Legal library › Case digests › Political Law
Case digest · Aliens and condominium units; Sec. 5 of the Condominium Act
Hulst vs. PR Builders, Inc.
A Dutch couple signed a contract to sell for a unit in a Batangas townhouse project that was never finished. In 2007 the Supreme Court declared their contract void because they were foreigners. A year later, it set that pronouncement aside.
Facts
The contract
Jacobus Bernhard Hulst and his wife Ida, Dutch nationals, entered into a Contract to Sell with PR Builders, Inc. for a 210-square-meter residential unit in its townhouse project in Barangay Niyugan, Laurel, Batangas. On full payment, the seller was to deliver a deed of absolute sale and a Condominium Certificate of Title, and the rights conveyed were subject to the Condominium Act.
1995–1997
PR Builders failed to complete the project by June 1995, as it had verbally promised. On April 22, 1997, the HLURB Arbiter rescinded the contract and ordered PR Builders to reimburse the P3,187,500.00 purchase price with interest and to pay damages and fees. The spouses later divorced, and Ida assigned her rights to Jacobus.
2000–2002
On execution, 15 parcels of PR Builders’ land were sold at auction, and P5,313,040.00 was turned over to Hulst. The HLURB then set aside the levy as excessive, and the Court of Appeals dismissed Hulst’s petition.
September 3, 2007
The Supreme Court granted Hulst’s petition and upheld the auction. But it also took up a point that had escaped the HLURB Arbiter and the Court of Appeals: as foreign nationals, Hulst and his wife were disqualified from owning real property, so it declared the Contract to Sell void, limited his recovery to the P3,187,500.00 purchase price and ordered him to return the excess of P2,125,540.00.
The motion
Hulst moved for partial reconsideration of the return order, arguing that the contract involved a condominium unit and would give him a Condominium Certificate of Title, not title to the land. PR Builders filed no comment.
Issue
Did the constitutional ban on aliens owning real property make the foreign buyers’ Contract to Sell for a condominium unit void?
Ruling
No. In its September 25, 2008 Resolution, the Court granted the motion for partial reconsideration, set aside its pronouncements on the invalidity of the contract, and deleted the order to return P2,125,540.00.
The Contract to Sell provided for a Condominium Certificate of Title and made the rights conveyed subject to the Condominium Act. Under R.A. No. 4726, foreign nationals can own Philippine real estate by buying condominium units constituted under the condominium principle. A unit cannot be sold without the corresponding interest in the condominium corporation, and the Court described the law as allowing foreigners to acquire units and shares up to not more than 40% of the total and outstanding capital stock of a Filipino-owned or controlled corporation. Because Hulst, as unit owner, would simply have been a member of the condominium corporation, and the land remained owned by PR Builders, the constitutional proscription did not apply and there was no circumvention of the prohibition. In its dispositive portion, the Resolution modified the 2007 decision by deleting the return order. As the 2007 decision had noted, the townhouse project did not push through.
“Under Republic Act (R.A.) No. 4726, otherwise known as the Condominium Act, foreign nationals can own Philippine real estate through the purchase of condominium units or townhouses constituted under the Condominium principle with Condominium Certificates of Title.”
Doctrine
The constitutional ban on aliens acquiring land does not reach a condominium unit held under the Condominium Act, because “the ownership of the land is legally separated from the unit itself.” The limit is in Sec. 5 of R.A. No. 4726: where the unit owners co-own the common areas, a unit may be transferred only to Filipino citizens or to corporations at least 60% Filipino-owned, except by hereditary succession; where a condominium corporation holds the common areas, no transfer is valid if it would make the “alien interest” in the corporation exceed the limits imposed by existing laws.
Compare: land, not a unit
In Muller vs. Muller, G.R. No. 149615, August 29, 2006, the property was a lot and a house in Antipolo, and the alien buyer could recover nothing: “Not even an ownership in trust is allowed.”
Bar tip
Separate land from a condominium unit. A foreigner may buy a unit under the condominium principle, with a Condominium Certificate of Title, subject to Sec. 5 of the Condominium Act. The 40% the Court mentioned is measured against “the total and outstanding capital stock” of the condominium corporation, and a house and lot with a title to the land is a different matter.
Hear it explained
Land Titles Jurisprudence Ep. 4, at 12:46
Follow Forlawssake
Get the next case explainer when it’s out.
New videos and episodes come out on YouTube, Spotify and TikTok. Follow there, and the app tells you when the next one is posted. It’s free.
This digest is general legal information for education, not legal advice, and it is not a substitute for reading the decision. Quoted passages are taken word for word from the full text.