Condominium Monthly Dues Increase: Legal Standards and Remedies Under the Philippine Condominium Act

This article explains how monthly condominium dues are imposed and increased in the Philippines, the legal standards that govern those increases, and the practical and legal remedies available to unit owners.

1) Legal Foundations

a) Condominium Act (Republic Act No. 4726)

The Condominium Act authorizes a condominium corporation or association to maintain, operate, repair, and improve the common areas, and to levy assessments (commonly called “association dues” or “monthly dues”) on unit owners to fund those activities. Each unit is generally assigned a percentage interest in the common areas, which is typically used as the basis for allocating dues and assessments, unless the master deed or by-laws prescribe another lawful basis.

b) Master Deed and By-Laws

Every condominium project has a master deed (establishing the condominium regime and defining common/limited common elements) and by-laws (the operating rules of the condominium corporation or association). These documents usually specify:

What expenses are “common expenses” chargeable to all owners;
How regular budgets are prepared and approved;
The formula for allocating dues (e.g., proportionate to floor area or percentage interest);
Who may approve increases in regular dues and special assessments (board alone vs. board + membership vote);
Notice, quorum, and voting requirements;
Penalties, interest, and collection procedures for delinquencies.

The master deed and by-laws are binding on all unit owners and are read together with the Condominium Act and general corporation law.

c) Corporation Law Principles

Condominium associations are generally non-stock, non-profit corporations. Corporate governance rules apply (board powers, fiduciary duties, meetings, notices, quorum, voting). Directors and officers must act within authority, in good faith, and with due care. Actions that are ultra vires (beyond powers) or taken without required approvals may be voidable.

2) What Monthly Dues May Lawfully Cover

“Common expenses” typically include, among others:

Building operations: security, housekeeping of common areas, front desk/concierge, utilities for common areas, elevator and equipment maintenance, pest control;
Repairs and preventive maintenance of common elements (roof, façade, structural components, elevators, fire-life-safety systems);
Insurance for the building and association (e.g., industrial all-risk/property, liability, D&O);
Professional services (property management, legal, audit);
Government compliance costs (permits, fire safety, environmental, compulsory inspections);
Contributions to reserves or sinking funds for capital repairs/replacements (e.g., elevator modernization, waterproofing, genset replacement).

Expenses benefiting only certain units (e.g., exclusive limited common elements) may be charged to those units if the master deed/by-laws provide.

3) Standards Governing Increases in Dues

a) Authority and Process

An increase in monthly dues is valid only if authorized by the governing documents and approved using the prescribed process. Common frameworks:

Board-approved annual budget: By-laws often empower the board to adopt the annual operating budget (with line-item estimates for each expense plus reserve contributions). Adoption of the budget may implicitly adjust dues to match the budgeted totals, following the allocation formula.
Membership ratification: Some by-laws require owners’ ratification of the budget or of increases beyond a threshold (e.g., more than a set percentage year-on-year).
Special assessments: For extraordinary/unbudgeted items (e.g., emergency structural repairs), many by-laws require member approval by a specified vote.

b) Reasonableness and Good Faith

Even when formally authorized, increases must be reasonable and made in good faith:

Anchored to an adopted budget that is facially necessary for operations and reserves;
Proportionate to legitimate common expenses and consistent with the allocation formula;
Non-discriminatory: similarly situated units must be treated alike;
Transparent: owners should have access to the budget, financial statements, and supporting documents upon reasonable request.

c) Allocation Formula

The default legal intuition is that common expenses are shared in proportion to each unit’s interest in the common areas (often tied to floor area), unless the governing documents lawfully adopt another allocation (e.g., per-door minimums plus variable components). Any change in allocation typically requires member approval in accordance with the by-laws because it affects vested economic rights.

d) Reserve (Sinking) Funds

Sound governance (and often the by-laws) requires reserves for predictable capital replacements. Contributions should be regular, actuarially-informed, and segregated; they cannot be diverted to unrelated uses. A sudden spike in dues to “catch up” a neglected reserve may be challenged for poor stewardship, though genuine safety/compliance needs still justify appropriate assessments.

4) Notice and Documentation

While exact notice periods are set by the by-laws (and general corporation law for member meetings), best practice and legal defensibility require:

Advance written notice of the proposed budget/increase, with an executive summary and comparison to prior year;
Access to working papers: contracts, quotations, utility histories, reserve study or engineering reports supporting the change;
Clear disclosure of penalties/interest and effective dates.

Failure to observe required notice, quorum, or voting formalities can render an increase voidable.

5) Penalties, Interest, and Collections

a) Lien on the Unit

Unpaid assessments typically become a lien on the delinquent unit under the Condominium Act and/or by-laws. The lien generally runs with the unit and may have priority over subsequent encumbrances (taxes may still prime). Buyers should expect to settle arrears upon transfer.

b) Enforcement

Enforcement measures—set out in the by-laws and house rules—may include:

Contractual interest on arrears and late payment penalties (must be reasonable and disclosed);
Suspension of non-essential privileges (e.g., use of amenities) while preserving essential services and legal access;
Collection suits to recover unpaid assessments and enforce the lien, including reasonable attorney’s fees and costs if provided by the by-laws and awarded by the proper forum.

Extreme measures (like foreclosure) depend on governing documents and applicable law. Any enforcement must respect due process and proportionality.

6) When Is an Increase Vulnerable to Challenge?

An increase may be legally questionable if any of the following are present:

Lack of Authority
- The by-laws require membership approval for increases beyond X%, but only the board approved it.
- A special assessment was imposed for a capital item without the required owner vote.
Procedural Defects
- Deficient or rushed notice; no quorum; proxies mishandled; minutes not kept.
- Budget not circulated or supporting documents withheld despite reasonable requests.
Substantive Unreasonableness
- Charges unrelated to common expenses, or plainly excessive vs. market benchmarks;
- Discriminatory allocation departing from the stated formula;
- Reserve contributions grossly out of line with a reasonable reserve plan, or diversion of restricted funds.
Conflict of Interest / Bad Faith
- Related-party contracts not disclosed; no competitive bids; terms starkly unfavorable.
- Pattern of using dues for non-condominium purposes.

7) Practical Owner Remedies (Step-by-Step)

Request Information, in Writing
- Ask the board/management for the adopted budget, line-item justifications, prior-year comparisons, financial statements, reserve schedules, and minutes authorizing the increase.
- Cite your rights under the by-laws and corporation law to inspect books and records at reasonable times.
Engage Through the Governance Process
- Attend the budget meeting; raise questions on procurement (bids/quotes), staffing, utilities, insurance, and reserves.
- Propose cost-saving alternatives or phased capital programs.
- If the by-laws allow, move for a reconsideration or for membership ratification.
Call for Member Action
- If thresholds are met under the by-laws, petition for a special meeting to vote on rescission, amendment, or to require ratification.
- Consider board elections or recall as a governance remedy where mismanagement persists.
Alternative Dispute Resolution (ADR)
- Mediation within the association or through neutral providers is often faster and cheaper, especially for accounting transparency and payment plans.
Administrative and Quasi-Judicial Relief
- Housing/condominium regulatory bodies and adjudicatory commissions (successors to the former HLURB) commonly have jurisdiction over disputes involving association assessments, enforcement of by-laws, and related controversies. Remedies may include nullification of improper assessments, orders to produce records, and money claims.
Judicial Remedies
- Injunction/Nullification to stop or invalidate an ultra vires or procedurally defective increase;
- Damages for bad-faith actions;
- Declaratory relief to interpret ambiguous by-law provisions;
- Accounting/Audit orders in cases of opacity or suspected diversion.
Payment Under Protest
- To avoid compounding penalties or lien escalation, some owners choose to pay under protest while formally disputing the increase, expressly reserving rights to seek refunds/credits.

8) Developer-Controlled vs. Owner-Controlled Boards

In the early life of a project (when the developer still controls the board or holds unsold units), increases often arise from:

Commissioning defects and punch-list corrections (who pays?);
Initial reserve seeding;
Transition to owner control.

Owners should closely review the turnover agreement, punch-list status, warranties, and whether developer obligations (defect correction or initial subsidy) are being shifted into dues prematurely. Upon turnover, insist on:

Independent engineering assessment of building systems;
Reserve study and lifecycle plan;
Clean handover of books, records, and contracts.

9) Transparency and Financial Controls (Best Practices)

Annual budget package to members at least several weeks before effectivity;
Quarterly financial reports against budget with variance explanations;
Procurement policy: multiple bids for large contracts, related-party disclosures;
Reserve study updated on a multi-year cycle;
Segregated accounts for operating vs. reserve funds;
External audit by an independent auditor;
Clear house rules on billing cycles, penalties, and dispute escalation.

These practices not only enhance legal defensibility but also stabilize dues over time.

10) Frequently Raised Issues

Q: Can the board raise dues mid-year? A: If permitted by the by-laws (e.g., upon material cost changes or emergencies) and supported by amended budgets and proper notice, yes. Otherwise, it generally requires member involvement or must wait for the next budget cycle.

Q: Are uniform “per-unit” dues lawful? A: They can be if the master deed/by-laws adopt that method, but most projects follow a proportional model. Shifting methods usually requires a by-law amendment with owner approval.

Q: Can amenities closures (e.g., pool repairs) justify the same dues? A: Dues fund the overall common expenses and reserves, not pay-per-use. Temporary closures do not automatically reduce dues, but prolonged closures or service reductions may support negotiations or review of the budget.

Q: What if I simply stop paying an unlawful increase? A: Expect interest, penalties, and lien enforcement. A safer course is payment under protest or seeking timely injunctive/administrative relief.

11) Owner’s Checklist When Faced With a Dues Increase

Read the notice, budget, and minutes;
Verify authority in the by-laws (who approves? thresholds?);
Check the allocation formula and math;
Ask for supporting documents (contracts, quotes, reserve study);
Compare to prior years and to realistic benchmarks;
Assess reserve contributions vs. lifecycle needs;
Document your questions/objections in writing;
Use the meeting and vote mechanisms;
Consider ADR/administrative avenues;
If necessary, pursue injunctive/judicial relief—mindful of timelines.

12) Key Takeaways

Monthly dues and their increases are lawful when authorized, properly approved, transparent, and reasonable in relation to common expenses and reserves.
The master deed and by-laws are your primary rulebook; read them alongside the Condominium Act and corporate governance principles.
Owners have robust inspection and participation rights; boards have correlative fiduciary duties.
Effective remedies range from governance participation and mediation to administrative or court action.
Proactive financial controls and disclosure protect both the association and unit owners and reduce the likelihood of disputes.

Practical Note

Because each condominium’s master deed and by-laws differ, outcomes turn on the text of your governing documents and on facts (budget composition, reserve adequacy, procurement history, and process integrity). For contested increases, assemble the paperwork early and seek tailored advice on strategy and forum.