The Legality of Increasing Condominium Association Dues in the Philippines

This article explains when and how a condominium association (often a condominium corporation) in the Philippines may lawfully increase monthly dues, what limits apply, what process must be followed, and what remedies are available to unit owners. It synthesizes the core legal framework (statutes, regulations, and typical by-laws provisions) and common Philippine practice.

1) Legal Foundations

Condominium Act (Republic Act No. 4726). Governs the creation and operation of condominiums. Expenses for administration, maintenance, repair, insurance, utilities for common areas, and similar items are typically shared by unit owners in proportion stated in the Master Deed and By-Laws. Associations can levy regular assessments (monthly dues) and special assessments to fund these common expenses.
Revised Corporation Code (Republic Act No. 11232). Most condominium associations are organized as non-stock, non-profit corporations. Corporate governance (board powers, meetings, quorum, notice, member rights to records) is governed here, except where RA 4726 and the project’s governance documents provide specific rules.
Magna Carta for Homeowners and Homeowners Associations (Republic Act No. 9904). While written broadly for homeowners’ associations, many of its good-governance standards (transparency, access to records, due process for fines, reserve funds) are treated as persuasive—and sometimes applied—insofar as compatible with condominium setups. Your project’s Master Deed/By-Laws usually control where there’s tension.
DHSUD / HSAC framework. Disputes on condominium administration and assessments commonly fall under the Human Settlements Adjudication Commission (HSAC) (formerly HLURB adjudication). Corporate-type intra-corporate controversies may lie with special commercial courts, but assessment disputes and by-law enforcement typically go to HSAC first.

2) Who Can Increase Dues—and On What Authority?

Primary Source: By-Laws & Master Deed. These documents usually:
- Authorize the Board of Directors/Trustees to adopt an annual budget and fix monthly dues.
- Set the allocation formula (frequently based on the unit’s “percentage interest” in the common areas or floor area).
- Allow special assessments for capital projects, emergencies, or deficits.
- Provide procedures for member ratification (if required) and limits, if any.
Default Corporate Power. Even where by-laws are silent on exact mechanics, the Board has the duty to fund common expenses necessary to preserve the property and may impose reasonable assessments to do so—subject to due process, transparency, and the limitations below.

3) Types of Charges

Regular (Monthly) Dues. For recurring operations: security, cleaning, utilities for common areas, staff salaries, landscaping, routine repairs, admin and audit fees, association insurance, and reserve funding.
Special Assessments. For one-off needs: major equipment replacement (elevators, gensets), facade rehabilitation, extraordinary repairs after typhoons, legal expenses for litigation affecting the condominium, technology upgrades, etc.
User Fees / Limited Common Elements. Parking slots, amenities (pool, function rooms), or limited common elements (e.g., balcony waterproofing used by some but not all) may justify differentiated or usage-based charges when allowed by by-laws.

4) Substantive Limits on Increases

An increase is generally lawful if it satisfies all of the following:

Purpose Bound. The dues fund common expenses (operation, maintenance, preservation, necessary improvements) or duly authorized reserves—not unrelated or personal benefits.
Allocation Rule Compliance. The method (equal shares, floor-area-based, percentage interest, or a hybrid) must match the Master Deed/By-Laws. Boards cannot unilaterally change the allocation formula without a proper amendment.
Reasonableness & Necessity. Amounts should be supported by a line-item budget, vendor quotes, historical costs, inflation, and planned reserves. Excessive or punitive increases without basis can be struck down.
Non-Discrimination. Similarly situated units should be treated alike; distinctions must be rooted in the governance documents (e.g., commercial vs. residential use, limited common elements, or amenity tiers).
No Waiver of Essential Rights. Enforcement cannot deprive an owner of statutory rights (e.g., safe access to the unit). Sanctions for nonpayment must remain within what the by-laws permit and what due process allows.

5) Procedural Requirements (What “Due Process” Looks Like)

While exact steps depend on your documents, a defensible increase typically follows this pattern:

Board Budgeting & Resolution.
- Prepare a proposed annual budget (OPEX + CAPEX + reserves) and cash-flow.
- Pass a board resolution setting the dues, effective date, and basis.
Notice to Members.
- Provide written notice (and posting) with the budget summary, rationale, calculations, and effective date.
- Give reasonable lead time before implementation (commonly 15–30 days; check by-laws).
Member Meeting / Ratification (if required).
- Some by-laws require member approval (majority or 2/3) for budgets, special assessments above a threshold, or capital projects. If so, hold a meeting with proper notice, quorum, and minutes.
Recordkeeping & Transparency.
- Maintain board minutes, resolutions, contracts/bids, and financial statements.
- Make records available for inspection by members as allowed by law.
Billing & Implementation.
- Issue statements showing the computation per unit, due dates, penalties/interest, and where to pay.
- Apply existing penalty/interest schedules strictly as written (no retroactive changes).

6) Reserves and Long-Term Funding

Reserve Funds for major repairs/replacements (roofing, elevators, fire systems, repainting) are standard practice and often required by by-laws or recommended by regulators.
Boards should base reserve targets on reserve studies (useful life, replacement cost, inflation) and fund them steadily through monthly dues rather than repeated special assessments.
Transparency: disclose reserve contributions, current balance, and planned uses annually.

7) Nonpayment: Enforcement and Limits

Consequences Typically Allowed (if in the by-laws):
- Interest and penalties on arrears (must be reasonable and clearly stated).
- Collection actions: demand letters, HSAC cases, or court suits for sums of money.
- Association lien over the unit for unpaid assessments (often recognized in law and by-laws), enforceable against successors in title upon proper notice/annotation.
- Suspension of privileges related to amenities (e.g., function rooms, pool access), not essential rights.
Constraints:
- Associations cannot evict an owner or cut essential utilities (power/water) provided by public utilities due to unpaid dues.
- Security or gate access protocols must not impede lawful entry of owners/occupants.
- Any naming-and-shaming beyond proper posting of delinquency lists can raise legal and privacy issues.

8) Developer/Turnover Nuances

Pre-Turnover: The developer often advances deficits; dues may be subsidized or set at a provisional rate.
Turnover to Association: Expect re-benchmarking of dues once actual operating costs (post-full occupancy) are known.
Shared Facilities / Mixed-Use: Cost-sharing agreements (e.g., between residential and commercial components) must be honored; increases must respect these covenants.

9) Common Red Flags (Grounds to Challenge an Increase)

No board resolution, no budget or supporting computations.
Sudden increase without notice or before the start of the covered month.
Change in allocation formula without a proper Master Deed/By-Laws amendment.
Capital project funded via dues where by-laws require member approval and none was obtained.
Unrelated spending (e.g., political donations, perks) or expenditures benefiting only certain owners without proper basis.
Chronic deficits with no reserve planning or competitive procurement for big-ticket contracts.

10) How Unit Owners Can Respond—Practical Roadmap

Ask for the Paper Trail. Request copies of: the board resolution, annual budget, reserve schedule, bids/quotes for major items, and the computation per unit.
Check the Governing Documents. Verify whether member ratification is needed, what vote threshold applies, and how the allocation formula should work.
Engage Through Proper Channels. Submit a written query or objection; place the matter on the agenda of the next members’ meeting; organize a petition if thresholds are provided for calling a special meeting.
Seek Mediation or File with HSAC. If unresolved, file a complaint or petition (e.g., to enjoin an unlawful increase, compel disclosure, or settle interpretation of by-laws). Preserve evidence (notices, minutes, statements).
Consider Corporate Remedies. For director misconduct (e.g., self-dealing), explore corporate actions (derivative suits, removal for cause) under the Revised Corporation Code, observing venue and jurisdiction rules.
Keep Paying the Uncontested Portion. To reduce exposure to penalties, many owners pay the previous rate or the undisputed portion under protest while the dispute is pending—seek legal advice on the best approach in your case.

11) Governance Best Practices for Lawful Increases (For Boards)

Budget early with clear line items and inflation assumptions.
Obtain competitive bids for contracts; avoid related-party deals without full disclosure and member consent where required.
Maintain and disclose a reserve study; fund reserves consistently.
Use predictable index-linked escalators (e.g., CPI components) if the by-laws allow.
Provide plain-English explanations and Q&A to owners; host budget briefings.
Document everything: resolutions, minutes, attendance, voting, and proper notices.

12) Frequently Asked Questions

Q: Can the board raise dues without a member vote? A: Often yes for regular dues, if the by-laws authorize the board to adopt the annual budget. For special assessments or large capital expenditures, many by-laws require member approval at specified vote thresholds.

Q: Can different unit types pay different rates? A: Yes, if the Master Deed/By-Laws provide for it (e.g., floor-area-based, commercial vs. residential, limited common elements). Boards cannot invent a new formula on their own.

Q: Is there a cap on increases? A: The law does not impose a fixed percentage cap. The constraints are reasonableness, purpose, procedure, and documentary support, plus any caps in your by-laws.

Q: What if I sell my unit—do unpaid dues follow me? A: Unpaid assessments can be secured by an association lien and may attach to the unit; buyers should obtain a clearance from the association during transfer.

Q: Are dues subject to taxes (e.g., VAT, income tax)? A: The tax treatment of association dues has evolved over time and may depend on current revenue regulations and the association’s activities. Because tax rules change, get current tax advice when budgeting or challenging computations.

13) Key Takeaways

Authority comes from your Master Deed/By-Laws and RA 4726, applied within corporate governance rules under RA 11232.
An increase is lawful when it is purpose-bound, formula-compliant, reasonable, and properly approved with notice and records.
HSAC commonly handles assessment disputes; preserve evidence and follow internal processes first.
Owners are entitled to transparency and may challenge defective increases—but should manage arrears exposure prudently.
Boards should institutionalize reserve funding and competitive procurement to keep dues predictable and defensible.

Final Note

Every condominium is governed by its own Master Deed and By-Laws. For any specific dispute (e.g., whether a member vote was required, or whether a lien can be annotated), have a lawyer review those documents alongside the latest regulations and issuances that apply to your city or development.