MOD III
VALUATION OF CONDOMINIUM PRESENTED BY:
Origin of Condominium
MOD III
Several appraisal reference materials exist and support that condominium ownership originated under ancient Roman Law; and under this law, Condominium means JOINT OWNERSHIP. In the modern concepts, joint-ownership applies only to COMMON AREAS The horizontal or air-space are owned individually in FEESIMPLE.
Reference also imparts:
MOD III
• Ownership of floors, and separate room was common in German •
• • • • • •
cities In the 12th century and later in France and Switzerland. Housing shortages in Europe since 1930 spurred total condominium Ownership; and: Most European nations enacted supporting legislation England had condominium statute since 1925. In the United States, the concept of condominium has been recognized since 19th century. The first condominium law in New York was enacted in 1947 Puerto Rico enacted their law in 1958 The trend of owning a condominium unit has then spread throughout developed and undeveloped countries.(Philippines included)
MOD III
FOREIGN LAWS ON CONDOMINIUM • The purchase of a condominium gives to the buyer INDIVIDUAL
OWNERSHIP of unit in a building, together with an INDIVIDUAL INTEREST IN THE LAND and in the COMMON AREAS. These common areas, include: • the physical structure such as floors, halls, corridors, lobbies, stairs, fire escapes, entrance, exits, etc. the owner’s individual unit is taxed separately as real property and may be mortgaged, sold, rented, or otherwise transferred by the owner, subject to the conditions of the declaration & by-laws of the condominium association or corporation. The owner’s proportionate interest in the common areas permits the right of ingress and egress to the unit space and such use of the building and land as needed for servicing the owner’s unit. A condominium may be compared with a planned subdivision of land. The land is divided into plots, and common areas may include the streets, walks, recreation areas, pools, club facilities, etc.
MOD III
THE PHILIPPINE CONDOMINIUM LAW
Republic Act No.4726, known as the Condominium Law, as amended was enacted/approved on June 18, 1966. The main purpose, among others, is for real property and other taxes. Specifically, Section 25; states: “Whenever real property has been divided into condominium, each condominium separately owned shall be separately assessed, for purposes of real property taxation and other tax purposes to the owners thereof and the tax on each such condominium shall constitute a lien solely thereon.�
SALIENT POINTS OF THE LAW: MOD III
Sec. 2. A condominium is an interest in real property consisting of a 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. A condominium may include in addition a separate interest in other portions of such real property. Title to the common areas, including the land or the appurtenant interests in such areas, may be held by a corporation xxx known as “condominium corporation” xxxholders of separate interest shall be” automatically be members or shareholders,” to the exclusion of others, in proportion to the appurtenant interest of their respective units in the common areas.
a) b)
c) d) e)
Sec.3- As used in the this Act x x x
MOD III
“Condominium” means a condominium as defined x x x “Unit” means a part of the condominium project intended for any type of independent use of ownership, including one or more rooms or spaces located in one or more floors (parts of floors) in a building or buildings and such accessories as may be appended thereto. “Project means the entire parcel of real property divided or to be divided in condominiums, including all structures thereon. “Common areas means the ENTIRE PROJECTS excepting all units separately granted or held or reserved. “To divide” real property means to divide the ownership thereof or other interest therein by conveying one or more condominiums therein but less than the whole thereof.
MOD III Sec. 4-The provisions of this Act shall apply x x x only if there shall be recorded in the Register of Deeds x x x and duly annotated in the corresponding certificate of title of the land x x x an ENABLING OR MASTER DEED which shall contain, among others, the following: a)
Description of the land on which the building or buildings and improvements are or are to be located.
b)
Description of the building or buildings, stating the number of stories and basements, the number and their accessories, if any;
c)
Description of the common areas and facilities;
d)
A statement of the exact nature of the interest acquired or to be acquired by the purchaser in the separate units and in the common areas of the condominium project, x x x.
e)
Statement of the purposes for which the building or buildings and each of the units are intended or restricted as to use;
MOD III
A certificate of the registered owner of the property, if he is other than those executing the master deed, as well as of all registered holders of any lien or encumbrances on the property, they consent to the registration of the deed; g) The following plan shall be appended to the title as integral parts x x x 1) a survey plan of the land 2) a diagrammatic floor plan of the building or buildings in the project, in sufficient detail to identify each unit , its relative location and approximate dimensions; h) Any reasonable restriction not contrary to law, morale or public policy regarding the right of any condominium owner to alienate or dispose of his condominium. Sec. 5. Any transfer or conveyance of a unit or an apartment, office or store or other space therein, shall include the transfer or conveyance of the UNDIVIDED INTEREST in the COMMON AREAS, or in a proper case, the membership or shareholdings in the condominium corporation. x x x. f)
MOD III Sec. 6. Unless otherwise expressly provided in the ENABLING or MASTER DEED or Declaration of restrictions, the incidents of a condominium grant, as as follows:
a) The boundary of the unit granted are the interior surfaces of the perimeter walls, floors, ceilings, windows, and doors thereof. x x x x x NOT PART of the unit bearing walls, columns, floors, roofs, foundations and other common structural elements of the buildings; lobbies, stairways, hallways, and other areas of common use, elevator equipment and shafts, central heating, central refrigeration, etc. x x x b) There shall pass with the unit, as an appurtenance thereof, an exclusive easement for the use of air space encompassed by the boundaries of the unit as it exists at any given particular time and as the unit may lawfully be altered or reconstructed from time to time.xxx c) Unless otherwise, provided, the common areas are held in common by the holders of units, in equal shares, one for each unit. d) x x x e) x x x f) x x x g) x x x
MOD III
• Sec. 7. Except as provided in the following section, the common areas
shall remain undivided and there shall be no judicial partition thereof. Note: Succeeding sections/provisions refers more on management, accounting of the project.
Basically, the foreign references on the interests in a condominium compared to the owner’s interests provided under R.A.4726, as amended, are identical. Under the Philippine setting, the valuation process and procedures may differ between the appraisal of the assessor and the private appraiser. While the law is intended for REAL PROPERTY AND OTHER TAXES, it appears, there is no prohibition that the private appraiser may or cannot use the same for reference.
COMPARISON IN THE PROCESS AND PROCEDURES MOD III ASSESSOR 1. Appraisal & assessment based on specific provisions of law RA 7160
PRIVATE APPRAISER 1. Based on accepted appraisal standards
2. Definite schedule of unit base value for each class of property (land) and type of building.
2. Unit value determine at time of appraisal either for land or bldg.
3. Collect and stratify appraisal data for mass appraisal purposes,
3. Gather limited data to support singular appraisal or sometimes a semblance of mass appraisal may also occur.
4. All three approaches to value are applied in the preparation of the Schedule of Base Unit Value
4. All three approaches also used in the appraisal process.
5. Appraisal/assessment for taxation.
5. Appraisal for service and fee.
In the appraisal of CONDOMINIUM: MOD III
The assessor has to appraiser and assess the UNIT SEPARATELY in the name of the individual owner and the COMMON AREAS in the name of condominium association or developer. In an engagement with a client, private appraiser will most likely appraise (only) the individual unit. Is there the possibility or cause to include the valuation of the common area? Some appraisers opined there is no need to include the value of the common area corresponding to the percentage holdings.
ILLUSTRATION – ASSESSOR’ PROCEDURES ASSUME DATA: MOD III 1. Land Data
1,000 square meter
2. Building (Project) Area
800 square meter
3. Number of Storey (Floors)
4
4. Building Type (Building Code)
Type V
5. Number of units 2nd to 4th Floors
24 each
6. Net Area of Ground Floor, (commercial)
700 sq.m.
7. Alloted Common Areas: Ground Floor 2nd to 4th Floors 10% each fl. One Level Basement Parking
100 sq.m 240sq.m. 240sq.m.
8. Schedule of Base Unit Value – Land
Php10,000.00/sq.m.
9. Schedule of Base Unit Value – Building
Php30,000.00/sq.m.
10. Range of Area of Unit
30-35 sq. meter
(Note: Each unit covered by enabling or Master Deed)
SUGGESTED SOLUTIONS:
MOD III
Land – 1,000 sq.m. @ Php10,000.00 = Php10,000,000.00 Building (Assuming the basic SBUV is applied): Common Areas:
2nd to 4th Fl. Basement
Gr.Fl. 100sq.m.@ 30,000.=
Php3,000,000.00
240sq.m.@ 30,000X3= PhP21,600,000.00 240sq.m.@ 20,000. =
Php4,800,000.00
Total Php29,400.000.00
MOD III
Individual Area (For Units)
Ground Fl. 700sq.m.@30,000.00 =Php21,000.000.00 2nd Floor - 720sq.m.@20,000.00 =Php14,400,000.00 3rd Floor = 720sq.m.@15,000.00 =Php10,800,000.00 4th Floor = 720sq.m.@10,000.00 =Php 7,200,000.00 Total
Php53,400,000.00
MOD III
ď‚— Note: The common areas with the corresponding market
value and ASSESSED VALUE together with pertinent property data shall be covered by Tax Declarations in the name of the developer Corporation or the Condominium Association. The corresponding tax declaration for each unit representing the aggregate area for the ground floor, 2nd, 3rd and 4th floor shall also have separate tax declaration bearing individual Market Value and Assessed Value.
MOD III
FOR THE ASSESSOR: Land -
Php10,000,000.00 x 0.0375
Php375,000.00 Php922,500.00
Building(G.FL, 2nd to 4th fl) Php24,600,000.00 x 0.0375
Basement Php4,800,000.00x 0.0375
Php180,000.00 Total
Php1,477,500.00
ILLUSTRATION – PRIVATE APPRAISER VALUATION MOD III
Assume a client engage the services of an appraiser to appraise two units e.g. Unit 201 & 20 2, for mortgage purposes. The most common steps to take, among others; are: identify the property (location),gather market data, comparative sales, and possibly, BIR zonal unit value, etc.a Form or Narrative Report may then be prepared, coming up with a Conclusion to market v alue, as: Unit 201 30 square meters @ 50,000.00 = Php1,500,000.00 Unit 202 30 square meters @ 50,000.00 = Php1,500,000.00 Total Php3,000,000.00
Note: In both cases, how would the value for the common area be Indicated, if the shareholding (or based on the master deed) is 3 ž% of the total building area?
MOD III
FOR THE PRIVATE APPRAISER: Some says, in the appraisal of the individual interest or unit the value of the common area is already imputed/included. May be may be not. The following may support further your opinion:
MOD III
The appraisal of a condominium does not differ from the appraisal of any other complex. The problem, if one exists, is the INTERSPERSION of the value of the common and/or limited elements among the various units. The appraisal process itself utilizes the three approaches, or the ones which the assessor/appraiser decides is applicable. 2) Expert say CREATIVE COSTS, which are the contribution of the entrepreneur as a factor of production; may be considered. 1)
MOD III TABLE OF CREATIVE COSTS NO. OF UNITS MULTIPLIER TO ADD CREATIVE VALUE TO BASE VALUE Up to 10
1.54
11 thru 30
1.43
31 thru 50
1.33
51 and over
1.25
THANK YOU