60) days from receipt thereof, the submitted to the HIGC or SEC; application shall be deemed denied and the 2. When so required by the HLURB, the applicant documents shall be returned to the applicant. shall amend its Articles of Association and By- laws to conform to the requirements of the current Rules and submit such other Post-Registration documents; and 3. Payment of necessary fees. What are needs to be done by the HOA after receiving its Certificate of Registration from the What happens if the HOAs previously registered HLURB? with the HIGC or SEC fail to register in accordance with the current IRR of RA 9904? The HOA should immediately register itself with the Revenue District Office (RDO) of the Bureau of

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Internal Revenue (BIR) having jurisdiction over their territorial location. Every association shall keep and carefully preserve a record of all transactions and minutes of meetings What does the HOA need from the BIR? of the general membership and the board of directors or trustees, setting forth, in detail, the At the BIR, the HOA should secure the following: date, time and agenda, proof of notice, whether the meeting was regular or special, and the significant a) Its Tax Identification Number (TIN) and the acts done or ordered in the meeting. Certificate of Registration (BIR Form 2303); b) Its Official Receipts duly registered with the Are registered HOAs required to submit an BIR; annual report to the HLURB? c) Its Cash Receipts Book (CRB) and Cash Disbursement Book (CDB) duly registered with Within ninety (90) days from the close of the fiscal the BIR; and period, the association shall submit to the Regional d) Its Ledger and Journal duly registered with the Office the following books and documents BIR. concerning its operations during the preceding accounting period: After getting these things from the BIR, what should the HOA do next? a) General information sheet detailing the names of the members of the board of directors or Within thirty (30) days from the issuance of the trustees, including the executive and other Certificate of Association , the HOA shall submit accountable association officers; the following to the Regional Office: b) Latest financial statement certified correct by the treasurer and auditor of the association and a) Tax Identification Number; attested to by the Chairman of the Board or the b) BIR Certification/Official BIR stamps or President, and externally audited, preferably, receipts; and by an independent Certified Public Accountant; c) Updated master list of members and their and authorized representative, if any, with their c) Certified true copy of the master list of corresponding signatures as attested by the members and the compiled resolutions duly association. certified by the association secretary and attested to by the Chairman of the Board or the Are there other requirements that need to be President. submitted to HLURB after registration? What does the HLURB require to submit in cases In addition to the preceding requirements and of CMP, GLAD and other similar land tenurial within the same period , the association shall projects/arrangements? submit the following books in blank forms to the Regional Office for stamping or marking as official In such cases, the resolution delisting/expelling association books: members from the association, and the corresponding substitutions, if any, shall be a) Cash Receipts Book (CRB) and Cash submitted to the HLURB, within thirty (30) days Disbursement Book (CDB) duly registered with from its adoption . Otherwise, the delisting or the BIR; and expulsion of members shall not be enforceable . b) Ledger and Journal duly registered with the BIR. Under RA 9904, is a homeowners’ association required to keep financials records and other What books are required to be kept by a duly pertinent records of the affairs of the association? registered HOA?

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YES. The homeowners’ association is enjoined to Homeownership observe the following with regard to its funds, financial and other records: When does homeownership commence?

(a) The association or its managing agent shall Homeownership begins: keep financial and other records sufficiently detailed to enable the association to fully a) By owning a lot in a subdivision/village; declare to each member the true statement of its b) By purchasing a lot in a subdivision/village; financial status. All financial and other records c) By being awarded, or by being a usufructuary, of the association including, but not limited to, or by legally occupying, a unit, house, and/or checks, bank records and invoices, in whatever lot in a government socialized or economic form these are kept, are the property of the housing or relocation project and other urban association. Each association’s managing agent estates; and shall turn over all original books and records to d) By being listed as a prospective beneficiary or the association immediately upon termination awardee of ownership rights under the of the management relationship with the Community Mortgage Program, Land Tenurial association, or upon such other demand as is Assistance Program, and other similar made by the board. An association’s managing programs. agent is entitled to keep association records. All records which the managing agent has turned When does homeownership terminate? over to the association shall be made reasonably available for the examination and Homeownership ends by: copying by the managing agent; (b) All records involving the affairs of the a) Terminating ownership through conveyance of association shall be available for examination the property by sale, assignment or donation; or by all owners, holders of mortgages on the lots, b) Any other legal transfer of ownership, which and their respective authorized agents upon shall automatically authorize the association to reasonable advance notice, during normal deny homeowner rights to the transferee under working hours at the office of the association: Rule 2 of the Rules. Provided, That holders of mortgages on lots may have access to the information about the What is the right of every homeowner? property held in mortgage with the written consent of the registered owner. Every homeowner has the right to enjoy the basic (c) A financial statement of the association shall be community service and facilities: Provided , that the prepared annually by an auditor, the treasurer homeowner pays the necessary fees and other and/or an independent certified public account pertinent charges. within ninety (90) days from the end of the accounting period to be posted in the What is the duty and responsibility of a association office, bulletin boards, or other homeowner? conspicuous places within the subdivision/village, and to be submitted to the Every homeowner must pay the necessary fees, HLURB; and charges pertaining to basic community services, (d) The funds of the association shall be kept in and other special assessments such as but not accounts in the name of the association and limited to construction bond and stickers. shall not be joined with the funds of any other association, or any person responsible for the custody of such funds. Membership in the Association

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considered as homeowners for the purpose of Unless otherwise provided in the Contract to Sell, qualifying as a member of a homeowners’ Deed of Sale, or other instruments of conveyance, association without need of such written consent or or annotated in the title of the property, authorization. membership in the association is optional . Who is a member in good standing of a HOA? Who are qualified to become a member of a HOA? A member in good standing is someone who is up to date with his/her payment of the monthly dues or Every homeowner shall be qualified to be a membership fees or other charges/assessments and member of the association. has not violated the association’s by-laws and/or declared policies of the duly elected Board of Can a lessee, usufructuary, or legal occupant of a Directors of the association. member be qualified to become a member of a HOA? What are the rights of a HOA member?

Yes. A lessee of a member under a contract with a A member in good standing shall have the right to: term of [less than ]1 one (1) year may qualify to be a member and shall have the rights of a member (a) Avail of and enjoy all basic community services upon procurement of a written consent or and use of common areas and facilities; authorization from the owner of the lot/housing (b) Inspect association books and records during unit. Until the written consent or authorization is office hours and to be provided upon request revoked in writing, the owner of the lot/housing with annual reports, including financial unit is deemed to have waived the rights of an statements; association member except the right to inspect (c) Participate, vote and be eligible for any elective association books and records [ during office hours or appointive office of the association subject to and to be provided upon request with annual reports, the qualifications as provided for in the by- including financial statements. ] laws; (d) Demand and promptly receive deposits A lessee of a homeowner under a contract with a required by the association as soon as the term of at least one (1) year may qualify to be a condition for the deposit has been complied member and shall have the rights of a member with or the period has expired; upon complying with the requirements of (e) Participate in association meetings, elections membership under the by-laws and RA 9904. and referenda, as long as his/her bona fide membership subsists; and For purpose of RA 9904, the lessee authorized in (f) Enjoy all other rights as may be provided for in accordance with Section 6 shall qualify as a the association by-laws. member with all the rights enumerated in the law, including the duties and obligations enumerated What are the duties of a member? under Sections 7, 8 and 9 hereof : Provided, further, That lessees in government socialized housing A member shall have the following duties: projects or urban estates and those in communities of underprivileged and homeless citizens covered (a) To pay membership fees, dues and special under the term under Section 3 of the law will be assessments; (b) To attend meetings of the association; and 1The author is of the opinion that this is what should (c) To support and participate in projects and have been written in the 2 nd paragraph, Section 10, Rule activities of the association. 3 of HLURB Resolution No. 877, Series of 2011, in order to make harmonize it with the 3 rd paragraph of the same Who is a delinquent member of a HOA? section. www.realttorney.com P a g e | 8

Unless otherwise provided in the by-laws, a The rights and privileges of a member as provided member who has failed to pay three (3) cumulative in Section [11] 2 of the Rules is suspended upon the monthly dues or membership fees, or other declaration of delinquency by the Board. charges/assessment despite demands by the association, or has repeatedly violated the Nothing in the Rules shall prevent the HOA from association’s by-laws and/or declared policies, imposing other sanctions against the delinquent may be declared delinquent by the Board of member in accordance with the by-laws. Directors in accordance with the procedure in the Section 14, of the Rules. Can a HOA member be reinstated as a member in good standing? What is the procedure to be observed in declaring a member delinquent or a not in good standing? Yes. The Board shall, by majority vote of all members, reinstate the membership of the The right to due process shall be observed in cases delinquent member, provided that unpaid dues, where administrative sanctions are imposed on a fees or charges are paid or the sanctions imposed delinquent member. are satisfied.

As such, the Board or a committee assigned by the Board shall observe the following procedure Articles of Association and By-Laws declaring a member delinquent or not in good standing: What is a governing document, as defined in RA 9904? a) The Board or the committee shall determine whether a member [1] failed to pay at least Governing document refers to the articles of three (3) cumulative monthly dues, fees or association, by-laws, conditions, rules and other charges based on the report of the regulations of the association, or other written treasurer or as reflected in the association’s instrument by which the association has the financial records, or [2] repeatedly or grossly authority to exercise any of the powers provided violated the by-laws or policies of the for in RA 9904. association as reflected in the book of records of the association. b) The President or the designated officer of the What are the contents of the Articles of association shall forthwith notify the said Association? member in writing of the violation and require him to explain in writing, within fifteen (15) The Articles of Association shall substantially days from receipt of notice, why he or she contain the following matters: should not be declared delinquent. c) After the lapse of fifteen (15) days, with or a) Full association name; without a written explanation, the President or b) Specific purpose or purposes for association. the designated officer shall submit the matter to Where the association has more than one stated the Board or committee for hearing and purpose, the articles of association shall state deliberation. the primary and secondary purposes; d) Thereafter, the member may be declared c) Complete office address; delinquent by majority vote of all members of the Board. 2The author believes that the “Section 10” appearing in Section 15, Rule 3 of HLURB Resolution No. 877, Series What sanctions can be imposed on a delinquent of 2011, in a typographical error considering that Section member? 10 provides for the “Qualifications of Members” while Section 11 lists the “Rights of a Member.” www.realttorney.com P a g e | 9

d) Term of existence of the association not further , That no officer of the association exceeding fifty (50) years; holding a rank of director or trustee shall e) Names, nationalities and residences of the likewise be entitled to any compensation ; incorporators; (f) The schedule, venue, and manner of conducting f) Number of directors or trustees, which shall not the regular, special, and emergency meetings of be less than five (5) nor more than fifteen (15) the board, the required quorum, and allowable directors or trustees; proxies in such meetings; g) Names, nationalities and residences of persons (g) Such powers that the board may delegate to a who shall act as directors or trustees until the managing agent, if any, or to other persons; first regular directors or trustees are duly (h) The officer/s authorized to prepare, execute, elected and qualified; certify and record amendments to the h) Amount of capital, if any, and names, governing documents on behalf of the nationalities and residences of the incorporators association; as well as the amount of contributions by each; (i) The grounds and procedure for removal of and director or trustee, and the manner of filling up i) Such other matters not inconsistent with law vacancies in the board, consistent with Section and which the incorporators may deem 13 of RA 9904; necessary and convenient. (j) The grounds and procedure for dissolution of the board, and the manner of reconstituting the How is an association By-law adopted, under RA board, consistent with Sections 13 and 14 of RA 9904? 9904; (k) The actions for limiting, broadening or denying The By-laws of the association shall be adopted by the right to vote, and the extent thereof; a simple majority of the members of the (l) The designation of the presiding officer at association. meetings of directors or trustees and members; (m) The time for holding the regular election of What should the association By-laws contain? directors or trustees and the mode or manner of giving notice thereof. Consistent with the provisions of RA 9904, the By- (n) The creation of election, grievance and audit laws should provide for the following: committees, and such other committees which the association may deem necessary; as well as (a) The rights, duties and obligations of members; a conciliation or mediation mechanism for the (b) The circumstances under which membership is amicable settlement of disputes among acquired, maintained and lost; members, directors or trustees, officers and (c) The schedule, venue, and manner of conducting committee members of the association; the regular, special, and emergency meetings of (o) The dues, fees, and special assessments to be the general membership, the required quorum, imposed on a regular basis, and the manner in and allowable proxies in such meetings; which the same may be imposed and/or (d) The number, qualifications, powers and duties, increased; terms of office, manner of electing and (p) The procedure in the adoption, amendment, removing the board and the filling of vacancies repeal and abrogation of the by-laws; in the board: Provided , That the term of office of (q) The list of acts constituting a violation by its the members of the board shall not exceed two officers and the corresponding penalties (2) years. therefor; (e) The qualifications, positions, duties, election or (r) The penalties for violation of the by-laws; and appointment and compensation of other (s) Such other matters necessary for the proper or officers and employees of the association: convenient transaction of its corporate business Provided , That the term of office of the other and affairs. officers shall not exceed two (2) years: Provided, www.realttorney.com P a g e | 10

How can the HOA amend its Articles of and/or its by-laws is not contrary to law or public Association? policy and does not adversely affect any interest, the Regional Office shall issue the appropriate An association may file with the Regional Office of amended certificate of association or certificate of the HLURB a written application to amend its filing of amended by-laws as the case may be. articles of association. What about if the change in the corporate name is The application to amend the articles of association the amendment? shall be accompanied by the following: When a change in the corporate name is approved, a) The articles as amended indicating the the Regional Office shall issue an amended amendment/s; certificate of association under the amended name. b) Notarized certificate of the board of directors or trustees attesting that the amendment was approved by a majority vote of the board; The Homeowners’ Association c) Notarized certificate of the secretary of the association attesting that the amendments were What are the rights and powers of the approved by a majority vote of members Association? thereof; and d) Minutes of the meetings of the Board and the An association shall have the following rights and General Assembly called for the purpose. shall exercise the following powers:

How can the HOA amend its By-Laws? (a) Subject to consultation and with the approval of a simple majority of the members, adopt and An association may file with the Regional Office of amend the articles of incorporation and bylaws, the HLURB a written application to amends its by- rules and regulations, pursuant to existing laws laws. and regulations; (b) In behalf of its members, institute, defend or The application to amend the by-laws shall be intervene in litigation and/or administrative accompanied by the following: proceedings affecting the welfare of the association and the subdivision/village as a a) The original and the amended or new by-laws; whole, excluding, however, disputes that are b) Notarized certificate of the board of directors or not the responsibility of the association; trustees attesting that the amendment of or the (c) Regulate the use, maintain, repair, replacement new by-laws was approved by majority vote of and modification of common areas and cause the board; additional improvements to be made part of the c) Notarized certificate of the secretary of the common areas: Provided , That the association attesting that the amendment or aforementioned do not contradict the new by-laws were approved by a majority vote provisions of the approved subdivision plan; of members thereof; and (d) Regulate access to, or passage through the d) Minutes of the meetings of the Board and the subdivision/village roads for purpose of General Assembly called for the purpose. preserving privacy, tranquillity, internal security, safety and traffic order: Provided , That: Are the amendments to the articles of association (1) public consultations are held; (2) existing and/or by-law automatically approved by the laws and regulations are met; (3) the authority HLURB? of the concerned government agencies or units are obtained; and (4) the appropriate and No. It goes through a process of evaluation. If the necessary memoranda of agreement are application to amend the articles of association executed among the concerned parties;

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(e) Hire, discharge or contract managing agents traffic generation, and/or opening the area to and other employees, agents and independent outsiders which may result in the loss of contractors to ensure the full functioning and privacy, security, safety and tranquillity to its operation of the association; residents, in accordance with the National (f) Subject to consultation with and approval of a Building Code, zoning laws, existing local simple majority of the association members, ordinances, HLURB rules and regulations, and acquire, hold, encumber and convey in its own existing jurisprudence: Provided, That such prior name any right, title to or interest in real or approval shall not be necessary for the personal property: Provided, That such approval establishment of sari-sari stores, home of a simple majority of the association members industries and similar small-scale business shall not be required for the acquisition, enterprises within the subdivision/village holding, encumbrance and conveyance of classified as socialized housing; personal properties in amounts not exceeding (l) Suspend privileges of and services to and/or ten percent (10%) of the association’s cash impose sanctions upon its members for holdings for its use in the course of its normal violations and/or noncompliance with the operations; association by-laws, and rules and regulations; (g) Ensure the availability of quality water services (m) Petition for the creation of a separate barangay at a reasonable price and, at its option, independently or together with neighboring administer and manage the waterworks system subdivisions: Provided, That all the of the subdivision; requirements of the Local Government Code of (h) Upon consultation, grant easements, leases, 1991 are met; and concessions and authority to use common areas (n) Exercise any other powers conferred by the and petition for or consent to the vacation of bylaws and the HLURB necessary for the streets and alleys: Provided, That the said grant governance and operation of the association. of easements, leases, concessions and authority shall not be applicable to access roads, main Who has the primary authority to manage the interconnecting roads, alleys and sidewalks affairs of the HOA? within the subdivision; (i) Impose or collect reasonable fees for the use of The Board of Directors or Trustees has the primary open spaces, facilities, and services of the authority to manage the affairs of the association. association to defray necessary operational expenses, subject to the limitations and How many members should the Board of the conditions imposed under the law, the association have? regulations of the board and the association’s by-laws; Unless otherwise provided in the by-laws, the (j) Cause compliance with regard the height board shall be composed of at least five (5) but not regulation, easements, use of homes, buildings, more than fifteen (15) elected members of the edifices, or structures that may be built within association. the subdivision, in accordance with the National Building Code, zoning laws, HLURB Who are the officers responsible for the rules and regulations, existing local ordinances, management of the HOA’s day-to-day operations? and existing deeds of restrictions; (k) Subject to consultation and with the approval of Unless otherwise provided in the by-laws, an a simple majority of the association members, association shall have the following executive allow the establishment of certain institutions officers who shall be responsible for the such as, but not limited to schools, hospitals, management of the association’s business: markets, grocery stores and other similar President , Vice President , Secretary , Treasurer and establishments that will necessarily affect the Auditor . The board may create other management character of the subdivision/village in terms of positions in the association as may be necessary. www.realttorney.com P a g e | 12

In addition to the duties and responsibilities stated What are the qualifications of a member of the in the bylaws of the association, the Board shall Board and an officer of the HOA? have the following duties and responsibilities:

A candidate for director and officer of an (a) Regularly maintain an accounting system using association – generally accepted accounting principles, and keep books of accounts, which shall be open for (a) Must be of legal age; inspection to any homeowner and duly (b) Must be a member in good standing; authorized representatives of government (c) Must be an actual resident of the subdivision, agencies upon request, during reasonable hours housing or relocation project for at least six (6) on business days; months as certified by the association secretary (b) Collect the fees, dues and assessments that may or in default thereof, by a member having be provided for in the by-laws and approved by personal knowledge thereof; and a majority of the members; (d) Has not been convicted by final judgment of an (c) Collect reasonable charges for assessments , and offense involving moral turpitude. after due notice and hearing by the Board in accordance with the procedures as provided in The legitimate spouse of a member may be a the by-laws, and rules and regulations adopted candidate in lieu of the member. by the board, charge reasonable fines for late payments and for violation of the by-laws, rule What are the disqualifications of candidates for and regulations of the association , in members of the Board and/or officers of the accordance with a previously established HOA? schedule adopted by the board and furnished to the homeowners; The by-laws shall provide for reasonable (d) Propose measures to raise funds and the disqualifications of candidates for director and/or utilization of such funds and submit the same officer to protect the association and its members for consideration of the members of the from interests inimical or inconsistent with its association; purpose, or practices detrimental to the welfare (e) Undergo a free orientation by the HLURB or thereof, such as but not limited to the following: any other competent agency deputized by it on how to conduct meetings , preparation of (a) Those found guilty of having committed fraud, minutes , handling of accounts , laws and falsification, defalcation, or any other act pertinent rules and regulations within thirty inimical to the interests of the association; (30) days after election or appointment; (b) Former officers and directors of the association (f) Discharge the duties and responsibilities who have not turned over the books, monies provided for in the association’s bylaws; and and records of the association during their (g) Exercise such other powers as may be necessary term, in the interest of enforcing faithful and proper in accordance with RA 9904 and for discharge of their duties, transparency and the accomplishment of the purposes for which accountability; or the association was organized. (c) Those who refused to comply with the lawful orders of the HLURB. The board shall act in all instances on behalf of the association , except to amend the articles of Under RA 9904, what are the duties and incorporation , to dissolve the association , to elect responsibilities of the Board of Directors/Trustees members of the board or to determine the of a Homeowners’ Association? qualifications, powers and duties, or terms of office of the board , and other instances that require the vote or approval of the members themselves . In the performance of their duties, the officers and www.realttorney.com P a g e | 13

members of the board shall exercise the degree of board and the director or trustee subject of the care and loyalty required by such position. petition.

Are proxies allowed to vote in meetings of If, on the other hand, the petition is signed by the association members? required number of the members of the association, the Regional Office shall then proceed with the Yes. Association members may vote in person or by validation of the petition. The Homeowners proxy in all meetings of members. Proxies shall be Association Administration Division of the in writing, signed by the member and filed before Regional Office shall compare the signatures the scheduled meeting with the association appearing in the petition with the records on file secretary. Unless otherwise provided in the proxy, with the Regional Office it shall be valid only for the meeting for which it is intended. No proxy shall be valid and effective for What will the HLURB do afterwards? a period longer than three (3) years at any one time unless earlier revoked by the member. The Homeowners Association Administration Division shall then prepare a report on the conduct Does the law or rules provide for the procedure of validation and submit the same to the Regional for the removal of a Director or Trustee of the Officer/Director. The Regional Director/Officer Association? shall then issue an order validating the petition and the removal of the director or trustee, furnishing a YES, a director or trustee may be removed from copy thereof to the director/trustee concerned and office through a verified petition duly signed by the the Board. majority of the association members in good standing, for any cause provided in the by-laws of Within sixty (60) days from the receipt of the order the association. from the Regional Director/Officer, an election shall be called by the remainder of the board for the What happens next? purpose of determining who shall hold office for the unexpired term of the removed director or The duly signed petition, subscribed and sworn to trustee. before a notary public, shall be submitted to the Regional Office of the HLURB for purposes of What happens after the removal of the director or verification and validation. Within five (5) days trustee? from receipt of the petition, the Regional Office shall determine whether the petition complies with Within sixty (60) days from the receipt of the order the required formalities and based on any of the from the Regional Director/Officer, an election grounds or causes for removal provided under the shall be called by the remainder of the Board for by-laws. Upon being satisfied that the petition is the purpose of determining who shall hold office sufficient in form and substance, the Regional for the unexpired term of the removed director or Office shall determine, based on its record, whether trustee. the petition is signed by majority of the members of the association concerned; Does the removed director or trustee have the right to question his/her removal from the Board? What happens after that? The director or trustee who has been removed shall If the Regional Office determines that the petition is have the right to question his removal on the sole not signed by the required number of the members ground of the validity of the cause relied upon by of the association, it shall then dismiss the petition the members of the association, through a petition and shall inform the member who filed the petition filed before the Regional Office within fifteen (15) of its decision, furnishing a copy thereof to the days from receipt of the order of his removal; and

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Under RA 9904 and its Rules, what is the Can the special election called for the purpose of relationship of a HOA with the Local filling up the vacancy be prevented by the Government Unit (LGU)? petition filed by the removed director or trustee? Homeowners’ associations shall complement, No. The pendency of the petition filed by the support and strengthen LGUs in providing vital director or trustee shall not prevent the board from services to their members and help implement local conducting the special election called for the government policies, programs, ordinances, and purpose of filling up the vacancy. In the event the rules. HLURB decides that the removal is invalid, the removed director or trustee shall then be reinstated Associations are encouraged to actively cooperate to his former position and serve the remainder of with LGUs in furtherance of their common goals his term. The tenure of the person who replaced the and activities for the benefit of the residents of the removed director from the time of his election up to subdivision/villages and their environs. the time of the reinstatement of the latter shall be respected. Where the LGUs lack resources to provide for basic services, the association shall endeavor to tap the If a majority of the members of the board is means to provide for the same. In recognition of the removed, it shall be considered a dissolution of the associations’ efforts to assist the LGUs in providing entire board, in which case, Section 14 [ dissolution of such basic services, association dues and income the board ] of RA 9904 shall govern. derived from rental of their facilities shall be tax exempt: Provided, That such income and dues shall How will the Board of Director/Trustee be be used for the cleanliness, safety, security and dissolved? other basic services needed by the members including the maintenance of the facilities of their In the event two-thirds (2/3) of the association’s respective subdivisions or villages. members submit a verified petition for the dissolution of the Board, the following procedure Taxation of Monthly Association Dues: shall be observed: Revenue Memorandum Circular No. 9-2013

(a) The petition for the dissolution of the Board Are association dues and income derived from shall be based solely on the grounds or causes rental of their facilities, taxable under existing provided in the association’s by-laws; laws? (b) The procedure provided in subsections (b) to (g) of Section 65, Rule 11 shall be observed. [ It is YES. The amounts paid in as dues or fees by the same procedure as listed in the removal of a homeowner-members of a homeowners’ director or trustee. ] association form part of the gross income of the (c) Until the new Board members shall have been latter subject to income tax. elected and qualified, the HLURB shall designate an interim Board : Provided , That such What is the reason for this interpretation by the Board shall be composed of association BIR? members in good standing: Provided, further , That such interim Board members shall not be For tax purposes, the association dues, membership eligible to run in the election called for the fees, and other assessments/charges collected by a purpose of replacing the members of the homeowners’ association constitute income dissolved board. payments or compensation for beneficial services it provides to its members and tenants .

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Moreover, since a homeowners’ association is street and vicinity lights; maintenance, repairs subject to income tax, income payments made to it and cleaning of streets; garbage collection and are subject to applicable withholding taxes under disposal; and other similar services and existing regulations. facilities; and (c) The homeowners’ association must present Are association dues subject to value-added tax proof ( i.e. financial statements) that the income (VAT) or percentage tax? and dues are used for the cleanliness, safety, security and other basic services needed by the Association dues, membership fees, and other members, including the maintenance of the assessments/charges collected by a homeowners’ facilities of their respective subdivision or association are subject to VAT since they constitute villages. income payment or compensation for the beneficial services it provides to homeowner-members. Are LGUs required to consult with HOAs concerning proposed rules, zoning and other Non-VAT registered entities exempt under Section ordinances, project and programs that will affect 109 (1) (V) of the NIRC, as amended, are covered their locality? by percentage taxes. Hence, if a HOA is a non-VAT registered entity then it is liable to pay percentage Yes. LGUs shall, upon due notice, hold public tax. consultations with the members of the affected associations, especially their officers and directors, When can the association dues and income where proposed rules, zoning and other derived from rentals of the homeowners’ ordinances, projects and/or programs affecting association properties and facilities be exempt their jurisdiction and surrounding vicinity are to be from taxes? implemented prior to the effectivity or implementation of such rules, zoning, ordinances, Pursuant to Section 18 of RA No. 9904, the projects or programs: Provided, That in cases of association dues and income derived from rentals zonal reclassification, the approval of a simple of the homeowners’ association properties may be majority of homeowners shall be required. exempted from income tax, VAT and percentage tax subject to the following conditions: Such public consultations shall conform to the manner as specified in Rule XI, Article 54 of the (a) The homeowners’ association must be a duly implementing rules and regulations of Republic constituted “Association” as defined under Act No. 7160, otherwise known as the Local Section 3(b) of RA No. 9904; Government Code of 1991. (b) The LGU having jurisdiction over the homeowners’ association must issue a What is the relationship of the HOA with certification identifying the basic services being National Government Agencies (NGAs), under rendered by the homeowners’ association and RA 9904 and its Rules? therein stating its lack of resources to render such services notwithstanding its clear mandate The associations shall complement, support and under applicable laws, rules and regulations. strengthen the efforts of the NGAs in providing Provided further , that such services must fall vital services to their members and help implement within the purview of the “basic community the national government policies and programs. services and facilities” which is defined under Section 3(d) of RA No. 9904 as those referring to Associations are encouraged to actively cooperate services and facilities that redound to the with NGAs in the furtherance of their common benefit of all homeowners and from which, by goals and activities for the benefit of the residents reason of practicality, no homeowner may be of the subdivisions and its environs. excluded such as, but not limited to: security;

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NGAs shall consult the associations where proposed rules, projects and/or programs may If the reasons stated in the affidavit of non-holding affect their welfare. of election are found to be without merit, the Regional Office shall order the director/trustee and officers of the association to immediately call for Elections the conduct of the election within fifteen (15) days from receipt of the Order. The director/trustees When are elections held in a HOA? and officers who failed to comply with the order of the Regional Office shall be held, jointly and A homeowners’ association shall hold regular severally, liable therefore. membership meetings or elections on the time and date set forth in its by-laws. What happens when the election has been validly postponed? When is there failure of elections in a HOA? The Regional Office of HLURB shall call a special When a regular or special election cannot be held election for the officers of the association and set or conducted due to lack of quorum as defined the rules that shall govern the conduct thereof in under the association by-laws or for any other consultation with the members thereof. serious cause such as violence, terrorism, force majeure, and other analogous causes of such a What is the duty of the Regional Office of the nature that the holding of a free, orderly and HLURB in the conduct of the special election? honest election should become impossible, the Election Committee shall call for another election The Regional Office shall designate its responsible within a period of thirty (30) days from the date of officials to supervise the conduct of the special the failed election or the cessation of the cause for election with the participation of the Federation as such failure of election. observer. Within ten (10) working days after the date of the election, said election supervisor shall What documents should be submitted to the submit a report to the Regional Office stating, HLURB when the election is not held? among others, the following:

In case a regular or special election is not held, the (a) Whether the special election was held as following shall be submitted by the association to scheduled; the Regional Office: (b) Time of the commencement and end of election; and (a) Notice of Postponement of the regular or special (c) The following information as appearing in the membership meeting; and report of the committee on election of the (b) Affidavit of Non-holding [of Elections] stating homeowners association: [a] number of categorically the reasons why no election was qualified voters; [b] Number of votes cast; [c] conducted in accordance with the provisions of Number of votes received by individual the association by-laws. candidates; [d] Protest registered on the day of election, if any; and, [e] such other information The notice or affidavit shall be executed by the relevant and necessary in the conduct of Secretary and attested to by its President and shall election. be filed with the Regional Office within five (5) days from the date of the scheduled election. What happens when there is a failure to elect a new set of directors or officers? What happens when the reasons stated in the Affidavit of Non-holding of Election is found to Where there is failure to elect a new set of directors be without merit? or officers, the incumbent

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directors/trustees/officers shall be allowed to assets, to the new set of directors and officers continue in a hold-over capacity until their within sixty (60) days from the election of the new successors are elected and qualified, subject to Board. compliance with the preceding sections of the Rule on the non-holding or postponement of regular and What is the duty of the HOA with regard the special elections. In no case shall the hold-over conduct of the scheduled elections of its directors term of the officers/directors/trustees exceed two or trustees? (2) years . Within fifteen (15) days from the date of any How are election contest of HOAs resolved? regular or special election, the association shall submit the following to the Regional Office: Election contests and their resolutions shall be governed by the by-laws of the association . Unless (a) Proof of notice of election; otherwise provided by the Association’s by-laws, (b) A copy of the notice sent to the members or the election contest shall be in writing and filed by posted in conspicuous places stating the time, any of the aggrieved candidate/s within five (5) date and place of the election; days after the proclamation of the winning (c) Attendance sheet signed by the members and candidates, specifically stating the grounds thereof. attested by the Secretary; The duly constituted Election Committee of the (d) Notarized minutes of elections prepared and Association shall decide on the controversy signed by the committee which supervised the brought before it within the non-extendible period election of the association; of five (5) days. (e) Election returns duly certified by the committee which supervised the election of the Does the aggrieved party have recourse from the association; and decision of the Election Committee of the HOA? (f) Master list of qualified voters as certified by the association secretary and treasurer. The aggrieved candidate/s may file the necessary complaint before the HLURB Regional Office within ten (10) days from receipt of the decision of Merger, Consolidation and Federation the Election Committee. The complaint shall be accompanied by a certification that the dispute was Can there be a merger, consolidation or federation referred to, and resolved by the appropriate of existing HOAs? committee duly constituted by the association. YES. The Board of Directors of Trustees of two (2) In the absence of an Election Committee and or more associations may each approve, by Grievance Committee or refusal to issue the majority vote, a plan of merger, consolidation or certification, an affidavit attesting to this fact shall federation setting forth the following: be made further stating that complainant has exhausted administrative remedies, which shall be (a) Names of the associations that will merge, attached to the complaint. consolidate or federate, which are hereinafter referred to as the constituent associations; What is the obligation of the outgoing directors (b) Terms of the merger, consolidation or and officers with respect to the records and federation and the mode of carrying the same properties of the HOA? into effect; (c) Statement of the changes, if any, in the articles To ensure the orderly turnover of the management of association of the surviving association, in of an Association, the outgoing directors and case of merger; and, with respect to officers of an Association shall turn over all consolidation, all the statements required to be Association books, records, properties and other set forth in the articles of association;

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(d) Statement in the articles of association of the After the approval by the members as required by federation specifying the commonality of the preceding Sections, the articles of merger, purpose and interests of the constituent consolidation or of federation, as the case may be, associations, as well as the rights, obligations, shall be executed by each of the constituent and extent of powers of the federation over the associations, and signed by the president or vice- said associations; president and certified by the secretary or assistant (e) Vicinity map showing that the territory of the secretary of each association. associations proposing to merge or consolidate are contiguous to one another; and What are the contents of the articles of merger, (f) Such other provisions with respect to the consolidation or federation? proposed merger, consolidation or federation as are deemed necessary or desirable. The articles of merger, consolidation or federation shall set forth the following: Do the members of the individual association have a say in the proposed merger, consolidation (a) The plan of the merger, consolidation or or federation? federation; (b) The number of constituent associations; and YES. After the approval by majority vote of each of (c) The number of members of each constituent the board of directors or trustees of the constituent association voting for and against such plan, associations of the plan of merger, consolidation or respectively. federation, the same shall be submitted for approval by the members of each association at What documents will be submitted for the separate meetings duly called for the purpose. The approval of the Regional Office? notice of such meetings shall be given to all the members of the respective associations at least two The articles of merger, consolidation or federation, (2) weeks prior to the date of the meeting, either signed and certified as herein above required, shall personally or by registered mail. The notice shall be submitted to the Regional Office in three copies state the purpose of the meeting and shall include a for approval, together with the following: copy or a summary of the plan of merger, consolidation or federation. The affirmative vote (a) The plan of federation, consolidation or merger, representing a majority of the total membership of including a location and vicinity plan of the each association shall be necessary for the approval consolidating and merging associations; and of such plan (b) The records of the approval by majority vote of each of the board of directors or trustees of the Can an approved plan of merger, consolidation or constituent associations of the plans. federation be amended? When will the Certificate of Merger, YES. An approved plan of merger, consolidation or Consolidation or Federation be issued? federation may be amended by majority vote of the respective board of directors or trustees of all the If the merger, consolidation or federation of the constituent associations and ratified by the associations is not inconsistent with existing laws, affirmative vote of majority of the members of each the Regional Office shall issue a certificate of constituent association. The plan, together with any merger, consolidation or federation [which] shall amendment, shall be considered as the agreement be deemed effective. of merger, consolidation or federation. However, if the proposed merger, consolidation or Who shall execute the articles of merger, federation is contrary to or inconsistent with consolidation or federation? existing laws, the Regional Office shall set a hearing to give the associations concerned the

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opportunity to be heard. The notice of hearing shall constituent associations and shall have such be given to each constituent association at least two powers over its member associations as may be (2) weeks before the hearing. The Regional Office set forth in its approved articles of association shall thereafter proceed to determine whether or and by-laws. However, the creation of a not to approve the merger, consolidation or federation shall not affect the juridical federation. personality of the constituent associations .

What are the effects of merger, consolidation or Can a constituent association disaffiliate from a federation to the constituent HOAs? federation?

The merger, consolidation or federation shall have An association, by a resolution passed by the the following effects: majority of its board of directors or trustees, and duly approved by majority of its total membership, (a) The constituent associations shall become a may sever its membership from the federation single association which, in the case of merger, which shall take effect after a written notice of shall be the surviving association designated in disaffiliation is filed with the federation and the the plan of merger; and in the case of Regional Office. consolidation, the consolidated association designated in the plan of consolidation. Where will the notice of disaffiliation be (b) The separate existence of the constituent submitted by the constituent association? associations shall cease, except that of the surviving or the consolidated homeowners Upon receipt of the notice of disaffiliation by a association. constituent association, the Regional Office shall (c) The surviving or the consolidated association enter a memorandum thereof in the records of the shall possess all the rights, privileges, federation and the disaffiliating association, a copy immunities and powers of each of the of which shall be furnished the concerned parties. constituent associations and all property, real or personal, and all receivables due on whatever What are the effects of disaffiliation? account, and other choses in action, and all and every other interest of, or belonging to, or due Upon disaffiliation, the federation loses its powers to its constituent association, shall be deemed and privileges as set forth in the articles of transferred to and vested in the surviving or association and by-laws over the disaffiliating consolidated association without further act or association, while the latter loses its entitlement to deed. the rights and privileges arising from membership (d) The surviving or consolidated association shall in the federation. The disaffiliation shall be without be responsible and liable for all the liabilities prejudice to the settlement of any obligation and obligations of each of the constituent incurred by the federation and constituent associations in the same manner as if such associations against each other. surviving or consolidated association had itself incurred such liabilities or obligations; and any pending claim, action or proceeding brought by Dissolution of the Association or against any of the constituent association may be prosecuted by or against the surviving How can a HOA be dissolved? or consolidated association. The merger or consolidation shall not impair the rights of A homeowners’ association may be dissolved creditors or liens upon the property of any of voluntarily or involuntarily. the constituent association. (e) The federation shall have a separate and What is the effect of the voluntary dissolution of distinct legal personality from that of its a HOA where creditors are not affect? www.realttorney.com P a g e | 20

a majority of the members of the Board of If the dissolution of an association does not Directors/Trustees and countersigned by the prejudice the rights of any creditor having a claim Secretary. against it, the dissolution shall be effected as follows: (d) The Regional Office shall issue the certificate of dissolution upon determination that the (a) The issuance of a Board Resolution authorizing application has complied with all the foregoing the dissolution of the association: requirements and that it is not contrary to law.

(1) Notice sent to all members of the Board, in What is the effect of the voluntary dissolution of accordance with the notice requirements of a HOA where creditors are affected? the by-laws, setting a date for a Meeting for the purpose of the dissolution of the Where the dissolution of an association may association; prejudice the rights of any creditor, the following (2) In the meeting called for the purpose, a procedure shall be followed: majority of all the members of the Board shall be necessary for the approval of the (a) The association shall conduct the meetings and Board Resolution dissolving the association; all solemnities required for the notice as stated (3) The Board Resolution shall likewise state in the first two (2) subsections of Section 39, the date of the General Assembly which Rule 7; shall consider the dissolution of the association; (b) Upon completion of the foregoing, a petition for dissolution shall be filed with the Regional (b) A majority vote of all the members, duly Office which shall have the following notified beforehand, shall be required to requirements: dissolve the association. The Notice shall be – (1) The petition shall be signed by a majority of (1) Personally served or sent by registered mail its board of directors or trustees or other to the members at least thirty (30) days officers of the association having the before the scheduled meeting; management of its affairs;

(2) Published once a week for two (2) (2) The petition shall be verified by its president consecutive weeks in a newspaper of local or secretary or one of its directors or circulation where the principal office trustees, and shall set forth all claims and address of the association is located, or, if demands against it, and that its dissolution there is none, in a newspaper of general was resolved upon by the affirmative circulation once a week for two (2) majority vote of its members at a meeting consecutive weeks; called for that purpose;

(3) Posted at the bulletin board of the (3) The resolutions of the board and the general association and in other strategic and membership attesting to the consent of the conspicuous places with its territorial majority of both the members of the Board boundaries. and the general membership shall be attached to the petition, including proof of (c) The Regional Office shall be furnished copies of publication of the notice, its personal the Resolutions of the board of service or service by registered mail to all directors/trustees and the general assembly of members and posting; members dissolving the association, both of which shall be signed and certified as correct by www.realttorney.com P a g e | 21

(c) If the petition is sufficient in form and How is the involuntary dissolution of a HOA substance, the Regional Office shall, by an order effected? reciting the purpose of the petition, fix a date on or before which objections thereto may be The association may be dissolved by the Regional filed by any person, which date shall not be less Office upon the filing of a verified complaint and than thirty (30) days nor more than sixty (60) after proper notice and hearing on the grounds days after the entry of the order. Before such provided by existing laws, rules and regulations. date, a copy of the order shall be published at least once a week for three (3) consecutive weeks in a newspaper of local circulation in the Duties and Responsibilities of the HLURB under municipality or city where the principal office RA 9904 of the association is situated, or if there is no such newspaper, then in a newspaper of Under RA 9904, what are the duties and general circulation in the Philippines, and a responsibilities of the HLURB? similar copy shall be posted for three (3) consecutive weeks in three (3) public places in In addition to the powers, authorities and such municipality or city and in the bulletin responsibilities vested in it by Republic Act No. board of the association. 8763, Presidential Decree No. 902-A, Batas Pambansa Blg. 68 and Executive Order No. 535, (d) Upon five (5) day’s notice, given after the date Series of 1981, as amended, the HLURB shall: on which the right to file objections as fixed in the order has expired, the Regional Office shall (a) Regularly conduct free orientation for officers proceed to hear the petition and try any issue of homeowners’ association or deputize another made by the objections filed; and if no such competent agency to conduct the orientation;

objection is sufficient, and the material (b) Formulate and publish a Code of Ethics and allegations of the petition are true, it shall Ethical Standards 3 for board members detailing render judgment dissolving the association and prohibited conflict of interest; ordering such disposition of its assets as justice (c) Register all associations, federations, requires, and may appoint a management confederations or umbrella organizations of the committee to collect such assets and pay the associations; debts of the association. (d) Hear and decide intra-association and/or inter- association controversies and/or conflicts, What other means can an association be without prejudice to filing civil and criminal dissolved? cases by the parties concerned before the regular courts: Provided, That all decisions of A voluntary dissolution may be made by amending the HLURB are appealable directly to the Court the articles of association to shorten the term of the of Appeals. existence of the association. A copy of the amended (e) Formulate the rules or manner of verification articles of association shall be submitted to the and validation of petitions for the removal of Regional Office in accordance with these rules. director/s or trustee/s of the association or Upon approval by the Regional Office of the dissolution of the board pursuant to Sections 13 amended articles of association or expiration of the and 14 of RA 9904; shortened term, as the case may be, and upon such (f) Exercise the same powers over federations, terms as may protect the rights of creditors whose confederations or umbrella organizations of the claims against the association may be affected, the associations; association shall be deemed dissolved without any further proceedings. 3The Code of Ethics and Ethical Standards are still pending review at the HLURB Main office in Quezon City www.realttorney.com P a g e | 22

(g) Formulate, in consultation with the Regional Office shall issue a notice to the representatives of associations, federations, association for the submission of the pertinent confederations or umbrella organizations of the books and records, including but not limited to its associations, standard nomenclatures to be audited balance sheet or income statement, cash used for the associations’ books of accounts, book, ledger and journal, or cash flow statement. and a standard articles of association and by- For this purpose, the Regional Office may also laws for homeowners association for reference conduct its own examination and evaluation of the purposes; required reports of the association in its designated (h) Formulate, in consultation with the administrative office upon prior notice to the representatives of associations, federations, concerned association when circumstances confederations or umbrella organizations of the warrant. associations, the guidelines in regulating the kinds of contributions and fees that may be How can a show cause order be issued against a charged and/or collected by associations; and HOA? (i) Call upon the Philippine National Police, other law enforcement agencies, and other If, after investigation or upon evaluation of the instrumentalities of the government, if reports, it appears that a violation of existing laws, necessary, for the enforcement of its functions. rules and regulations of HLURB has been committed by the homeowners association, the What does the power to monitor of the Regional Regional Office shall require the association, its Office entail? directors/trustees and officers to submit a sworn statement explaining why no sanctions should be The Regional Office may, motu proprio or upon imposed for the reported violation within ten (10) report or request of an interested party, inspect and days from receipt thereof. examine documents, books and records, and investigate transactions and activities of the What will the Regional Office do with the sworn association for the purpose of ascertaining and statement submitted to it pursuant to a valid enforcing its compliance with laws, rules and show cause order? regulations being implemented by HLURB, and in proper cases, impose appropriate sanctions. Upon receipt of the sworn statement, the Regional Office shall determine if any violation exists. If the Does the HLURB have the power to examine the Regional Office determines that no violation was financial transactions of a HOA? committed, it shall issue an order considering the matter as terminated. YES. After the submission by the association of the annual reports required to be submitted, the If the Board of Director/Trustees and officers fail or Regional Office shall conduct an examination and refuse to submit the sworn statements as required evaluation thereof within fifteen (15) days from by the Rules, the Regional Office may make a receipt and shall complete the review and determination on the basis of the records at hand evaluation within an equal period of fifteen (15) and shall apply the penalties and sanctions days. 4 provided under Section 23 of the RA No. 9904.

If the Regional Office finds that the documents When can the Regional Office require the HOA to submitted are incomplete or inconsistent with engage the services of an independent auditor to generally accepted accounting principles, the review the financial transactions of the HOA?

4It is doubtful whether the HLURB Regional Offices can If, upon evaluation, the Regional Office finds conduct the review in the time specified by the IRR of ambiguity or inconsistency in the documents RA 9904 due to lack of adequate manpower vis-à-vis the submitted, it may require the board of directors of number of registered HOAs at present. www.realttorney.com P a g e | 23

the association to engage, at its own expense, the (h) To unreasonably fail to comply with Section 17 services of an independent auditor who shall [Financial and Other Records ] of RA 9904; or conduct and review the said financial records, and (i) To violate any other provision of this Act. finish the same within thirty (30) days from receipt of the HLURB order. The independent auditor shall What are the penalties and sanctions imposed on be an accredited CPA of the Board of Accountancy people who performed any of the prohibited acts and the Securities and Exchange Commission enumerated above? (SEC). Thereafter, the association shall submit the report of the independent auditor. Any person who, intentionally or by gross negligence, violates any provision of RA 9904, fails to perform his/her functions under this law and/or Final Provisions violates the rights of the members, shall be punished with a fine of not less than Five thousand What are the prohibited acts enumerated under pesos (Php 5,000.00) but not more than Fifty RA 9904? thousand pesos (Php 50,000.00) and permanent disqualification from being elected or appointed as Under Section 22 of the law, it shall be prohibited member of the board, officer or employee of the for any person: association, without prejudice to being charged before a regular court for violations of the (a) To compel a homeowner to join the association , provisions of the Revised Penal Code, Civil Code without prejudice to the provisions of the deed and other pertinent laws. of restrictions, its extensions or renewals as approved by the majority vote of the members If the violation is committed by the association, the or as annotated on the title of the property; the members, officers, directors or trustees of the contract for the purchase of a lot in the association who have actually participated in, subdivision project; or an award under a CMP authorized, or ratified the prohibited act shall be project or a similar tenurial arrangement; held liable. (b) To deprive any homeowner of his/her right to avail of or enjoy basic community services and If the violation is committed by the employees and facilities where he/she has paid dues, charges, agents who acted in gross violation of the and other fees for such services; provisions of the law, the officers, directors or (c) To prevent any homeowner who has paid the trustees, or incorporators of the association shall be required fees and charges from reasonably jointly and severally liable with the offending exercising his/her right to inspect association employees, agents, and the association. books and records; (d) To prevent any member in good standing from What actions do existing HOAs have to make participating in association meetings, elections pursuant to the passage and effectivity of RA and referenda; 9904? (e) To deny any member due process in the imposition of administrative sanctions; In order to comply with the provisions of the law, (f) To exercise rights and powers as stated in the homeowners’ association shall, within six (6) Section 10 [ Rights and Powers of Associations ] in months from effectivity of this law, conduct a violation of the required consultation and review of its by-laws, draft its own rules of approval of the required number of procedure to be incorporated in the by-laws and homeowners or members; conduct a plebiscite for the approval of the (g) To unreasonably fail to provide basic members of the association. A simple majority shall community services and facilities and maintain, be used to determine the approval of the by-laws. repair, replace, or modify such facilities;

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Who is tasked to formulate and promulgate the implementing rules and regulations of RA 9904?

The HLURB shall formulate and promulgate, in consultation with concerned sectors, rules and regulations necessary to implement the provisions of this law within six (6) months of its effectivity.

No rule or regulation shall be issued which tends to undermine the organizational and territorial integrity of any association.

When is the effectivity of RA 9904?

This law shall take effect fifteen (15) days following its publication in the Official Gazette or in at least two (2) national newspapers of general circulation.

Author’s Note :

Republic Act No. 9904 was signed by the President Arroyo into law last January 7, 2010 . It was published in the Official Gazette on March 15, 2010. Therefore, the law took effect on March 30, 2010 , pursuant to Section 29, thereof.

Meanwhile, the Implementing Rules and Regulations of RA 9904 were signed only on June 24, 2011 [almost fifteen (15) months after the effectivity of the law].

According to the HLURB HOA Franchising Unit Expanded National Capital Region, the IRR took effect on October 25, 2011.

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