The answer is a usual deciding factor as to whether to invest in one or not.
With a number of good projects left and right – all with cool and modern facilities, flexible payment schemes, livable and cozy units; and having a peaceful environment, while strategically located in a business district – there’s no telling when the appetite for condominium will cease to be insatiable.
Many developers nowadays are fixed on building projects to serve different markets, and cater to different needs.
But one thing that remains constant is the curious question about the future of a condominium.
“What happens after 50 years?”
Many homebuyers are skeptical about actually purchasing a condominium unit, given the idea that condominium projects have a definite lifespan of only 50 years. They think (and believe) it will eventually be demolished, and would not really count as a good investment.
One needs to consider that condominium projects are considered corporations, and in the Philippines, corporations have a lifespan of 50 years. (Act 1459).
Now, it is stated under Section 8 c of the Condominium Act (R.A. 4726) that:
That the project has been in existence in excess of fifty years, that it is obsolete and uneconomic, and that condominium owners holding in aggregate more than fifty percent interest in the common areas are opposed to repair or restoration or remodeling or modernizing of the project;
This leads many people to believe that a condominium project will automatically become an urban decay after 50 years’ time. While it is true that no real estate hotspot will stay the same way after some time; buildings will experience signs of aging, and have its structural damage, and deterioration made visible through the years; it won’t be rendered useless after 50 years.
Three factors come into play when determining a condominium to be inhabitable: (1) existence in excess of 50 years; (2) obsolete and uneconomical, and (3) owners holding in aggregate more than 50 percent interest in the common areas are opposed to repairing or restoration or remodeling or modernizing the project.
Remember that the standard of being “obsolete and uneconomical” continues to change, given the advanced construction efforts, and use of high quality materials in developing the condominium.
“Will I lose ownership of my unit?”
No. The condominium corporation can be renewed for another fifty years, so ownership does not necessarily end.
The ownership of the condominium is similar to a corporation where unit owners are considered to be the shareholders. The shareholders only possess a specific dwelling/s (particular unit/s). They do not hold the title for the land where the building stands, nor do they hold exclusive ownership to the condominium’s common areas.
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“What is my shareholding percentage?”
Let’s say the building has 100 units. One unit is equivalent to one share. It is proportionate to the size, and price of your unit, and is also equal to a proportionate vote. If you purchased one unit, that means there are 99 others (shareholders, like you) in the condominium corporation, all of whom – more or less – have the same stake and voting power as you do.
“As shareholders, do we decide what to do with the condominium?”
If the time comes (50 years) and the condominium has become inhabitable, the shareholders may vote to: sell the land, make money from the salvageable scrap from the demolished building, deduct the cost of demolition, and get the share depending on the extent of ownership.
Or, they may work on a deal with a developer, either with the original developer who built the condominium, or another, to build a new building on their land. Under Section 6 of the Corporation Code of the Philippines, it states that:
Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders of such shares shall nevertheless be entitled to vote on the following matters: #3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property.”
Suppose the votes of the association favors the decision of selling the property because it is not fit for residential purpose, the profit collected will then be divided depending on the floor area of the purchased unit.
“What is the type of ownership of the condominium?”
It pays to do due diligence on this particular aspect. Inquire about the type of ownership of the condominium with your real estate sales agent, or with the developer. Is it leasehold? Perpetual? Here’s the difference:
Leasehold Ownership: Developers only lease the land where the condominium project is built. Now, unless the lease gets extended (after 50 years), the property ownership is handed back to the actual landowner.
Perpetual Ownership: Developers buy, and own the land where the condominium project is built. The 50-year rule under Republic Act 4726 will apply, therefore, giving you the authority (as shareholder) to have a say, and stake in the condominium project.
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