Eight rants about owning a Philippine condo
Philippine Daily Inquirer
By: Tessa R. Salazar—Reporter
24 February 2012

Owning a piece of real estate such as a condominium unit has become a reachable dream for the multitude belonging to the working class. The healthy competition among developers has resulted in competitive pricing and more flexible payment schemes.

At a price range of P45,000 to P80,000 per square meter depending on the project location, a wider base of buyers are taking up units big and small near their places of work. The condominium business has become the darling of the local real estate industry.

But what’s on the flip side of this seemingly pretty picture of happy condo buyers and (even) happier developers? Inquirer Property has come across discerning readers and buyers who have had not-so-pleasant experiences of buying condominium units in the Philippines. Then, we asked property experts to either confirm or explain these experiences. Here are some surprising insights and revelations on the 8 most-ranted-about issues of buying condo units in the Philippines

1. Parking
Condos don’t come with the parking slots. One reader/buyer ranted: “Developers don’t provide units with their own parking slot. We have to buy a separate lot with a separate title just for parking.”

Architect Edilberto J. Morcilla did confirm that parking slots are not bundled with the condo unit most of the time. “It is an option for a client to buy or not. It has a separate title, thus, a separate acquisition cost. Many buyers would also opt not to have a parking slot. Designers therefore do not provide a one-to-one ratio for units and parking slots.”

National Real Estate Association chair Alejandro S. Maņalac agreed with this observation. “Most developers do provide parking slots, but yes you have to buy them separately. This gives the buyer a choice whether to get one or not. It is more practical than automatically offering the unit with parking (with the corresponding additional price, of course) and ‘forcing’ the clients to buy them even if they don’t have use for them, especially those who are just intending to lease out their units. But, as a piece of advice to condo buyers, it is really more practical to buy a parking slot. You may not have use for them but you can definitely easily lease them out.”

Enrique M. Soriano, Ateneo program director for real estate and senior adviser for Wong+Bernstein Business Advisory, explained that developers must balance parking provisions vis-ā-vis various unit sizes, and usually priority slots are given to bigger sized units. The building code provides a certain ratio, sq m over parking, making a parking purchase not automatic and separate from the condo unit.

2. Lost deposits
“If you are in the process of buying a condo, you will go through all kinds of problems from (agents). You will lose your deposit if you don’t follow up all the time,” another buyer ranted.

Soriano confirmed this happening. “Agents come and go, however, buyers must also have the initiative to track their purchase and not be overly dependent on agents.”

Maņalac said, “If you buy from the wrong agent, you will experience this whether you are buying real estate, cars, insurance, etc. Some buyers also tell their agents that they will just buy through their friends or relatives who are not really into the property business but just to give them a favor. This messes up the whole thing. Also, if you buy from an agent, and you ask for all their commissions, why should you expect good service?”

Morcilla explained that condo projects, especially the fast-moving ones, follow strict deadlines when it comes to unit reservations. Buyers must be mindful of the deadlines to submit pertinent documents as other agents might be eyeing the same units for their own clients. Failure to submit needed documents can and will result to the forfeiture of reservation fees, because there is also what is called the “lost opportunity” for the developer.

3 Overseas Filipino workers are taken advantage of
“Overseas Filipino workers have more problems (when buying condo units in the Philippines) as they are being taken advantage of. Buyers lose their deposits and payments because of corruption in the system. Sometimes, the OFW isn’t aware that he or she has been paying for a unit owned by many other buyers or existing owners, and corrupt agents collect payments from all of them. If you’re not in the Philippines they take advantage of your absence. And there are just too many paper work which are so complicated,” an angry reader writes.

“Agree,” Soriano quipped, as he added, “And I empathize. Overseas buyers really go through the wringer. The key is to invest on reputable developers with a long history of delivering quality projects on time.”

Maņalac revealed, “It is true that there are other agents selling abroad. Some were officially sent by their companies to do roadshows, while some are there on their own. It is very important for our OFWs to be very careful in dealing with these agents since they will not be here to personally attend to their accounts.” He then urges OFWs to answer these important questions whenever they encounter agents offering condos in the Philippines:

Does the agent belong to a credible company with a good track record of delivering their projects with good quality and on time?

Is he or she an official representative of the company? It would be better if the developer has an official and legitimate office in that particular foreign country.

Are the agents quoting you the official prices and availability of the units? It would be better if their inventories and official computation templates were online.

Does the agent’s company maintain an online client portal where buyers can securely access their accounts anytime? This would be useful, especially when the agents are inaccessible or have left the company.

Maņalac said paperwork is necessary, whether they are buying properties here or abroad. Basically, though, this paperwork is really just part of a contract printed in several sets for buyer’s signatures, which makes it seem already voluminous for some. Expect additional paperwork when buyers avail of financing either through banks or a Pag-Ibig housing loan.

Morcilla said OFWs acquiring condo units can expect the process to be a “little more complicated,” more so if the overseas Filipino assigns a local representative not knowledgeable in such transactions.

“Being taken advantage of can happen in any business transaction. It is best that one must first solicit for a recommendation from relatives or friends for a more reliable developer, marketing firms or agents for that matter, before negotiating for a unit. Also, be cautious and discerning with your agent who might be ready to move heaven and earth just to close a sale. Most of all, if one is serious in buying a condo unit and after paying reservation fees, make sure to have the necessary documents delivered on time to avoid forfeiture as they are allowed to do so, for the reason given above,” Morcilla cautioned.

Condominiums are no longer the exclusive domains of the moneyed. They have also become financially attainable by the working class. Consider the competitive prices of condominiums at P45,000 to P80,000 per square meter in the city, and one can understand how tempting it is to buy a place to live in and be literally a stone’s throw away from the workplace.

However convenient condo living may be, buying a unit can be frustratingly difficult, as Inquirer Property started revealing last week, based on the experiences of actual buyers who e-mailed their buying “woes.” This series started by citing the first three of the eight most-ranted-about issues: condos with no parking slots; lost deposits; and overseas Filipino workers taken advantage of.

Before proceeding to the next rants, let’s expound a bit more on the overseas Filipinos’ complaints, particularly on payment forfeiture. A disgruntled reader/buyer wrote Inquirer Property online, “As a result of an OFW’s ‘absence,’ paperwork does not matter to selling agents, as they do not help you out. They just forfeit your payments.”

National Real Estate Association chair Alejandro S. Maņalac shed light on this issue. Most developers, he said, make “forfeitures their last resort. However, in most cases, this is not done without due process. Notices and reminders are sent with ample time/grace period for settlement before a final demand or notice of forfeiture is served (via registered mail).”

Maņalac stressed that the most important action in situations like these would be to communicate with the developers and “never ignore” their notices.

“If they have valid reasons and are not in habitual default of their payments, considerations and even restructuring of payments are accommodated. The problem is that some buyers ignore these letters and use the lame excuse that they are not receiving these notices (that is why it is very important to indicate the mailing address in the buyer’s info sheet that they fill up because this will be the same address used for the contract. Also, make sure that in case they decide to use their local address here, the people residing in the local address are responsible enough to inform them about such notices. There are many cases where relatives do not inform the buyers that the account is already delinquent),” Maņalac said.

Veteran real estate broker and educator Enrico Cruz of Marikina said OFWs should seek out reliable salespersons and brokers (before buying). Cruz said he always taught his students at Urban Institute that brokers and salespersons should always remember that the buyer is their principal, even if the commission fee they receive comes from the developer.

4“Multiple ownership leads to manipulation of condominium units.” A reader lamented that “Koreans, Chinese and Filipino politicians who own a number of units are renting out their units to ‘balikbayans’ for the duration of their vacation… Are they (unit owners) even paying income tax for renting out?”

Architect Edilberto J. Morcilla agreed with the observation. “Since foreign nationals are not allowed by Philippine law to own land, but allowed to own condominium units, these enterprising foreigners opt to buy several units for their investments. I am not sure, though, whether it will be easy for them to evade paying taxes as we now have stricter rules on taxation,” Morcilla said.

Maņalac said: “I am not sure whether the reader is referring to the ‘co-development/comunidades/Build-your-Own’ set-up where all the buyers are considered ‘coowners’ or ‘codevelopers.’

He added, however, that it is true that “some units were sold to investors to be operated as condotels where the investors enjoy monthly returns through short- and long-term leasing of their units without personally managing it since it is being done by professional hotel operators, and there is absolutely nothing wrong with it.”

5. No price regulation of association dues
Enrique M. Soriano, Ateneo program director for real estate and senior adviser for Wong+Bernstein Business Advisory, said: “Again, it’s a balancing financial act played by the developer in the initial stage prior to the turnover. Then, another challenge will come from the facilities manager managing the condo using as baseline variables like security, staffing, cost of maintenance, brand value and competitiveness.”

Maņalac said rates for association dues really depend on several factors: a) who manages the condo (in-house or professional building managers?); b) number of units/residents (to share in the operating expenses); and, c) size of common areas, amenities to maintain and to secure. “Thus, comparisons should be done apples to apples,” he stressed.

Morcilla said the varying rates would be due to “project cost and package prices of condominiums differing greatly, depending on location, amenities, specifications and of course, target market.” Cruz said such wildly varying dues happen “especially if the condominium corporation is still controlled by the developer.”

“However, for condominium corporations already in the hands of the unit owners, all dues and assessment emanates from the boards after thorough discussion with the members. Besides, any excess becomes property of the corporation, which is owned by unit owners,” Cruz said.

6. Geological background
Some developers don’t reveal the “geological background” of the location. “I agree (with this rant). There should be full disclosure,” quipped Soriano, while Manalac said, “Buyers should always exercise due diligence before buying a property, especially if a particular area has a recent history of problems like flooding, faultlines, landslides and the like.”

Morcilla said such geological data would be “too technical for most buyers, but for those who would want this particular information, the local government is the best entity to solicit documents from.” Cruz discloses that “development permits are issued by the Housing and Land Use Regulatory Board for the condo projects. The LGU issues building permits. These two should be able to prevent such an occurrence where a condo project is located in geo-hazard zone.”

7. No clear policy for discounts on bare or damaged units
No clear policy for discounts on bare or damaged units. Soriano agreed with this complaint, observing that “buyers must catch up on a lot of issues before investing or buying a condominium.” Morcilla explained “This is also dependent on package prices of condominiums. Damaged units also differ on extent, thus, discounts cannot be encapsulated in the form of policy.”

Cruz agreed, saying discounts on bare/damaged units are the prerogative of the developer.

8. No clear policy on accountability
No clear policy on accountability when man-made disasters occur. The unfortunate incident involving unit owners of the West Tower Condominium Building in Makati and the busted gas pipeline of First Philippine Industrial Corp. comes to mind. In such cases, Soriano said “legal remedies are provided through the condo corporation, but then again unit owners must contend with the Philippine legal system.”

Maņalac said “this problem would already be outside the developer’s concern and control.” Morcilla explained that “this falls on a different law of the land called ‘Writ of Kalikasan,’ where the Filipino people are empowered to assert their rights for a healthier environment.”

Cruz said building codes, structural codes, fire codes and development permits pinpoint responsibilities. “In the case of the pipeline leak, this is not the responsibility of the developer,” he said

Do the eight rants have basis?
The past two weeks, Inquirer Property has enumerated the eight most common complaints of buyers of Philippine condominiums. Now, we ask the property experts and analysts: Do these rants have basis? The unanimous response seems to be in the affirmative.

“Yes, a significant component (of the condominium business) comes from the most neglected part of the development phase—the post sales and service delivery process. Developers look at this phase as ministerial and an added cost. So they end up using poorly trained frontliners and account managers employing archaic methods that breed bureaucracy. This can be a recipe for a higher attrition rate,” analyzed Enrique M. Soriano, Ateneo program director for real estate and senior adviser for Wong+Bernstein Business Advisory.

Soriano added that buyers must read and understand the Reservation Agreements (RA). They must also make sure that they take the initiative in monitoring their deposits and downpayments. Agents, he noted, come and go, and it would be hard to rely on agents and developers’ representatives to provide the servicing when there are thousands of units being processed.

“Real estate buying should never be an emotional decision, and it pays to do extensive research not only on projects but on the track record of the developer. That includes doing a full check on agents and brokers,” he said.

Soriano added that buyers must ask these questions: Is the agent an organic part of the property firm? Is he/she an accredited broker? Is he/she on full time with property brokering or with the development?

He also urged buyers to ask to meet with the most senior head of the sales organization so you can have the assurance of a fair deal.

National Real Estate Association chairman Alejandro S. Maņalac, for his part, said: “Basically, it all boils down to the choice of company and choice of agents.”

He advised buyers to be wary of deals with new agents with no real estate experience. He said that buyer security would “hopefully improve with the strict implementation of the RESA [Real Estate Service Act] law requiring PRC licenses for brokers and accreditation for agents.”

Stress-free buying experience
Paul Vincent Chua, Colliers International associate director for valuation and advisory services and head of consultancy and research, said that with the amount of units being sold in the market these days, “what separates a good developer from one that is not is the quality of their agents.”

“One of the primary responsibilities of the agent is to make sure that the buying experience of their client is as stress-free as possible. That is the reason people go through agents anyway. Now, if the agent does not explain properly the requirements or the timelines needed to process the documents needed to complete the reservation, then the agent is at fault.”

Chua added that “buyers must be fully informed and it is their right to be informed. If the agent cannot answer your questions, particularly on the documents, then you have the right to request for a different agent or talk with your agent’s superior. It is their money and they have that right. You have to have everything documented (official receipts are issued, etc.)”

Veteran broker and real estate educator Enrico S. Cruz also agreed that most of the complaints have basis.

“I have been receiving information on these unfortunate situations. The usual case is where the buyer signified something verbally and not in black and white with the ‘agent’ (who should be called a real estate salesperson) or to the developer who initially agreed but later on denied.”

It would be best to deal only with reputable developers when buying a unit, whether you’re an overseas Filipino or not.

Cruz said buyers should be advised to make all their communications with the developer or salespersons in written form, and properly received by them. As much as possible, he said, buyers should directly communicate with the developer.

Buyers should be careful to read and fully understand the contents of all the documents they sign, specially the fine print. Buyers should also demand any explanation or replies to be made in writing.

Cruz said double sales are prohibited. Pesidential Decree 957 requires developers to register all sales made, even if on installment, with the Register of Deeds. Even though with this requirement, buyers should first verify the Transfer Certificate of Title or Condominium Certificate of Title before buying any property, if it is clear of any annotation of previous sale or mortgage

Real estate buying should never be an emotional decision, and it pays to do extensive research not only on projects but on the track record of the developer.

Cruz said that upon deposit or payment of down payment and signing of the Contract to Sell, buyers should take the initiative of registering the sale with the Register of Deeds. This will prevent the seller from making a second sale of the same property, or if ever there is a second buyer, the first buyer who registered the sale has the right over the property.

Chua said buyers should understand that prior to any condominium launched, it must be approved by the local government unit and the Housing and Land Use Regulatory Board—two government agencies that should be able to identify based on their zoning plan the areas where residential buildings should be built. “Admittedly, some of our land-use plans are outdated and should be studied by the local government again, to ensure the safety of the would-be buyers in these developments,” Chua added.

Soriano said that in his engagements in other Asian countries, developer initiatives provide prospective homebuyers with a neighborhood directory that provides a detailed natural history of the area, contact information of local officials, support institutions like schools and hospitals as well as destination landmarks.

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