Legality of Condominium Associations Increasing Monthly Dues in the Philippines

Overview

In the Philippines, the power of a condominium association (usually a condominium corporation) to fix and increase monthly dues (often called association dues, common charges, or assessments) is grounded primarily in:

Republic Act No. 4726 (The Condominium Act)
The Revised Corporation Code (RCC) for corporate governance
The Master Deed and the corporation’s Articles and By-Laws
Longstanding principles on reasonableness, good faith, and non-discrimination in corporate and property administration

There is no statutory “cap” or fixed percentage limit on increases. Legality turns on authority, process, basis, and fairness.

Legal Bases and Core Principles

1) The Condominium Act (R.A. 4726)

Common Expenses & Proportional Sharing. Each unit owner must contribute to common expenses in proportion to the value or area of their unit as provided in the Master Deed or By-Laws. “Common expenses” typically include security, housekeeping, utilities for common areas, insurance, elevator upkeep, administrative payroll, and routine repairs.
Common Profits & Accounting. Any common profits belong to unit owners pro rata; dues must not be used to unjustly enrich the association beyond legitimate needs.
Lien for Unpaid Assessments. The association generally has a statutory lien over a unit for unpaid assessments (often annotatable on the Condominium Certificate of Title), enforceable according to law and the governing documents. Interest, penalties, and collection costs may be charged if authorized by the By-Laws and applied fairly.

2) Corporate Governance under the RCC

Board Authority. Day-to-day administration rests with the board of directors of the condominium corporation. Unless the By-Laws require membership approval, the board can adopt a budget and fix or adjust dues to fund ordinary operating needs.
Extraordinary or Special Assessments. Many By-Laws distinguish ordinary (recurring) assessments from special assessments (e.g., capital repairs, retrofits, major equipment replacement). Special assessments often require member approval (commonly a majority or supermajority) at a meeting with proper notice and quorum.
Members’ Rights to Information. Members have rights to inspect books and records, obtain financial statements, and receive notices of meetings. Budget transparency and access to ledgers underpin the reasonableness of any increase.

3) Master Deed, Articles, and By-Laws

These documents are controlling as to:

The formula for allocating dues (usually per square meter of floor area or value fraction)
Who may approve increases (board vs. membership)
Quorum and voting thresholds for budgets and special assessments
Penalties for late payment, interest rates, and collection procedures

If the By-Laws are silent, general corporate law principles and the Condominium Act fill the gaps, with reasonableness and fiduciary duty of directors as guardrails.

What Makes an Increase “Legal”?

A. Proper Authority

Ordinary increases (to cover inflation in utilities, wages, routine maintenance) are typically board-approved if the By-Laws so provide.
Special or extraordinary increases (e.g., façade rehabilitation, structural retrofits, generator replacement) often require owner approval per the By-Laws.

B. Due Process & Procedure

Notice. Owners should receive advance written notice of the proposed budget or increase, with an intelligible breakdown of line items.
Meeting & Quorum. If membership action is required, ensure proper quorum and voting per the By-Laws and RCC.
Documentation. Adopt the budget through board resolutions or owner resolutions, recorded in the minutes.

C. Reasonable Basis

The increase must be grounded in a bona fide budget: bids/quotations, historical spend, projected inflation, regulatory requirements, preventive maintenance schedules, and prudent reserves.
Charges must be necessary (for common areas/common elements), not ultra vires (beyond corporate powers), and non-discriminatory (same formula applied to similarly situated units).

D. Proper Allocation

Dues must be apportioned strictly per the governing formula (commonly per sqm or value fraction). Ad hoc or preferential rates for certain owners—with no By-Law basis—invite challenge.

Typical Workflow for a Lawful Increase

Budget Preparation. Property management drafts the next year’s budget, with supporting documents (contracts, bids, preventive maintenance plans, reserve study if any).
Board Review. Finance committee and board review, question, and revise.
Owner Communication. Circulate budget notes explaining: (i) current dues, (ii) drivers of the increase, (iii) impact per sqm, (iv) comparison to prior years, and (v) whether this is an ordinary or special assessment.
Approval.
- Ordinary: board resolution (if By-Laws allow).
- Special: owners’ meeting and vote per By-Laws.
Implementation. Issue formal notice of new rate and effective date; update ledgers and payment channels.
Ongoing Reporting. Provide quarterly or semiannual variance reports to owners; adjust if materially off-budget as allowed by the By-Laws.

Common Legal Pain Points (and How to Handle Them)

1) “We weren’t notified.”

Cure: Show dated notices, meeting minutes, and proof of service (e.g., email logs, posted notices, courier receipts). If notice was deficient, consider ratification at a properly noticed meeting.

2) “It’s excessive or arbitrary.”

Cure: Produce the budget pack (line-item detail, quotes, historicals, inflation notes) and, where relevant, a reserve study or engineering report justifying lifespan replacements.

3) “Wrong computation.”

Cure: Demonstrate the formula in the By-Laws/Master Deed and provide a per-unit worksheet showing area × rate, plus any board-approved surcharges explicitly authorized (e.g., commercial loadings, if allowed).

4) “Selective enforcement.”

Cure: Apply the same formula to all similarly situated units. Document any allowed distinctions (e.g., commercial vs. residential wings) that are expressly provided in the governing documents.

5) “We won’t pay.”

Remedies for the association:

Demand letters, imposition of interest/penalties consistent with By-Laws
Suspension of non-essential privileges (e.g., amenity access) if expressly allowed
Annotation of lien on the CCT where authorized and collection/foreclosure according to law and procedure
Court or quasi-judicial action to collect, plus damages/fees if provided by law or contract

(Always confirm that any sanction is expressly allowed by the By-Laws and implemented with due process. Essential services—e.g., water to the unit—must be handled with great care to avoid legal and safety violations.)

Special Assessments vs. Ordinary Dues

Feature	Ordinary Dues	Special Assessment
Purpose	Recurring OPEX: security, cleaning, utilities for common areas, routine repairs	Non-recurring CAPEX: roof replacement, major retrofits, elevator modernization
Approval	Typically board (per By-Laws)	Often membership vote (threshold set by By-Laws)
Duration	Monthly/regular	Time-bound or lump-sum
Documentation	Annual budget, service contracts	Engineering report, bids, project plan, cash flow

Transparency & Good Governance Expectations

Annual audited financial statements presented to members
Detailed budget with narratives and assumptions
Procurement discipline (e.g., multiple bids for major contracts)
Conflict-of-interest disclosures for directors and officers
Reserves policy for predictable capital replacements
Clear house rules on billing cycles, penalties, and dispute resolution

Good governance not only supports legal defensibility; it also protects market value and owner confidence.

Dispute Venues & Remedies

Internal remedies first: Letter to the board, request for documents/inspection, agenda request for the next meeting, and motions to reconsider or to amend By-Laws.
Mediation/ADR: Many By-Laws encourage mediation; it’s efficient and preserves community relations.
Regulatory/Quasi-Judicial: Depending on the nature of the issue (e.g., matters under the Condominium Act or developer obligations under special housing laws), specialized housing adjudication bodies may have jurisdiction.
Regular Courts (RTC): For intra-corporate disputes, contract enforcement, injunctions, and collection suits. Venue and jurisdiction depend on the parties and relief sought.

(Because jurisdiction can hinge on the specific facts—developer vs. unit owner, association vs. member, or corporate governance vs. consumer protection—assess carefully before filing.)

Practical Compliance Checklist (for Boards/Managers)

Confirm authority in the By-Laws for the type of increase (ordinary vs. special).
Build a file: line-item budget, vendor contracts, bids/quotes, benchmarks, reserve study.
Compute correctly: follow the exact allocation formula in the Master Deed/By-Laws.
Give proper notice: advance circulation with a plain-language explanation and per-unit impact.
Hold the required meeting: ensure quorum, minutes, voting records.
Document approval: board resolution or owners’ resolution.
Roll out fairly: uniform application, published effective date, updated ledgers.
Report performance: periodic variance reports; adjust responsibly if needed.
Enforce with due process: demand letters, penalties/lien strictly per By-Laws and law.
Keep owners informed: open books (within legal limits), audit, and answer queries promptly.

Practical Playbook (for Unit Owners)

Read the documents: Master Deed, Articles, By-Laws, house rules, recent budgets, and audits.
Ask for the math: request your per-unit calculation and the basis for new line items.
Engage constructively: attend meetings, propose alternatives, and request staged or time-phased spending where feasible.
Use rights to information: inspect books/records at reasonable times; request copies where allowed.
Escalate proportionately: seek mediation; if needed, pursue administrative or judicial remedies with counsel.

Special Topics & Cautions

No profit motive in dues. Association dues are meant to fund common needs, not to earn profits. Surpluses should reduce next year’s dues or bolster reserves according to policy.
Penalties & interest. Must be expressly authorized and reasonable. Excessive, retroactive, or discretionary penalties can be struck down.
Amenities & essential services. Suspension of non-essential amenities may be permitted (if stated). Cutting essential utilities is risky and may be unlawful or unsafe—seek legal advice before any such action.
Commercial units. If different rates apply to commercial spaces (e.g., heavier loads), this must appear in the By-Laws or be properly approved; otherwise, stick to the uniform formula.
Data privacy. Publishing debtor lists must be balanced with data privacy and defamation risks; limit disclosure to what rules allow and what is necessary for legitimate purposes.
Taxes. The tax treatment of association dues has evolved through revenue rules and circulars. Whether dues are subject to income tax/VAT or exempt can depend on current BIR issuances and facts (e.g., non-profit status, nature of receipts). Because rules change, confirm the latest tax guidance with a tax professional.

Sample (Illustrative) Computation

Assumptions: By-Laws allocate dues per sqm; the approved annual operating budget is ₱60,000,000; total saleable area is 40,000 sqm; dues are collected monthly.

Annual Rate per sqm: ₱60,000,000 ÷ 40,000 sqm = ₱1,500/sqm/year
Monthly Rate per sqm: ₱1,500 ÷ 12 = ₱125/sqm/month
Unit’s Monthly Dues (e.g., 65 sqm): 65 × ₱125 = ₱8,125/month

If a special assessment of ₱20,000,000 is approved for elevator modernization over 10 months:

Monthly special per sqm: ₱20,000,000 ÷ 40,000 ÷ 10 = ₱50/sqm/month
Unit pays: 65 × ₱50 = ₱3,250/month (for 10 months)

(Exact numbers depend on the Master Deed/By-Laws formula.)

Key Takeaways

No hard legal cap exists on increases; the test is authority + process + reasonableness + correct allocation.
By-Laws control who approves increases and how they’re computed.
Transparency (budget, records, notices) is the association’s strongest legal shield.
Owners’ rights to information and participation help keep dues fair.
Disputes should start with internal remedies and can escalate to mediation or court if needed.
Tax and regulatory details evolve—get current advice for edge cases (e.g., VAT, non-profit status, liens, utility disconnections).

Final Word

If you are facing (or planning) a dues increase, anchor your actions in the Condominium Act, the RCC, and—most importantly—your Master Deed and By-Laws. A documented, transparent budget process and faithful application of the allocation formula are what make an increase lawful and defensible in the Philippine setting.