Foreign individuals and foreign corporations are disqualified from owning private lands in the Philippines. Section 7 of Article XII of the 1987 Constitution states that “[s]ave in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.” This must be read in relation to Section 3 of the same Article, which states that “[p]rivate corporations or associations may not hold such alienable lands of the public domain except by lease[.]”
In other words, only Filipino citizens and Filipino corporations or partnerships may acquire land in the Philippines. One legal solution to this foreign ownership limitation is the acquisition of no more than 40% interest in condominium projects. Note that the constitutional proscription applies only to private lands, and not to all kinds of real property and real interest.
Section 2 of the Condominium Act (R.A. No. 4726) defines a condominium as an “interest in real property consisting of separate interest in a unit in a residential, industrial or commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building.” Under this definition, ownership of mere “interest in real property” is not equivalent to ownership of “land”.
SEC-OGC Opinion No. 08-27 dated 27 November 2008 states that foreigners can acquire condominium units and shareholdings or membership in condominium corporations up to not more than 40% of the total and outstanding capital stock of a Filipino-owned or -controlled corporation. This confirms what is merely implied in Section 5 of the Condominium Act, which provides the following:
[…] where the common areas in the condominium project are owned by the owners of separate units as co-owners thereof, no condominium unit therein shall be conveyed or transferred to persons other than Filipino citizens, or corporations at least sixty percent of the capital stock of which belong to Filipino citizens, except in cases of hereditary succession. Where the common areas in a condominium project are held by a corporation, no transfer or conveyance of a unit shall be valid if the concomitant transfer of the appurtenant membership or stockholding in the corporation will cause the alien interest in such corporation to exceed the limits imposed by existing laws.
Can the condominium corporation have more than 40% foreign equity? This is possible if the condominium corporation merely leases the private land. SEC-OGC Opinion No. 08-27 answers in the affirmative. This is because “the condominium corporation will not acquire ownership of the land but will be a mere lessee of the land where the project will be erected.” And the 1987 Constitution does not proscribe the lease of private lands by foreign individuals and foreign stockholders.
Respicio & Co. Law Firm can help you buy or sell your property in the Philippines.