How HOAs and Property Administrators Should Handle Bank Foreclosures on Unit Owners (Philippines)

This guide is written for condominium and subdivision associations, property managers, and developers operating in the Philippines. It provides a practical, step-by-step framework grounded in Philippine law and industry practice. It is general information, not legal advice.

1) Legal Foundations (What governs you)

Condominium Act (R.A. 4726). Governs condominium projects and condominium corporations. Unpaid assessments are a charge on the unit and may be secured by a lien as provided in the master deed/by-laws and annotations on the unit’s CCT.
Magna Carta for Homeowners and Homeowners’ Associations (R.A. 9904). Recognizes HOAs (including in subdivisions and, when applicable, mixed-use estates) and their power to collect dues, enforce by-laws, and manage common areas.
Act No. 3135 (as amended) & Rules of Court. Governs extrajudicial foreclosure of real estate mortgages; judicial foreclosure is under Rule 68. Most bank foreclosures are extrajudicial.
Property Registration Decree (P.D. 1529). Controls registration/annotation on titles (TCT/CCT) and priorities of encumbrances.
Civil Code & Corporation Code (as amended). Cover obligations, possession/ownership transfer, and corporate governance of the association.
DHSUD/HSAC framework. Sector regulation lies with the Department of Human Settlements and Urban Development (DHSUD); adjudication of HOA/condo disputes is with the Human Settlements Adjudication Commission (HSAC).
Data Privacy Act (R.A. 10173). Applies when sharing unit-owner information and arrears with banks, bidders, or brokers.

2) How Foreclosure Unfolds (so you know where you fit)

A. Pre-foreclosure: Borrower defaults; bank sends demand; mortgagee schedules extrajudicial sale (Act 3135) and posts/publishes notices.

B. Auction & Certificate of Sale (COS): Highest bidder wins; sheriff/notary issues COS; COS is registered on the unit’s title.

C. Redemption Period: Generally one (1) year from registration of COS for extrajudicial foreclosure by banks. The debtor (or successor) may redeem by paying required amounts.

D. Consolidation & New Title: If not redeemed, mortgagee/buyer consolidates ownership; new title (CCT/TCT) is issued.

E. Possession: Buyer is entitled to a writ of possession (usually ex parte after consolidation). Association must honor the writ.

Where the HOA/Administrator is relevant: throughout—especially at pre-foreclosure (lien strategy, documentation), post-sale/redemption (billing, turnover), and possession (move-in/out controls, arrears settlement).

3) Assessment Liens vs. Mortgages: Priority & Recovery

General priority rule. Real property taxes outrank everyone. Between a bank mortgage and an HOA/condo assessment lien, priority depends on timing and registration/annotation:
- A prior-registered mortgage generally primes later-arising or later-annotated HOA liens.
- An HOA lien that is validly created under the master deed/by-laws and duly annotated on the title before the mortgage has stronger priority.
- If your project documents declare assessments to be a perpetual charge running with the land, you still strengthen enforceability by annotation.
Practical implications.
- Pre-foreclosure arrears may be difficult to collect from the bank if the bank’s mortgage is prior and you did not annotate a lien earlier. You will likely need to pursue the original owner (and, where applicable, sureties).
- Post-acquisition/common-expense obligations accrue to whoever is the registered owner or possessor (bank, winning bidder, or its transferee) from the date of possession or ownership, subject to your by-laws and local practice.
Tenanted units. Your by-laws/house rules can require proof of dues payment to process lease registration at the admin office. Some associations, via by-laws, require tenants to show current Dues Clearance; where allowed, you may direct tenants’ payments of association dues to the HOA if the owner is delinquent (without appropriating rent unless a lawful assignment exists).

4) End-to-End Playbook for HOAs & Administrators

Step 1 — Document & Secure Your Claim

Keep a running statement of account (SOA) per unit (principal, interest/penalties per by-laws, dates).
Board resolution confirming delinquency and authorizing legal measures.
Serve notices of delinquency and demand (deliver to last known address, email on file, and unit door; keep proofs).
Check title (CCT/TCT) for mortgage annotations and determine if your lien (if allowed) is already annotated; if not, pursue annotation of your by-laws’ lien clause and, when supported, a specific notice of unpaid assessments.

Step 2 — Early Engagement with the Bank

Notify the bank’s foreclosure unit (in writing) that the unit carries outstanding association dues; attach the SOA and cite your by-laws/master deed provisions.
Request that any bidder be informed of continuing dues and move-in clearance requirements.
Share only necessary data (Data Privacy Act: minimization, purpose limitation).

Step 3 — During Foreclosure/Auction

Monitor posting/publication to learn the sale date.
Prepare a Bidder’s Advisory (one-pager) stating:
- Dues as of a cut-off.
- Policy that clearance is required before possession, transfer processing, and access to non-essential amenities.
- Utilities policy (see Step 6).
If allowed by your by-laws, require buyers to acknowledge house rules upon application for occupancy/turnover.

Step 4 — After Certificate of Sale (within redemption)

Keep billing the “Unit Account”; send copies to both the debtor-owner and the bank/buyer.
Clarify who has possession; if the bank secures possession, start billing the bank (or buyer) from possession date (or from consolidation date if that’s your by-laws trigger).

Step 5 — After Consolidation / New Title

Update your Unit Registry to reflect the new owner; require:
- Copy of new title or COS + proof of consolidation.
- Dues settlement:
  - Pre-consolidation arrears: pursue previous owner, unless you have a prior or annotated HOA lien that survives.
  - Post-consolidation/current: collect from the new owner.
- Move-in/turnover clearance issuance once current dues and lawful charges are paid.

Step 6 — Access, Amenities, and Utilities (what you can/can’t withhold)

You may withhold non-essential amenities (pool, clubhouse, function rooms, RFID for parking beyond legal requirements) per by-laws for delinquency.
Do not disconnect essential utilities (e.g., individually metered water/electricity) if doing so would violate service laws, concessionaire contracts, or public policy. For association-controlled utilities (e.g., bulk water), apply clear, published rules consistent with law and due process (notice, opportunity to pay/negotiate).
Maintain security access but you may require temporary visitor passes until clearance is completed, provided this is uniformly applied and does not block lawful possession under a writ.

Step 7 — Turnover & Physical Control

If the unit is vacant, protect the building: require new owner to book move-in, post damage deposit, present contractor permits for fit-out, and comply with construction hours.
If the unit is occupied by the debtor and the buyer obtains a writ of possession, cooperate with lawful enforcement; your guards may not obstruct.

Step 8 — Accounting, Interest, Penalties

Charge interest/penalties strictly per by-laws/resolutions; avoid usurious or arbitrary rates.
Apply payments in a transparent order (e.g., penalties → interest → principal) only if your policy discloses this.
Issue ORs properly (break out principal vs. penalties).

Step 9 — Legal Escalation Options

Small Claims/MTC for money claims within jurisdictional thresholds against the previous owner (pre-foreclosure arrears).
HSAC for disputes arising from HOA/condo governance, by-laws enforcement, and assessments.
Annotation & levy strategies with counsel where your lien supports it.
Compromise agreements with banks/bidders (e.g., settle X months of arrears upon turnover).

5) Special Scenarios & How to Respond

1) HOA lien annotated after the mortgage. Collect current dues from the buyer/new owner going forward; pre-foreclosure arrears are usually against the old owner unless you negotiated otherwise or your lien has priority by timing.

2) HOA lien annotated before the mortgage. Stronger standing to argue payment of some arrears from sale proceeds or to require settlement on turnover. Coordinate early with the bank’s counsel.

3) Unit redeemed within 1 year. Ownership returns to the mortgagor; keep billing continuously. Any turnover to a bidder during redemption should be conditioned on lawful possession and dues clearance for the period of possession.

4) Tenanted unit at time of auction.

Recognize the lease if valid and pre-existing (subject to mortgage terms and rules on overriding interests).
Require tenant to register with the admin and present receipts of current dues (or pay dues directly to HOA per house rules).

5) Developer-controlled condo vs. turned-over board. Developers should ensure the master deed/by-laws clearly create an automatic lien for dues and authorize annotation; turned-over boards should pass clear assessment and collection policies and pursue annotation where permissible.

6) Insurance proceeds after casualty. Insurance on common areas is for the association; unit insurance (if any) is separate. Foreclosure does not entitle the HOA to unit insurance proceeds; stick to dues collection.

7) Bank requests a waiver of past dues as a condition of early takeover. You may compromise pre-foreclosure arrears (without waiving current/future dues), if authorized by a board resolution, and if fair to other members.

6) Policy Toolkit (what to bake into your documents)

A. By-laws / House Rules should:

Declare assessments as a continuing charge on each unit/lot.
Authorize annotation of the lien on the CCT/TCT and filing of notices of unpaid assessments.
Provide interest/penalty caps, due process (notice, cure periods), and collection steps.
Require dues clearance for: turnover, move-in, lease registration, and amenity access (excluding essential utilities).
Set fit-out/contractor policies and security access protocols.
Allow coordinated engagement with mortgagees/banks and bidders.

B. Standard Forms & Records:

Statement of Account template with running balance.
Demand Letter and Final Notice templates.
Bidder’s Advisory handout.
Turnover Checklist (IDs, title/COS, ORs, fit-out permits).
Data-sharing notice (DPA-compliant).

7) Practical Checklists

Pre-Foreclosure Checklist

SOA updated; computation reviewed.
Board resolution authorizing collection/legal measures.
Demand letters served; proofs kept.
Title checked; status of mortgage and any HOA annotations confirmed.
Request sent to bank to notify bidders of dues.
Bidder’s Advisory prepared.

Post-Auction / Redemption Checklist

COS obtained; date of registration calendared (to compute redemption).
Billing continues to Unit Account; copy to debtor and bank.
Possession status verified (debtor vs. bank/buyer).
Current dues charged to possessor; arrears strategy settled.

Post-Consolidation / Turnover Checklist

New title/COS presented.
Current dues and lawful charges settled; clearance issued.
Access credentials released; utilities set up per rules.
Unit registry updated; archival of old owner’s ledger maintained for potential suit.

8) Do’s & Don’ts (Condensed)

Do annotate lien rights where your documents allow it.
Do keep meticulous records and ORs.
Do coordinate with banks early and often.
Do apply rules uniformly to avoid discrimination claims.
Do route disputes to HSAC or courts with counsel when needed.

Don’t

Don’t obstruct a lawful writ of possession.
Don’t disconnect essential utilities unlawfully.
Don’t charge undisclosed or arbitrary penalties.
Don’t overshare personal data; stick to DPA principles.

9) Frequently Asked Questions

Q1: Can we refuse turnover to the bank/buyer until all past dues (even those before the auction) are paid? A: You can require payment of current and post-possession dues for clearance. For past dues, your leverage depends on lien priority/annotation and any agreement you reach. Without priority, pursue the previous owner.

Q2: Can we collect from the sale proceeds? A: Only if your HOA lien is prior/annotated or the bank agrees to allocate. Otherwise, mortgagee priority usually controls.

Q3: Who pays dues during the redemption period? A: The possessor/beneficial user should pay ongoing common expenses. Keep billing both parties until possession is clear; document your basis.

Q4: Can we bar a delinquent foreclosed owner from entering? A: You may restrict amenities per by-laws but must respect lawful possession and safety rules.

10) Sample “Bidder’s Advisory” (one-pager you can adopt)

Notice to Bidders and Mortgagees

Association dues and charges accrue monthly and run with the unit.

As of [date], estimated dues/charges: ₱[amount] (subject to update).

Clearance is required for turnover, move-in, and non-essential amenities.

Essential utilities are governed by concessionaire rules and lawful policies.

For inquiries and settlement, contact [Admin Office / Email / Phone].

11) Work with Counsel (when to escalate)

Engage counsel when: (i) annotating HOA liens and notices; (ii) negotiating with banks for settlement from proceeds; (iii) defending or pursuing HSAC/court actions; (iv) handling writs of possession; and (v) crafting by-laws amendments to strengthen lien and collection language.

Bottom Line

Your strategy rests on three pillars: (1) Get your lien house in order (documents + annotation), (2) bill the right party at the right time (old owner vs. bank/buyer based on possession/priority), and (3) enforce consistently and lawfully (due process, utilities policy, cooperation with writs). Do these, and foreclosures become manageable events—not crises—for your community.