Overview

In subdivisions, villages, and condominiums, “common areas” (also called common elements in condos) are spaces intended for shared use—clubhouses, function halls, sports courts, parks, guardhouses, multi-purpose areas, roof decks, hallways, lobbies, and sometimes parking or commercial kiosks, depending on the project and governing documents.

When association officers (or directors/trustees) rent out common areas—especially if they rent them to themselves, their relatives, or their businesses, or do so without proper authority—homeowners often ask:

Who owns the common areas?
Who has the power to lease them?
What approvals are required?
What rules prevent self-dealing and abuse?
What can homeowners do if officers act without authority or profit personally?

This article answers those questions using the Philippine legal and regulatory framework.

1) What Counts as a “Common Area,” and Why Ownership Matters

A. Condominiums

Under the Condominium Act (RA 4726), common areas are generally common elements owned in undivided interest by unit owners (usually through a condominium corporation or association arrangements). A lease of a common element is not the same as leasing a private unit—it affects everyone’s property interest and use.

B. Subdivisions / Villages / Homeowners Associations

Common areas in subdivisions can be legally structured in different ways:

Owned by the homeowners association (HOA) (as a corporation/nonstock association).
Owned by the LGU (e.g., certain roads or parks donated/turned over).
Still owned by the developer (pending turnover, subject to law and project approvals).
Subject to easements / zoning / project approvals (open spaces, parks, road-right-of-way, waterways).

Why this matters: You can only validly lease what the lessor has the right to lease. If the HOA doesn’t own the area—or is legally restricted from converting it to commercial use—any “rental” may be void, voidable, or unlawful, and may expose officers to liability.

2) Key Legal Sources (Philippine Framework)

A. RA 9904 (Magna Carta for Homeowners and Homeowners’ Associations)

This is the central law for HOAs. It recognizes members’ rights, regulates associations, and generally places HOAs under housing-sector regulation (now under DHSUD/related adjudication systems). It also emphasizes transparency, accountability, and proper governance.

B. Revised Corporation Code (RCC) — for Associations Organized as Corporations

Most HOAs are nonstock corporations. That means the HOA’s board/officers must follow:

corporate governance standards,
fiduciary duties,
record-keeping and member rights to information,
rules on self-dealing and conflict of interest transactions.

C. Condominium Act (RA 4726) + Condo Corporation/Bylaws/Master Deed

For condos, leasing common areas must comply with:

the master deed,
declaration of restrictions,
condominium corporation bylaws,
rules on alteration of use and disposition/encumbrance of common elements.

D. Civil Code Principles (Obligations, Contracts, Co-Ownership/Fiduciary Concepts)

Even when a specific HOA statute doesn’t spell out every scenario, Philippine civil law principles apply:

contracts require authority and consent,
fiduciary-like obligations exist for those managing property for others,
damages, restitution, and unjust enrichment principles may apply.

E. Local Ordinances / Zoning / Building / Fire Codes

A common area lease that effectively converts a residential common space into a business venue may require permits and compliance with:

zoning rules,
occupancy/load limits,
fire safety,
noise ordinances,
sanitation and waste requirements.

3) Who Has Authority to Lease Common Areas?

The Short Rule

The power to lease must come from the governing documents and the law. That usually means:

the HOA board can manage property only within its authority, and
member approval may be required for significant or conflicted transactions.

A. Start With the Governing Documents (Always)

Homeowners’ rights and board powers are usually defined by:

Articles of Incorporation / By-Laws (HOA as corporation),
Master Deed / Declaration of Restrictions (condos),
Rules and Regulations,
Deeds of donation/transfer for common areas,
Turnover documents from developer/LGU.

These often specify:

whether the board can lease,
leasing limits (term, purpose, rates),
required vote thresholds (board vote vs member vote),
restrictions (no commercial use, no exclusive long-term occupation, etc.).

B. Board Authority vs. Member Approval

Typical governance patterns:

Day-to-day, short-term rentals (e.g., clubhouse for private parties) may be within board authority if rules exist and funds go to the HOA.
Long-term leases, exclusive possession, commercial leasing, or leasing that changes the intended use often require member ratification, sometimes by a supermajority, depending on bylaws and the nature of the property interest.

C. If Officers Lease to Themselves: Higher Standards Apply

Even if the HOA has general authority to rent common areas, renting to an officer/director/trustee is a conflict-of-interest scenario and is subject to stricter requirements (see Section 5).

4) Homeowners’ Core Rights When Common Areas Are Rented

1) Right to Know and Be Informed

Homeowners generally have the right to be informed of:

rental policies (fees, eligibility, schedules),
the contract/lease terms (at least material terms),
where rental income goes,
approvals obtained.

2) Right to Inspect Records (Transparency)

In corporate HOAs, members typically have rights to inspect:

minutes of board/member meetings,
resolutions approving leases,
financial statements,
accounting of rental income and expenses,
contracts (especially those involving common property).

Practical note: Access is not unlimited in format (e.g., reasonable hours, safeguards), but refusal without valid reason is a major red flag.

3) Right to Equal Treatment (Non-Discrimination)

If the HOA rents a facility to members, it should do so under uniform rules:

same fees/requirements,
fair scheduling,
no special “officer-only” discounts unless properly approved and justified.

4) Right to Proper Use of Dues and Rental Income

Rental income is typically HOA revenue and should be used for HOA purposes:

maintenance,
security,
utilities and repairs,
reserves.

If officers divert revenue for personal use, homeowners may demand:

restitution,
accounting,
sanctions/removal,
legal action.

5) Right to Participate in Governance

Members usually have rights to:

vote in elections,
call/signal for special meetings (subject to bylaws),
propose resolutions,
approve or reject major transactions when required.

6) Right to Challenge Ultra Vires or Irregular Acts

Homeowners can challenge acts that are:

beyond board authority (ultra vires),
approved without quorum/notice,
inconsistent with restrictions (e.g., converting parks into commercial rentals),
tainted by conflict of interest.

5) Conflict of Interest and “Self-Dealing” Rentals (Officer as Lessee)

This is the most sensitive scenario.

A. Why It’s Problematic

Officers/directors are expected to act for the benefit of the association. If they rent common areas personally, risks include:

underpricing the rent,
reserving prime dates/times,
exclusive use that blocks other homeowners,
informal/no-contract arrangements,
kickbacks from third-party renters.

B. What Makes a Self-Dealing Lease Potentially Valid

A conflict-of-interest lease is more likely to be defensible if ALL of these are present:

Full disclosure of the officer’s interest (in writing, before approval).
Proper approval process (board and/or members as required), with the interested officer not improperly influencing quorum/voting.
Fairness: rent and terms are demonstrably comparable to market/arms-length arrangements.
Documented contract: clear term, rate, permitted use, liabilities, insurance, deposits, damage responsibilities.
Transparency in accounting: rent paid to HOA, receipted, deposited, reflected in financials.

If these are missing, homeowners have strong grounds to challenge the deal.

6) Common Areas Often Cannot Be “Effectively Privatized”

Even when an HOA owns a facility, certain acts may be improper, such as:

granting exclusive long-term possession of a park/road/open space to a private party,
converting an open space into a commercial venue that contradicts approvals/restrictions,
leasing road-right-of-way or easements in a way that blocks access,
using the common area in ways that violate safety, zoning, or nuisance standards.

A useful test:

Does the lease materially reduce or remove the homeowners’ ability to use the area as intended? If yes, it likely requires higher-level approval and may be illegal or voidable depending on the property’s legal status.

7) Required Process: What “Proper Rental” Usually Looks Like

A well-governed HOA/condo association rental program typically includes:

Written policy approved by the board (and members if required)
- rates, deposits, cancellations, member priority rules
Scheduling and equal access rules
Standard form contract
Board resolution for non-routine leases (commercial/long-term/third-party)
Member ratification for major transactions, if bylaws/law require
Permits and compliance (noise, safety, occupancy, business permits if applicable)
Transparent accounting
- official receipts, bank deposits, audited reporting

If officers resist formalities (“verbal lang,” “wala namang problema,” “kami na bahala”), homeowners should treat that as high-risk.

8) Remedies and Actions Homeowners Can Take

A. Internal Remedies (Usually Step 1)

Written demand for disclosure and accounting
- request minutes/resolutions, contract, receipts, income/expense summary
Request agenda item for next meeting
- to review/ratify/void lease policy
Call for special meeting (if bylaws allow)
Vote to remove/recall officers (depending on bylaws and election rules)
Commission an independent audit
- especially if money is involved and records are unclear

B. Regulatory / Administrative Routes

Depending on the association type and issue, homeowners may bring disputes to:

housing/HOA regulatory channels (commonly under DHSUD/related adjudication frameworks), and/or
corporate governance regulators for corporate compliance issues (often SEC-related concerns for corporate records and governance).

Which forum is best depends on:

whether it’s mainly an HOA governance dispute,
a corporate records/inspection dispute,
or a property/use dispute tied to housing regulation.

C. Barangay Conciliation (Katarungang Pambarangay)

Many neighbor/association disputes can require or benefit from barangay conciliation first, especially if parties are residents in the same locality and the case is not exempt.

D. Court Actions (When Necessary)

Possible legal actions include:

injunction (to stop an ongoing unauthorized lease),
annulment/voiding of contract (authority/consent issues),
accounting and restitution (return of funds),
damages (if homeowners suffer measurable harm),
derivative-type actions in corporate context (where members sue on behalf of the corporation under certain conditions).

E. Potential Criminal Exposure (Serious Misconduct)

If facts support it, officers could be exposed to:

estafa (fraud/misappropriation),
falsification (fake minutes/receipts),
other crimes tied to misappropriation or deception.

Criminal complaints require strong evidence and careful handling; they are not a substitute for governance fixes, but they matter when money is diverted.

9) Evidence Checklist for Homeowners

If you suspect improper rentals, gather:

copies/photos of rental advertisements, messages, postings
schedules showing officer priority/exclusive use
receipts (or absence of receipts)
bank deposit records (if obtainable through HOA disclosure)
minutes/resolutions approving rental
contract/lease documents
comparative pricing evidence (similar venues)
witness statements (staff/security/maintenance)
photos showing structural alterations or blocked access

10) Red Flags That Often Indicate Abuse

no written contract
cash-only payments without official receipts
rent paid to a person instead of the HOA account
missing minutes/resolutions
“private” deals with officer’s family/company
rates far below comparable rentals
long-term exclusive occupation of a “common” space
refusal to show financial statements or ledgers
sudden rule changes benefiting officers

11) Practical Standards Homeowners Can Advocate For

To prevent recurring disputes, homeowners can propose reforms such as:

mandatory publication of rental policy and rates
conflict-of-interest policy requiring disclosure and member ratification for officer-related leases
quarterly income and expense reporting for rentals
annual independent audit
standardized official receipt system and bank-only payments
online booking with transparent queue rules
caps on frequency of officer/member rentals to ensure equal access

12) A Simple Homeowner Demand Template (Text You Can Adapt)

Subject: Request for Documents and Accounting – Rental of Common Areas

I am requesting, as a member/homeowner, access to the following records regarding the rental/lease of the association’s common areas:

Board/member meeting minutes and resolutions approving the rental program and/or specific leases
Copies of lease/rental contracts entered into for the past ____ months
Schedule of rentals (dates, renter classification: member/non-member/officer-related)
Statement of income received and expenses paid relating to rentals for the past ____ months
Proof of deposits to the association’s bank account and official receipts issued
Current written rental policy, rates, and guidelines

Please provide these within a reasonable period and advise the schedule for inspection/copying, consistent with association rules and applicable law.

Closing Notes

Homeowners are not powerless when association officers rent out common areas. The key issues are authority, proper approvals, fairness, transparency, and conflict-of-interest controls. Many disputes resolve quickly once officers are required to produce minutes, contracts, receipts, and accounting—and once homeowners organize around formal governance mechanisms (special meetings, audits, elections, policy adoption).

If you want, paste your HOA/condo bylaw provisions on board powers, quorum/voting, and property management (or summarize them), and I’ll map exactly:

what approvals were required,
which acts are void/voidable,
and what the strongest remedy path is based on those provisions.