Verifying Legitimacy of a Homeowners Association Selling “Lot Rights” in the Philippines

This article explains how to assess whether a Philippine homeowners association (HOA) may lawfully sell—or claims to sell—“lot rights,” and how buyers and homeowners can verify legitimacy, avoid scams, and enforce their remedies. It is written for lay readers, developers, property managers, and counsel who need a practical, end-to-end checklist grounded in Philippine law and typical regulatory practice.

1) Quick takeaways (if you read nothing else)

HOAs generally do not sell subdivision lots. Developers sell lots under a License to Sell. HOAs primarily manage the subdivision or condominium’s common concerns. If an HOA is “selling lots,” treat it as a red flag and verify carefully.
What an HOA may sell: only property it actually owns (titled in the HOA’s name) and only if its governing documents allow it and the members approve under required voting thresholds.
What an HOA typically may not sell: open spaces, parks, roads, and facilities that are restricted for subdivision/common use or donated to an LGU—these are ordinarily inalienable or heavily restricted.
“Lot rights” is not a statutory ownership category. It often signals a membership/use right (not ownership) or, worse, a disguised sale without proper authority or title. Always check the Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT) and the Deed of Restrictions.
When in doubt, walk away unless (a) title is clear, (b) HOA authority is clear, (c) member approvals and minutes exist, and (d) taxes and regulatory clearances are buttoned up.

2) Legal framework (what governs HOAs and sales)

Homeowners Associations
- Governed by the Magna Carta for Homeowners and Homeowners Associations (RA 9904) and its implementing rules.
- HOAs are non-stock, non-profit associations formed to represent and manage a subdivision/condominium community.
- Regulation & Dispute Resolution today are split: the Department of Human Settlements and Urban Development (DHSUD) handles policy/regulatory functions for housing and real estate; the Human Settlements Adjudication Commission (HSAC) adjudicates housing/real estate and intra-association disputes.
Subdivision & Condominium Sales
- Presidential Decree No. 957 (PD 957) and its rules govern the sale of subdivision lots and condominium units by developers/owners/agents, requiring registration and a License to Sell.
- Condominium Act (RA 4726) and master deeds govern common areas and unit ownership.
Local & Private Restrictions
- Deed of Restrictions (DoR), Master Deed, Articles of Association/Bylaws, and approved subdivision plans may prohibit or restrict alienation of open spaces, roads, parks, or facilities.
- Donations to LGUs (e.g., roads/parks) and easements (e.g., for utilities) frequently render certain parcels non-disposable by the HOA.
Property & Tax Laws
- The Civil Code on ownership, sales, agency, and corporate acts applies.
- Real estate taxes, transfer taxes, documentary stamp tax, and income tax/VAT consequences may apply to an HOA’s disposition of property, which are distinct from dues/assessments.

3) What exactly can an HOA sell?

A) Property titled in the HOA’s name

An HOA may sell only if all of the following are true:

Title check: The TCT/CCT shows the HOA as registered owner (or the HOA holds an absolute deed of sale from the developer duly transferred at the Registry of Deeds).
No legal encumbrance bars sale: No annotations in the title (e.g., “for open space,” “park,” “road lot,” “for common use,” “deed of donation to LGU,” “reversion clause,” or lis pendens) that prohibit alienation.
Governing documents authorize disposition: The Articles/Bylaws or a member-approved resolution allows sale of real property. Many bylaws require member approval (commonly 2/3 or 3/4 vote) for disposal of substantial assets.
Regulatory consistency: The DoR/Master Deed/subdivision plan does not classify the parcel as a common area/open space reserved for the community.
Corporate authority: A Board Resolution and Secretary’s Certificate authorize named signatories to sell, with minutes evidencing the members’ vote (if required).
Taxes and permits: The HOA acknowledges and settles applicable taxes and obtains any required clearances.

B) Common areas & open spaces

High caution: Open spaces, parks, roads, setbacks, clubhouses and utility areas are typically common or restricted by the approved subdivision plan and DoR (often required under PD 957 rules).
Usual rule: These areas are not for sale to private individuals. They are either held in trust for common use, or donated to an LGU, or burdened with easements—alienation is generally prohibited.
Narrow exceptions: Sometimes an HOA owns a non-essential asset (e.g., an excess parcel) not designated as open space. Even then, expect stringent member-approval and documentation.

C) “Lot rights” vs. real ownership

“Lot rights” is not ownership unless backed by a TCT/CCT transfer.
It often refers to use rights (e.g., parking slots, garden plots, or exclusive use of a portion of common area) or membership/share rights in a non-condo setting. These do not create registrable ownership and cannot be represented as a fee-simple title.
If the HOA is “selling lot rights” that look like a substitute for a titled sale, treat it as a potentially unlawful workaround.

4) Red flags and how to handle them

No title in HOA’s name for the parcel being sold.
Title annotations label it as open space/park/road/common area, or it’s already donated to the LGU.
No License to Sell where the transaction is effectively a subdivision sale by a party acting like a developer.
No member approval or minutes; refusal to show Board and members’ resolutions.
Vague “rights” documents (receipts, certificates of membership) instead of a proper Deed of Absolute Sale and TCT/CCT transfer.
Pressure tactics: steep discounts for immediate cash; discouraging independent counsel; “reservation” fees without escrow.
Mismatch between DoR/Master Deed/subdivision plan and the parcel being offered (e.g., it’s actually a designated park/utility lot).

When any red flag appears, pause the transaction, request documents (see Section 5), and consult counsel.

5) Due diligence checklist (practical, step-by-step)

Identity & Good Standing of the HOA
- Certificate of Registration (HOA) and latest proof of good standing with the housing regulator.
- Articles of Association, Bylaws, and current officers list; verify term and authority.
Corporate Authority to Sell
- Board Resolution and Secretary’s Certificate naming signatories.
- Minutes and attendance showing member approval meeting the bylaw threshold (e.g., 2/3 or 3/4).
- If bylaws are silent or ambiguous, insist on a supermajority member vote and ratification.
Property Identification & Status
- Certified true copy of TCT/CCT (from the Registry of Deeds) naming the HOA as owner.
- Subdivision plan/lot plan and technical description matching the title.
- Annotation page review (easements, donations, restrictions, liens, lis pendens).
- Tax Declaration and Real Property Tax (RPT) receipts; check for delinquencies.
Use/Restriction Verification
- Deed of Restrictions / Master Deed / approved subdivision or site development plan to confirm the lot is not an open space/park/road/utility area or otherwise restricted.
- If the property is a former developer asset, verify any deed of donation or turnover document to the HOA and if it restricts alienation.
Regulatory Compliance
- If the sale looks like a subdivision/developer-type sale, ask for project registration and License to Sell.
- For one-off sales of HOA-owned property, obtain a legal opinion on whether DHSUD clearance is needed given the project’s regulatory history and lot classification.
Contracts & Transfer Mechanics
- Deed of Absolute Sale with complete representations and warranties, including:
  - HOA owns the property free and clear (except disclosed encumbrances).
  - Property is not an open space/common area restricted from sale.
  - Authority is validly obtained (attach Board/Member resolutions).
  - Taxes/assessments are fully paid up to closing; indemnity clause for hidden defects in title.
- Closing checklist: transfer taxes, documentary stamp tax, capital gains tax/creditable withholding tax as applicable, CAR (BIR), new tax declaration, and title transfer at the Registry of Deeds.
Escrow & Funds Flow
- Use a neutral escrow for the purchase price, releasing funds only upon delivery of registrable title and submission of required clearances.

6) Special scenarios

A) The “excess parcel” or former developer lot

Sometimes the HOA legitimately owns an “excess” parcel (not designated as open space). This can be sold if the HOA’s governing documents and member vote authorize it and no restriction exists on title or in the DoR/subdivision plan. A careful regulatory memo is recommended to ensure no PD 957 implication is triggered.

B) Selling portions of common areas as exclusive-use strips

Turning common areas into quasi-private “strips” via “rights” is typically not allowed unless the DoR expressly provides a mechanism (e.g., reclassification with supermajority vote plus regulatory and local approvals). Even then, roads/setbacks/parks are highly protected.

C) Informal settlements or untitled lands

Where “rights” are colloquially traded (e.g., possession or occupancy rights), an HOA cannot convert these into ownership absent title and proper government processes (e.g., land disposition/award). Treat “lot rights” here as non-ownership and high risk.

D) Condominiums

“Parking slots” or limited common areas may be assignable if the Master Deed allows, but open spaces and structural/common areas are not for sale as fee-simple property.

7) Rights and remedies

For Homeowners (members)

Internal remedies: question the board via written demand; request inspection of records (resolutions, minutes, contracts); call for a general membership meeting per bylaws.
Regulatory/Administrative: file before the HSAC for intra-association disputes (e.g., to nullify an ultra vires sale, compel disclosure, or enjoin actions).
Judicial: seek injunction, annulment of sale, damages, or derivative action on behalf of the HOA in the Regional Trial Court.
Criminal (in egregious fraud): consider estafa or violations related to real estate sales law, in coordination with counsel and prosecutors.

For Buyers

If misled by an HOA purporting to sell “lot rights,” pursue rescission or annulment, refunds, and damages; seek preliminary injunction to stop further disposition.
If funds were paid, demand escrow return under contractual milestones or claim unjust enrichment/fraud as appropriate.

For HOA Officers/Directors

Fiduciary duties apply. Ultra vires or bad-faith transactions risk personal liability and administrative sanctions. Ensure full compliance, robust member approvals, and transparent disclosure.

8) Practical documents to request (and why)

Certificate of HOA Registration & good standing – proves regulatory status.
Articles/Bylaws – sets authority and voting thresholds for asset disposition.
Board Resolution & Secretary’s Certificate – proves corporate authority and signatories.
Members’ Meeting Minutes & Voting Tally – proves supermajority approval.
Certified true copy of TCT/CCT (and latest title status report) – proves ownership and reveals annotations/encumbrances.
Deed of Restrictions / Master Deed / Approved Subdivision Plan – reveals whether parcel is open space/common area or restricted.
Tax Declaration & RPT receipts – checks for arrears and supports transfer.
Prior Deeds (donation/turnover) – shows restrictions or conditions.
Legal opinion / regulatory memo – confirms that the sale does not violate PD 957 or open-space rules.
Draft Deed of Absolute Sale with warranties – confirms terms before paying any reservation/earnest money.
Escrow Agreement – secures funds pending title transfer.

9) Sample contract language (for buyers to insist on)

Representation on Nature of Property. Seller represents that the Property is not designated as open space, park, road lot, utility or common area under any approved subdivision plan, Deed of Restrictions, Master Deed, or regulatory approval, and that no law, ordinance, regulation, or title annotation prohibits its sale or transfer.

Authority & Approvals. Seller represents that its Board of Directors and the required percentage of HOA members have duly authorized the sale; certified copies of the Board Resolution, Secretary’s Certificate, and members’ meeting minutes are attached as Annexes.

Title & Encumbrances. Seller warrants good and registrable title in its name, free from liens and encumbrances other than those disclosed in Annex [ ], and will cooperate in securing all taxes, clearances, and permits necessary for transfer.

Indemnity. Seller agrees to indemnify Buyer against any loss arising from breach of the foregoing representations and warranties, including the nullity of the sale due to violations of law, deed restrictions, or lack of authority.

Escrow. The Purchase Price shall be deposited in escrow and released only upon delivery of registrable documents and evidence of tax/fee payments required for title transfer.

(Adjust for the specific project and regulatorily required forms.)

10) Risk-mitigation playbook (buyers & members)

Never rely on a “certificate of rights” or membership card as proof of land ownership.
Do not pay reservation fees outside escrow without reviewing title and minutes.
Match the lot number and technical description across the TCT/CCT, subdivision plan, and deed drafts.
Photograph and map the site; verify that the physical parcel is not a road setback, park, or utility corridor.
Confirm with the LGU planning office if the parcel was donated or designated as open space in the approved plan.
Get counsel to issue a short form due diligence opinion before paying significant sums.

11) FAQs

Q: Can an HOA sell a road lot inside the subdivision? Generally no. Road lots are usually dedicated for common/public use and often cannot be privately sold. Even if titled in the developer’s or HOA’s name, use restrictions and easements typically bar alienation.

Q: The HOA is offering “lifetime lot rights.” Is that ownership? No, not by itself. Ownership of land in the Philippines is evidenced by TCT in your name. “Rights” without title typically mean use/membership rights.

Q: If members voted unanimously, can we sell a park to raise funds? A unanimous vote cannot override statutory and regulatory restrictions on open spaces/common areas. If the law, DoR, or approved plan prohibits alienation, the sale remains void or voidable.

Q: Does the HOA need a License to Sell? If the HOA is effectively acting like a developer marketing subdivision lots, a License to Sell regime under PD 957 would be implicated—and the HOA likely cannot proceed. For a one-off sale of an HOA-owned, unrestricted parcel, a License to Sell may not apply, but full due diligence and regulatory review are still essential.

12) Final checklist (printable)

HOA registration and good standing verified
Articles/Bylaws reviewed; asset-sale authority confirmed
Board resolution, members’ minutes, and vote thresholds satisfied
Certified true copy of TCT/CCT in HOA’s name obtained
Title annotations clean; no open space/common-area restrictions
DoR/Master Deed/subdivision plan matched to parcel
LGU/utility easements checked; no donation to LGU
Taxes/fees computed; escrow set up
Deed of Sale with robust warranties ready
Counsel’s legal/regulatory memo secured

Disclaimer

This is general information intended for educational purposes and not legal advice. Facts vary widely by project and document set. For any contemplated purchase or HOA disposition, consult a Philippine lawyer and review the exact title, Deed of Restrictions, subdivision plan, and current DHSUD/HSAC guidance.