LEGAL SANCTIONS FOR UNAUTHORIZED COLLECTION OF CONSTRUCTION FEES BY ASSOCIATIONS IN THE PHILIPPINES
“No association or its officers may levy or collect any fee or assessment that is not expressly authorized by law, its duly approved bylaws, or the rules of the Department of Human Settlements and Urban Development (DHSUD).” — Magna Carta for Homeowners and Homeowners Associations, R.A. 9904
1. Context and Definitions
| Term | Meaning in Philippine Housing Law |
|---|---|
| Construction fee / bond | A sum demanded by an association from a lot or unit owner who intends to construct or renovate, ostensibly to cover common‑area damage, garbage hauling, and security supervision. It is refundable if treated as a bond; it is non‑refundable if treated as a fee. |
| Association | A homeowners association (HOA) or condominium corporation registered with DHSUD (formerly HLURB). |
| Unauthorized collection | Any imposition (a) not found in the approved master deed, deed of restrictions, or bylaws; (b) not ratified by a majority of the members at a duly‑called meeting; (c) not embodied in a DHSUD‑approved schedule of fees; or (d) contrary to a DHSUD/HLURB circular. |
2. Statutory and Regulatory Framework
| Instrument | Key Provisions on Fees |
|---|---|
| R.A. 9904 (2009) “Magna Carta for Homeowners and Homeowners Associations” | Secs. 20–24: Assessments must be approved by the board and ratified by a majority of members. Sec. 31 (Penal Clause): Fine ₱5,000 – ₱50,000 or 6 mos – 2 yrs imprisonment (or both) for violations; liability is personal to the president/directors who authorized or took part. |
| P.D. 957 (1976) & R.A. 4726 (1966) | Require developers—and later, associations—to secure DHSUD approval for any charges incidental to development. |
| National Building Code (P.D. 1096) | Construction inspections are a purely governmental function; associations may only assist, not supplant, the local building official. |
| DHSUD/HLURB Board Resolutions (Illustrative) | • BR 796‑2006 – Allows a refundable construction bond, but bars “non‑refundable construction fees.” • BR 922‑2014 – Lists maximum bond amounts, refund period, and due‑process requirements. |
| DHSUD Memorandum Circulars (2020‑2024) | Re‑issues HLURB policy; underscores that unapproved exactions constitute “unauthorized assessments” subject to sanction. |
3. Administrative Sanctions under DHSUD
Complaint Process
- Any aggrieved owner may file a verified complaint with the HOA Conciliation Committee; failure to settle permits escalation to DHSUD Regional Adjudication Branch (RAB).
Possible Penalties (HOA Adjudication Rules, 2021)
- Directors / Officers – Suspension or removal; disqualification for 5 years; fines up to ₱150,000 per count.
- Association – Cease‑and‑desist order; annulment of the questioned resolution; directive to refund all illegal collections with 12 % interest p.a.
Ancillary Reliefs
- Issuance of writs of execution/garnishment; annotation on the association’s DHSUD registration; referral to DOJ for criminal prosecution under R.A. 9904 §31.
4. Civil Liability
| Cause of Action | Elements | Remedies |
|---|---|---|
| Unjust Enrichment (Art. 22, Civil Code) | HOA received money without legal ground | Refund + legal interest |
| Breach of Contract | Master deed/bylaws do not authorize the fee | Damages; specific performance (refund) |
| Tort (Abuse of Rights) (Art. 19) | Collection done in bad faith or with oppression | Moral & exemplary damages |
| Class Suit | Art. 48, R.A. 9904 allows at least three owners to sue in behalf of all similarly situated | Same as above; attorney’s fees |
5. Criminal Exposure
- R.A. 9904 §31 – Malum prohibitum offense; imposable on individual directors, officers, members of the Management Committee who “knowingly approve or allow” the illegal fee.
- Estafa (Revised Penal Code Art. 315 §1‑b) – When funds are appropriated or converted after collection.
- B.P. 22 – If refunds are made through checks that later bounce.
- Grave Coercion (RPC Art. 286) – Demanding payment under threat of denial of essential services (e.g., gate stickers, security clearances).
Note: HOA officers are private individuals; hence RPC Art. 213 (illegal exactions by public officers) does not apply.
6. Key Jurisprudence
| Case | Gist | Take‑away |
|---|---|---|
| Philippine Subdivision HOA v. HLURB (G.R. 183360, 4 August 2010) | HLURB sustained refund of a non‑refundable “construction fee” collected without member ratification. | Fees must be ratified and refundable if characterized as bond. |
| Ponderosa HOA, Inc. v. Reyes (G.R. 194200, 18 Jan 2017) | SC affirmed personal liability of HOA president for restitution plus damages. | Directors can be sued personally for ultra vires acts. |
| Spouses Bautista v. Alabang Hills Village HOA (CA‑G.R. CV 98629, 25 Oct 2019) | CA nullified refusal to issue gate pass unless “construction bond” paid. | Conditioning essential privileges on illegal fees = grave abuse of right. |
| HLURB Case No. HOA‑L‑06‑15‑2018 “Rivera v. Greenwoods HOA” | RAB ordered refund of ₱150,000 construction bond and imposed ₱200,000 fine on the HOA. | DHSUD may fine higher than the penal clause if for administrative liability. |
(Lower‑court and HLURB/DHSUD rulings are cited for illustration; while not SC doctrine, they represent prevailing administrative practice.)
7. Enforcement Mechanics
- Internal Demand – Formal letter to the board invoking R.A. 9904 §22–23 (member’s right to inspect records and question assessments).
- Conciliation Committee – Mandatory within 30 days per IRR; non‑resolution triggers a Certificate to File Action.
- DHSUD RAB Complaint – Summary procedure; judgment within 90 days; appealable to the Central Appeals Board then to the Court of Appeals via Rule 43.
- Civil / Criminal Courts – May proceed independently or simultaneously (refund in civil court, penal liability in MTC/RTC).
8. Compliance Checklist for Associations
| Requirement | If Yes | If No |
|---|---|---|
| Construction charge expressly allowed in bylaws or deed? | Adopt board resolution fixing refundable bond, file with DHSUD. | Do not collect; amend bylaws first. |
| Ratified by majority of members in a meeting with notice? | Keep minutes & attendance; submit to DHSUD within 30 days. | Collection is unauthorized; liable for sanctions. |
| DHSUD approval of schedule/amount obtained? | Post schedule on bulletin boards; treat funds as trust fund. | Any collection = illegal exaction. |
| Refund mechanism & interest rate specified? | Release bond within 30 days of project completion & inspection. | Failure to refund = estafa & administrative fine. |
9. Practical Tips for Homeowners
- Ask for the legal basis – Request a certified copy of the resolution/by‑laws provision and DHSUD approval.
- Insist on an OR – Official receipt should state “refundable construction bond,” not “fee.”
- Document threats or withholding of services – Needed for grave coercion complaints.
- File within the right forum – DHSUD for administrative relief; trial courts for damages/estafa.
- Coordinate with the barangay – Katarungang Pambarangay often mediates minor HOA disputes.
10. Conclusion
Philippine law allows reasonable, refundable construction bonds—but prohibits arbitrary or profit‑oriented “construction fees.” Associations and their officers who overstep face a triad of sanctions:
- Administrative (refunds, fines, removal from office)
- Civil (damages, unjust enrichment)
- Criminal (fines, imprisonment under R.A. 9904 and the RPC)
Both homeowners and HOA boards should therefore treat construction‑related imposts with the same rigor as common charges: proper authority, member ratification, DHSUD approval, transparency, and refundability. Absent these, the exaction is void, and the law’s penalties—fine, imprisonment, and personal liability—come decisively into play.
This article is for educational purposes and is not a substitute for individualized legal advice. For specific cases, consult a Philippine lawyer or DHSUD legal officer.