Condo Association Dues Increase: Rights of Unit Owners in the Philippines — A comprehensive legal guide (2025 edition)
1. The Legal Framework
| Source of Law | Key Provisions on Dues & Assessments | Practical Effect |
|---|---|---|
| Republic Act No. 4726 (Condominium Act, 1966) | • §9 (c): By-laws must provide the basis and manner of collecting common expenses. • §20: Unpaid assessments constitute a lien on the unit. |
Creates the right to levy and to collect; gives the association a powerful security interest over delinquent units. |
| Revised Corporation Code (RA 11232, 2019) | • §87-131 (non-stock corporations): voting thresholds, board powers, inspection rights, derivative suits. • §49/§50: notice periods & agenda for members’ meetings. |
Applies to condominium corporations because they are always non-stock; enforces democratic checks on the board. |
| PD 957 (Subdivision & Condominium Buyers’ Protective Decree, 1976) | §22 orders developers to turn over the association, accounts & records. | Ensures the initial schedule of dues is disclosed and turnover audit is completed. |
| RA 9904 (Magna Carta for Homeowners & Homeowners Associations, 2009) | Applied by the HLURB/DHSUD suppletorily to condo corps on governance and ADR. | Supplies due-process standards in dispute resolution. |
| HLURB / DHSUD rules & circulars (e.g., Board Res. 921-14, Res. 33-17) | Cap interest rates, require posting of new rates, mandate transparency of the annual budget. | Give owners concrete procedural tools to test the reasonableness of any increase. |
| Leading jurisprudence | Gotesco vs. Chatto (G.R. 157632, 2005); Oxley vs. St. Francis Towers (G.R. 204182, 2017); etc. | Supreme Court upholds liens and foreclosures only if assessments are validly approved and proportionate. |
2. What Exactly Are “Association Dues”?
| Term | Meaning |
|---|---|
| Regular/common expense | A recurring monthly share in the cost of utilities, security, janitorial, insurance, salaries, taxes on common areas, and management fees. |
| Special assessment | One-off or time-bound levy for capital repairs, façade repainting, elevator modernization, creation of a sinking fund, or disaster rehabilitation. |
| Penalties & interest | Monetary charge for late payment (capped by HLURB at “reasonable market rates,” often 2 % per month or 24 % per annum maximum). |
| User fees | Charges for use of amenities (function rooms, parking, etc.)—not part of association dues, hence governed by separate schedules. |
Allocation formula – Unless the Master Deed specifies otherwise, each owner pays in the ratio that the floor area of the unit bears to the total sellable area. Parking slots may be treated separately.
3. Who May Increase the Dues?
Board of Directors (BoD) Default rule – The BoD prepares the annual budget and may increase dues up to the ceiling allowed by the by-laws. Many by-laws set a 10 – 15 % cap beyond which membership approval is required.
Unit Owners in General Meeting
- Regular increases above the cap or any special assessment must be ratified by a majority or 2/3 of the members present or represented, depending on the by-laws.
- Under the Revised Corporation Code, a majority of the quorum can overturn a BoD act that is ultra vires or patently wasteful.
Developer (while in control period)
- The developer holds unsold units and corresponding voting rights. However, once 51 % of units are sold, control must be turned over. From that point forward, the BoD elected by the buyers decides.
4. Procedural Requirements Before an Increase Takes Effect
- Detailed Budget – Must itemize historical expenditure, projected increases in utility tariffs, reserve-fund computation, and the exact peso or percentage increase.
- Notice of Meeting – At least 21 days before the vote (by-laws often track the RCC’s 21-day rule for non-stock corps). Notices may be sent by e-mail or Viber if the members have consented.
- Posting & Circulation – Budget and explanatory notes must be posted on bulletin boards and, under DHSUD rules, delivered to doorsteps or mailboxes.
- Open Forum – Owners have the right to ask questions and demand supporting contracts or quotations.
- Minutes & Resolution – The BoD or membership resolution must show the vote tally, precise amount of increase, and effective date.
- Filing with DHSUD & SEC – Although not a pre-condition to validity, many circulars direct associations to submit the new schedule within 30 days for monitoring.
Failure to observe these steps voids the increase, and any payment demanded under it can be legally resisted.
5. Substantive Limits on Increases
| Control | Explanation |
|---|---|
| Reasonableness Standard | Spending must be proportional to actual, necessary, and documented costs. BoD cannot stockpile cash for vague contingencies. |
| Pro-rata Allocation | All similarly-situated units must bear the same per-square-meter rate; discriminatory rates violate §9(c) of RA 4726. |
| Cap on Penalties | HLURB Res. 33-17 allows only reasonable commercial interest. Usury law ceilings are gone, but excessive charges are struck down as unconscionable. |
| No Profit Principle | Condominium corporations are non-stock, non-profit entities. An assessment that generates surplus beyond working capital and reserves risks being voided. |
6. Rights of Unit Owners Faced with a Dues Hike
Inspection Right (RCC §73) – Owners may demand access to ledgers, vouchers, and contracts during reasonable office hours. Denial is actionable.
Right to Information & Participation – They can ask for the per-square-meter computation sheet, management contract, and bank reconciliations; they may appoint a representative (CPA, lawyer) during the open forum.
Right to Vote – In person or by proxy. Proxies must be in writing and filed before the meeting.
Right to Contest –
- Internal: mediation/conciliation under the by-laws or an Internal Dispute Resolution (IDR) committee.
- External: file an action with the DHSUD Adjudication Commission for annulment of the assessment, refund, or damages.
- Corporate: derivative suit or petition to nullify BoD actions before the SEC, if corporate abuse is alleged.
Right to Pay Under Protest – To avoid penalties and lien while preserving the right to reimbursement if the hike is later voided.
Right to Withhold – If the assessment is patently void (no meeting, no notice, discriminatory), withholding is a legitimate defense, but the owner bears the risk of foreclosure if later proven wrong.
7. Consequences of Non-Payment
| Consequence | Legal Basis | Notes |
|---|---|---|
| Statutory Lien | RA 4726 §20 | Automatically attaches; rank is usually junior to real-estate mortgage but senior to later liens. |
| Interest & Penalties | By-laws + HLURB rules | Must be clearly fixed and reasonable. |
| Suspension of Privileges | By-laws | Use of pool/gym, right to vote, issuance of gate stickers may be withheld. Cannot cut off essential utilities directly supplied by public providers. |
| Collection Suit / Foreclosure | Rule 68 of Rules of Court (foreclosure), ordinary civil action | Association must prove validity of the assessment and notice of default. |
| Posting of Delinquents List | Common in practice but must comply with the Data Privacy Act—only minimal data, no shaming language. |
8. Defenses & Arguments Commonly Raised
- Ultra Vires – Board exceeded the cap without membership ratification.
- Lack of Notice – Meeting notice or assessment notice defective.
- Unconscionability – Increase exceeds inflation or lacks cost-basis.
- Improper Allocation – Floor-area percentages misapplied or parking slots irrationally assessed.
- Misuse of Funds – Past dues diverted to non-condominium projects.
- Developer Liability – Increase triggered by defects attributable to the developer (e.g., leaky roof); owners can insist the developer shoulder the expense under PD 957 warranties.
9. Procedural Roadmap to Challenge an Increase
- Request Documents (within 5 days of notice).
- Write a Protest Letter to the BoD within the period stated in the by-laws (often 15 days).
- Invoke Internal ADR – mediation/conciliation committee (RA 9904, if adopted).
- File DHSUD Complaint – within 1 year from the last demand for payment if seeking refund or annulment.
- Seek Injunction – If foreclosure is imminent, file in the Regional Trial Court Branch 24 (Special Commercial Court) or DHSUD for status quo ante order.
- Attend Hearings & Submit Position Papers – The DHSUD process is summary; evidence of corporate records and notices is key.
- Appeal – Aggrieved party may elevate to the Office of the President, then to the Court of Appeals via Rule 43, up to the Supreme Court by certiorari.
10. Best-Practice Checklist for Boards (and What Owners Should Watch For)
| Good Practice | Why it Matters |
|---|---|
| Rolling 5-Year Capital Plan | Prevents sudden spikes for elevator or façade rehab. |
| Annual External Audit | Builds trust; auditor’s notes justify increases. |
| Sinking Fund Segregation | Reserve funds should be in time deposits or government bonds, not commingled with operating cash. |
| Transparent Contract Bidding | Security and janitorial contracts over ₱1 M should use at least three sealed bids. |
| Cap-and-Review Policy | E.g., no increase above CPI + 3 % unless majority vote of owners. |
11. Recent Developments (2021 – 2025)
- Electronic Meetings & Voting – The RCC and SEC Memorandum Circular 7-2021 allow fully virtual assemblies; e-notice is valid if owners consent and the corporation keeps proof of delivery.
- DHSUD Centralized Registry – Associations must file updated schedules of dues; repeated non-compliance can trigger suspension of the corporation’s Certificate of Registration.
- Data Privacy Enforcement – NPC Circular 2022-01 warns against “name-and-shame” delinquent lists posted in elevators or social media.
- Green Building Incentives – Some LGUs grant real-property-tax discounts if the condominium spends on energy-efficient retrofits; such costs may be classified as capital expenses and thus special assessments subject to owner approval.
12. Frequently Asked Questions
Can the board back-bill increases retroactively? No. Assessments must be prospective; retroactive hikes violate the non-impairment clause and are routinely voided by DHSUD.
Do commercial units pay a higher rate? Only if the Master Deed or By-laws expressly impose a different loading factor; otherwise, the general pro-rata rule applies.
Are parking slots compulsory contributors? If titled separately, yes. Developers often exempt accessory slots embedded in the CCT of a residential unit.
May I offset my dues against association breaches (e.g., poor security)? Courts frown on unilateral offsets; pay under protest and sue for damages or reduction.
What if the developer still controls the board and pushes a steep increase? Buyers can petition DHSUD for forced turnover and nullify self-serving resolutions under PD 957.
13. Key Take-Aways
- Transparency + Proper Approval = Valid Assessment.
- Owners wield inspection, voting, and adjudicatory rights to keep dues reasonable.
- Non-payment is risky because of the statutory lien, but payment “under protest” preserves remedies.
- Dispute venue is DHSUD for most cases; SEC and courts retain jurisdiction over pure corporate or lien-foreclosure issues.
Disclaimer: This article is for informational and educational purposes only and does not constitute legal advice. Laws and regulations change, and factual circumstances vary. Consult a qualified Philippine lawyer for advice tailored to your situation.