Dear Attorney,
I am a homeowner residing in a subdivision governed by a homeowners’ association (HOA). Recently, the board of directors notified us about a proposed increase in our monthly association dues, allegedly amounting to fifty percent (50%). I am concerned about whether such a substantial increase is legally permissible and about the proper procedures that the HOA must follow under Philippine law. Specifically, I would like to know:
- Can the HOA legally raise our monthly dues?
- If so, what rules and processes must they comply with to implement the increase?
- Is a 50% increase allowed, and under what circumstances or limitations might it be deemed valid or invalid?
I respectfully request your guidance regarding these questions. I want to ensure that our HOA operates within the boundaries of the law and that the members’ rights are duly protected. Any advice or clarification you can offer would be greatly appreciated.
Sincerely,
A Concerned Homeowner
LEGAL ARTICLE ON THE VALIDITY AND PROCESS OF INCREASING HOMEOWNERS’ ASSOCIATION DUES IN THE PHILIPPINES
In the Philippines, homeowners’ associations (HOAs) are primarily governed by Republic Act No. 9904, otherwise known as the “Magna Carta for Homeowners and Homeowners’ Associations,” along with its Implementing Rules and Regulations (IRR). These statutes and regulations guide HOAs on how they may organize, regulate themselves, impose dues or assessments on their members, and perform other functions necessary for the benefit of the community.
Below is a comprehensive discussion on the legality of raising HOA fees, the procedural requirements that must be observed, and the potential ramifications of unilaterally imposing or increasing dues without following the appropriate steps. This analysis is intended as a broad guide and does not substitute for an actual consultation with a licensed attorney or a formal opinion based on the specific facts and governing documents of an individual HOA.
I. LEGAL FOUNDATION AND AUTHORITY OF HOMEOWNERS’ ASSOCIATIONS
Republic Act No. 9904 (RA 9904)
RA 9904 was enacted to protect the rights of homeowners and to strengthen the governance of HOAs. It defines a “homeowner” as any person who, by virtue of a contract or other legal means, owns and/or occupies a lot or housing unit in a subdivision or condominium project (if condominium unit owners form an HOA), among others.This law provides the legal basis for HOAs to enact policies, rules, regulations, and guidelines that bind all their members. The statute also outlines the process by which HOAs may impose dues, fees, and special assessments necessary to maintain or improve the common areas, or to provide services and facilities for the subdivision or community.
Implementing Rules and Regulations (IRR)
The IRR of RA 9904 elaborates on the procedures and details that HOAs must follow in carrying out their statutory functions. Among these is the authority of the association’s board of directors or trustees to propose budgetary changes (including dues increases), subject to ratification or approval by the general membership where required by the HOA’s governing documents or by law.Other Relevant Laws
- Republic Act No. 9522 and Real Property Laws: While RA 9522 concerns maritime boundaries, it is sometimes invoked along with other property-related legislation for clarifications on territorial delineations. However, in the context of subdivisions, the relevant laws typically focus on land registration, property ownership, and local government regulations affecting the enforcement of subdivision rules.
- Local Government Code: HOAs may sometimes be subject to certain local ordinances or permit requirements, especially if they are recognized as an association with a civic purpose. The local government may also require HOAs to follow certain public policies, though these typically do not directly regulate the amount of HOA dues.
By virtue of RA 9904, an HOA is empowered to collect reasonable fees and charges from members. The key word here is “reasonable.” What amounts to a “reasonable” increase in dues depends on factors such as the approved annual budget, the needs of the community, prevailing economic conditions, and any repairs or capital improvements essential to the welfare of the residents.
II. PURPOSE OF ASSOCIATION DUES
Association dues are collected primarily to finance the following:
Maintenance of Common Areas
This includes, but is not limited to, the upkeep of roads, sidewalks, parks, clubhouses, security systems, streetlights, open spaces, communal water pumps, and similar facilities that the HOA is tasked to maintain.Operational Expenses
HOAs require funds to cover administrative costs such as salaries of security personnel, maintenance staff, administrative staff, and costs related to the enforcement of the subdivision’s rules and regulations.Capital Improvements
From time to time, the HOA may resolve to upgrade existing facilities or construct new amenities to improve the homeowners’ quality of life. Such projects generally require additional or increased fees if they exceed the standard budget for routine operations.Emergency Reserves
HOAs may set aside a reserve fund to cover emergencies, unforeseen expenses, and significant repairs or replacements (e.g., damage caused by natural calamities).
All these expenses are typically reflected in an annual budget that the board of directors or trustees of the HOA proposes to the general membership. The proposed budget usually includes projected income (based on membership dues) and projected expenditures for the year.
III. THE PROCESS OF INCREASING HOMEOWNERS’ ASSOCIATION DUES
Review of the HOA’s Governing Documents
The foundational documents of an HOA typically include:- Articles of Incorporation (if the HOA is registered as a non-stock corporation)
- Bylaws
- Deed Restrictions or Master Deed (in the case of condominiums)
- Subdivision Restrictions, Covenants, Conditions, and Regulations
- Board Resolutions, if any
These documents often contain provisions outlining who has the authority to impose dues or special assessments, how any proposed changes are to be presented, and what percentage of homeowner votes or board approval is needed to effect such changes.
Proposal by the Board of Directors/Trustees
The board normally initiates the process of adjusting dues. They evaluate the financial status of the HOA, considering:- The previous year’s budget and actual expenses
- The current year’s projected costs
- Any capital improvements or repairs needed
- Foreseen emergencies or contingencies
If the board determines that the existing dues are insufficient to cover projected expenses or new projects, they create a proposal that will recommend how much the increase will be and why it is necessary.
Notice to Members
HOAs are generally required to inform members in writing of a proposed dues increase. This notice often includes:- The rationale for the increase
- The specific amount or percentage of the proposed increase
- The date and venue of any meeting (e.g., a general membership meeting) at which the proposal will be discussed
- The right of members to vote or to express objections or comments
Under Philippine law, a homeowners’ association must maintain a certain degree of transparency and due notice in matters involving financial obligations. Failure to give adequate notice may render any dues increase vulnerable to legal challenges.
Membership Meeting and Ratification
Depending on the association’s bylaws, certain percentages of homeowner votes (e.g., a simple majority, two-thirds, etc.) might be required to ratify or reject the proposed increase. Some HOAs allow the board to impose minor incremental increases without a formal vote, provided such increases do not exceed a predetermined percentage. However, larger or more substantial increases—especially something as significant as 50%—may necessitate approval by a majority or supermajority of the entire membership.During the meeting, members may:
- Ask questions about the proposed increase
- Call for justifications from the board
- Propose alternatives or amendments to the proposed budget
- Ultimately vote on the motion to adopt or reject the increase
The results of this vote should be clearly recorded in the minutes of the meeting, and proper documentation must be kept.
Documentation and Publication
If an increase is duly approved, the board issues a resolution or an official notice reflecting the new dues structure and the effective date. This must be circulated to all members, often by written notices, bulletin board announcements, email, or other digital means. In some cases, local government units (LGUs) or relevant housing agencies may require a copy of this resolution, although the statutory requirement for submission varies.
IV. LEGALITY OF A 50% INCREASE
A 50% increase in association dues may be perceived by many homeowners as excessive. Nonetheless, whether or not it is permissible depends on the following:
Necessity and Reasonableness
Under Philippine law, HOAs are mandated to spend collected dues for legitimate community purposes. If a 50% increase is justified by extraordinary maintenance costs, substantial capital improvements, emergency repairs, or major security and infrastructural upgrades, the increase might be considered reasonable. However, an increase that is arbitrary, grossly disproportionate to actual needs, or lacking any clear factual basis could be subject to legal challenge on grounds of unreasonableness.Compliance with Governing Documents
If the association’s bylaws or master deed stipulate a maximum annual percentage increase or set out procedures requiring the consent of a certain number of members for increases beyond a threshold, the HOA must strictly adhere to these provisions. For instance, if the bylaws say that any increase beyond 10% per year must be put to a vote of at least two-thirds of the membership, the board cannot unilaterally impose a 50% increase. They must follow the specified procedures.Proper Ratification
Even if the board proposes a 50% increase, it should be properly ratified by the general membership, if required by the association’s internal rules. Failure to do so may render the increase invalid or unenforceable. Homeowners could argue that they were not given a fair opportunity to examine or oppose the proposal, especially if no transparent disclosure of financials was made.Potential Legal Remedies
If a homeowner believes that the dues increase was enacted without following the prescribed procedures—or that it is unreasonably high and unsupported by actual budgetary needs—the homeowner may:- File a complaint before the Housing and Land Use Regulatory Board (now under the Department of Human Settlements and Urban Development) if the matter falls within its jurisdiction.
- Seek an injunction in court to prevent the implementation of the increase if there is a clear violation of the law or the association’s governing documents.
- Request a special meeting of the membership to question or recall the resolution approving the increase.
Nonetheless, legal remedies can be time-consuming and costly. Thus, it is generally preferable for the board and homeowners to come to a reasonable consensus.
V. ENFORCEMENT OF DUES AND PENALTIES FOR NON-COMPLIANCE
Under RA 9904, the association has the authority to impose and collect dues and assessments approved in accordance with its procedures. Non-compliance by a homeowner may lead to certain penalties, which could include:
Interest and Late Fees
HOAs typically incorporate provisions for imposing interest on overdue accounts and additional penalties if dues remain unpaid after a certain period.Suspension of Privileges
The HOA may suspend certain privileges, such as the use of common facilities, if a homeowner fails to settle outstanding obligations. However, the suspension of essential services (e.g., basic utilities) is subject to legal scrutiny and may not always be permissible without a court order.Legal Action
Persistent non-payment may prompt the HOA to initiate collection suits or other legal actions. Under Philippine law, if the amounts involved are within a particular threshold, the HOA could file a complaint in the proper court for the recovery of dues. If the homeowner’s refusal to pay is grounded on the illegality of the increase, however, the court will first determine the validity of the assessment.Lien on the Property
Some HOAs, by virtue of specific provisions in their incorporation documents or contractual agreements, claim that unpaid dues constitute a lien on the homeowner’s property. The legal enforceability of these liens varies, depending on whether the association properly registered such a lien or if local jurisprudence supports it. In most cases, an unpaid lien could lead to foreclosure proceedings, but this is often subject to strict legal procedures and judicial oversight.
It bears emphasizing that the fundamental principle of “due process” must be respected. Homeowners have a right to receive notice, a fair hearing, and an opportunity to remedy or dispute the delinquency before any extreme measure is taken.
VI. BEST PRACTICES FOR BOTH THE HOA AND HOMEOWNERS
Transparent Financial Management
- The board of directors should maintain a transparent and accessible record of the HOA’s financial affairs. Homeowners have the right to examine the association’s financial statements or audit reports, typically during office hours, as mandated by law or the HOA’s bylaws.
- Any proposal to increase dues should be backed by a clear budgetary analysis detailing how the additional funds will be allocated.
Proactive Communication
- Associations should notify members well in advance of any proposed increase, explaining the necessity, how the funds will be used, and the consequences if the association’s budget is not adequately funded.
- Homeowners are encouraged to attend meetings, ask questions, and voice their opinions or concerns. Constructive dialogue can often resolve misunderstandings or complaints.
Legal Consultation
- Before implementing significant fee increases—especially those beyond routine cost-of-living adjustments—an HOA should consult with legal counsel to ensure full compliance with all applicable laws and with its own internal rules.
- Likewise, homeowners who suspect impropriety or illegality in the assessment process may consult with a lawyer to explore their legal options.
Documentation
- All notices, proposals, minutes of meetings, and board resolutions must be meticulously documented to prevent future disputes.
- Keeping a systematic paper trail also reassures members that the process is open and legitimate.
VII. FREQUENTLY ASKED QUESTIONS
Does the Housing and Land Use Regulatory Board (HLURB) still oversee HOAs?
Before the creation of the Department of Human Settlements and Urban Development (DHSUD) in 2019 under Republic Act No. 11201, the Housing and Land Use Regulatory Board (HLURB) was the principal agency regulating HOAs. The DHSUD now assumes most functions of the HLURB, including the power to address disputes arising from HOA transactions.Can a homeowner refuse to pay the increased dues until the board obtains the proper approval?
If the homeowner genuinely believes the increase is illegal or was implemented without proper procedure, they may raise formal objections and seek resolution with the HOA. However, withholding payment carries risks; the HOA may still assess penalties and label the homeowner as delinquent. Legal advice is recommended before taking such a stance.How does the association prove the necessity for an increase?
Through financial statements, budget proposals, maintenance schedules, and project outlines, the association should demonstrate that the existing dues are insufficient to cover the costs. Transparency and a robust paper trail bolster the HOA’s argument that the increase is justified.Can a homeowner be evicted or their property be foreclosed immediately upon non-payment of the increased dues?
Immediate eviction is highly unlikely under Philippine law without proper court proceedings. Foreclosure may only be pursued under circumstances where the HOA has a properly registered lien and strict legal protocols are followed. Even then, this remedy is considered a last resort.Is there a maximum increase set by law (e.g., 10%, 20%)?
Philippine law does not impose a specific numeric cap on how much an HOA can raise its dues. Instead, associations must adhere to principles of reasonableness, necessity, and procedural compliance, as dictated by their own bylaws and the broader framework of RA 9904 and its IRR.
VIII. CONCLUSION AND RECOMMENDATIONS
A homeowners’ association possesses the legal authority to impose and collect dues or assessments from its members. Under the Philippine Magna Carta for Homeowners and Homeowners’ Associations (RA 9904), these fees must be reasonable and devoted to maintaining, improving, or serving the community’s welfare. A 50% increase, while potentially substantial, is not automatically unlawful. Its permissibility hinges on proper justification, compliance with the HOA’s governing documents, adherence to due notice and ratification requirements, and transparent governance practices.
Key Takeaways:
- Check Your Governing Documents: The bylaws or deed restrictions will outline the procedural requirements for approving dues increases.
- Ensure Transparency and Notice: Homeowners must be duly informed and provided with clear justifications for any proposed increase.
- Ratification and Voting: The method for approving substantial increases typically involves a meeting and a vote of the homeowners, especially if the increase exceeds routine cost-of-living adjustments.
- Legal Remedies: If the increase is enacted improperly, aggrieved homeowners may seek mediation, file administrative complaints, or undertake court action.
- Reasonableness is Paramount: Regardless of the percentage increase, the association must establish that the funds are necessary to meet legitimate community needs and that the approval process is in accordance with law and the HOA’s internal rules.
Ultimately, a balanced approach between the HOA’s prerogative to collect sufficient funds for the community’s well-being and the homeowners’ right to be protected from unfair financial impositions is vital for a harmonious neighborhood. Through transparent procedures, active homeowner participation, and strict adherence to RA 9904, HOAs can responsibly fulfill their duties without overburdening members. Conversely, homeowners are encouraged to participate in the governance process to ensure that any proposed increases are grounded in necessity and fairness, thereby fostering a cooperative and legally compliant environment for everyone.
Disclaimer: This legal article is intended for general informational purposes only and does not constitute legal advice. No attorney-client relationship is formed by virtue of providing this information. Individuals seeking advice on specific legal matters should consult a qualified attorney, especially when dealing with disputes or uncertainties about the enforceability of HOA dues or assessment increases.