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Author Topic: Best Legal Structure for a Condo Project?  (Read 7682 times)

Offline philippineexplorer

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Re: Best Legal Structure for a Condo Project?
« Reply #15 on: June 03, 2009, 02:01:25 PM »
Thanks Russ & Tom

Appreciate the advice. Yes I agree about the knowledge base of this forum perhaps is limited in this area. Hopefully, when my project is fininshed I can expand on it here for all to learn from. And btw, having it all in my wifes name is fine by me and there was never any consideration otherwise. I have no interest in creating more obstacles or inviting an endless supply of held out hands for \"Compliment$$$$$\" for those of you who may be familiar with that particular expression or experience. Nevertheless, I have heard of better vehicles to use other than a corporation and indeed I will be investigating those options this week with a competent attorney.

Will keep you informed when I get it all figured out. I am sure many foreigners could benefit from the information I find out on the various Ownership Structures.



 

Offline c_a_p_t_a_i_n_r_o_n

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Re: Best Legal Structure for a Condo Project?
« Reply #16 on: June 03, 2009, 03:24:16 PM »
On a serious note, yes they drift by from time to time.

Those with (Filipino born) kids can set up trusts for their kids, but still effectively control real assets as the trustee.......I\'m resonably au fait with UK/US/Euro trusts but can\'t advise on how they operate in Philippines
You will need a lawyer you can trust, start them on small projects first

I don\'t know if this\'ll be appropriate for philippine explorer, don\'t know his name let alone his family situation

Offline philippineexplorer

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Re: Best Legal Structure for a Condo Project?
« Reply #17 on: June 03, 2009, 04:30:06 PM »
Hi captain.

It is not so much a question of whether I own it, a corporation owns it, my wife owns it or my kids own it in trust. It is about the best legal structure that protects me and my family as a eventual unit owner ourselves from any future owners that may want to change the by-laws or condo docs to their own end and possibly force me from the lifestyle I wanted for the place to begin with as the actual developer LOL.

I heard of one foreign guy in Cebu who built a half a million dollar house on an expensive property for his retirement in one of the best subdivisions overlooking the city (up near the marco polo I think) This place had a homeowners association. About one month after completion of the foreignes house, the assoication changed the rules for I guess an influential lot owner and allowed him to use his vacant lot (located unfortunately next to this foreigners house)to breed Roosters.

This is what I want to avoid happening in my condo building with me and my family as tenants. A Philippine corporation with condo owner shareholders can allow this to happen.

So in a nutshell I need a LEGAL STRUCTURE  that allows us to keep CERTAIN RULES as they pertain to the condos that cannot be changed by the eventual purchasers of the Condo units. This means a legal structure that is in our (the developers) contol for all time. So some powerful person doesn\'t bully us around.

Am I being paranoid? maybe... as most associations do generally enforce rules that provide a quality of life for thier owners BUT.......but I don\'t want to take anythinig for granted and mind you anyone on this forum that thinks they are immune form this should look at the association rules that apply to where they live so as to avoid future headaches.

Possibly it involves buyers signing doecuments that are ironclad about certain rules of owning in the condo. Perhaps it involves leasing the condos for 40 years with 20 year automatic renewal and we retain ownership of the land. Who knows

Sorry for beating this dead dog to death. Wish it was a rooster LOL


thanks again - suggestions are welcome


Offline c_a_p_t_a_i_n_r_o_n

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Re: Best Legal Structure for a Condo Project?
« Reply #18 on: June 03, 2009, 08:14:18 PM »
Sounds like you need to investigate freeholder v leaseholders rights

To wit.....Your wife or trust will be the freeholder of the land
tenants/owners of the condos are leaseholders

I doubt leaseholders can override freeholders will in any aspect of the land usage (absolutely the freeholders ownership) anywhere in the world

Offline philippineexplorer

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Re: Best Legal Structure for a Condo Project?
« Reply #19 on: June 03, 2009, 08:37:45 PM »
Captain

Thanks kindly. Time to do some homework. Are you aware of other luxury priced condo properties that use this formula successfully.

Would I be wrong in guessing that most of the time this formula is probably being used by a foreign husband seeking security on a house he has built for himslef and family. He gets the house on a long term renewal lease and the wife gets the property. Both are protected in case of a seperation or divorce

Just wonder how this might work with a luxury condo development such as I propose. I know the buyers would have the same financial security owning their unit in this legal structure, but  how would a potential buyer in your mind perceive this value when coughing up $400,000 big ones from this type of arrangement versus being a shareholder of a corporation as most condo buildings seem to operate as?

thanks again

Offline tom.inbigdtexas

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Re: Best Legal Structure for a Condo Project?
« Reply #20 on: June 04, 2009, 02:33:24 AM »
PhilippineExplorer,

No need to apologize... beating a \"dead dog to death\" is the specialty of all on-line groups and forums. ;D

Perhaps your persistence in seeking this non-existent \"legal structure\" that will allow you, a foreigner, to --

1) own and control land and the improvements on that land (even after the improvements are sold or leased to very wealthy Filipinos),

2) to hold on to that control for all of eternity, and

3) provide you with an effective legal shield from being bullied by the rich and powerful in the Philippines---

--- stems from a basic misunderstanding of the structure and purpose of the constitution, statutes and regulations of the Philippines.

The very first sentence of your first post of this thread states that you are going to build a five story condo \"on a piece of land that I own.\"  That is simply impossible.  You do not own a piece of land in the Philippines.  You will never own a piece of land in the Philippines unless they amend their constitution.   

You further state, with regard to this luxury Filipino condominium, that \"I would control the board and all rules and regulations would be in my control,\" and that you want this control for \"all time.\"  Sorry, this is just not possible unless the statutes and regulations of the Philippines are amended.  Look into the corporate structure, ownership and control of banks, hotels, resorts, etc., in the Philippines.  Whatever the name on the building, Filipinos retain final control. You are not going to find a legal loophole to exploit and accomplish something in the Philippines which giant multi-national corporations have been unable to accomplish.     
 
The constitution, statutes and regulations (\"laws\") of the Philippines were designed to be protectionist in nature.  Unfortunately (IMHO), their laws are not designed to encourage investment in the Philippines by non-Philippine individuals, corporations or any other entity.  Their laws are certainly not administered in such a manner as to encourage such investments.  Whether by design or not, their laws have stymied foreign investment in the Philippines --- and, their laws are the reason you will never build, own or control your proposed condominium project.

Sorry... \"beat the dead dog\" all you wish, but right or wrong, fair or unfair, the laws of the Philippines accomplish what they are designed to do... which is to prevent you from accomplishing the exact thing you are attempting to accomplish.

Tom

BTW... If you would provide a little background on yourself pertinent to the issue of real estate development, in foreign countries or otherwise, or other start-up business ventures you have managed, it might help in understanding the perspective from which you view your proposed project and help us in getting that long-suffering \"dead dog\" some relief.   


Dallas, Tx, USA
Mactan, Cebu, PH

Offline tom.inbigdtexas

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Re: Best Legal Structure for a Condo Project?
« Reply #21 on: June 04, 2009, 03:23:44 AM »
PhilippineExplorer,

Take a look at Myril\'s post today in “Its Your Money” - “Real Estate Information” - “Club Morroco Subic Bay”

Do you believe she could have avoided these problems by reading the association rules?  How would you handle her complaints if you were the developer of her subdivision?

Tom
Dallas, Tx, USA
Mactan, Cebu, PH

Offline philippineexplorer

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Re: Best Legal Structure for a Condo Project?
« Reply #22 on: June 04, 2009, 06:57:46 AM »
Tom For some reason you keep harping about me being a foreigner when I have explained many times in the other posts that is irrelevant. My wife will own it all or my kids will own it all.  She is a Fiilipina. My kids are Filipina. Can we be clear about that!!!! Even if I continue to use \"I\" just take that as \"My Wife\" talking or writing this.

Now back to the legal structure. Using \"Captain\" Freehold/Lease scenario. Will that work and allow My Wife the control she wants to be able to enforce with the condo by-laws and documents. She would retain ownership of the property while leasing out long term the Condo units. I assum no one can do anything on the property since she owns it correct? And she can take legal action against those who tresspasses on it as an example

Offline philippineexplorer

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Re: Best Legal Structure for a Condo Project?
« Reply #23 on: June 04, 2009, 07:18:20 AM »
As for Myrils post. It is sad that she and the other owners have to go through all that. They should sue and if enough join the class action perhaps something will happen.

I live in a sub-division and HAD similar issues. Stray dogs, late night karaoke. No squatter though. Initially we spoke to the association office about this but they are useless. So we decided to take care of those problems ourselves and without conflict or stress. We hired some people to take care of the dogs and enough other people were complaining about the late night karaoke that they ended up stopping at a reasonable hour.

I am surprised Sta Lucia allows this to happen in Myrils sub-division as they are an upscale property developer and usually their properties are highly secured.

These are not issues my wife would run into as developer/owner of our condo project. There are literally no neighbors where the project is located so for now there are no dogs, roosters or noises to be seen or heard from presently. And it is unlikely there would be for many years to come as there is no other practical property to build on anywhere near us. 

That\'s the point. For us it\'s the other way around......As developers we are not concerned about outside the property assaults on our peace of mind but from our own condo purchasing tenants following the rule of their ownership. And again what ownership scenario will give MY WIFE the most power and ability to put a stop to any situation that may arise with a one of the Condo Owners.

Offline tom.inbigdtexas

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Re: Best Legal Structure for a Condo Project?
« Reply #24 on: June 04, 2009, 11:20:20 AM »

Using \"Captain\" Freehold/Lease scenario. Will that work and allow My Wife the control she wants to be able to enforce with the condo by-laws and documents. She would retain ownership of the property while leasing out long term the Condo units.


Ahhhh, now this question is a dead dog of a different color from the little pooch you posed many posts ago... and with a minor modification, in a word, I believe the answer is \"yes.\" 

Minor modification - substitute \"apartments\" for \"condo\" and substitute \"lease provisions\" for \"by-laws.\"  \"Condominium\" is typically a legal word of art with ownership connotations that are contrary to the \"lease rather than sale\" question you are now posing above.

Good luck and post some pics when the building starts to take shape.

Tom.   
Dallas, Tx, USA
Mactan, Cebu, PH

Offline philippineexplorer

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Re: Best Legal Structure for a Condo Project?
« Reply #25 on: June 04, 2009, 12:51:02 PM »
Final question along these lines

Since we are leasing these puppies for a very pretty song, do potential buyers understand that the stability, security of the leasing/owning their apartment is no different than a traditional Condo they may purchase. Its only a matter of semantics to a degree. In a nutshell this will be no different than any real estate purchase they may make. It is theres to do with as they want within the confines of the leasing rules just like any Condo? I assume the documents will allay any fears about ownership security that may crop up?

Offline bowlofsopas

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How do Ayala and SM do it? Best Legal Structure for a Condo Project?
« Reply #26 on: June 05, 2009, 06:05:43 PM »

Here\'s my two cent\'s worth...  When people buy property (which is always a big expense) they would balk at anything which would make the transaction out of the ordinary from the structure of regular property transactions - notwithstanding the fact that the property itself may be an outstanding one (especially if the difference is materially disadvantageous compared to regular property transactions).

Having said that, I was wondering about how to achieve some of your goals... where you said that you wanted to control usage of the properties... even to the degree that the majority property owners could not hang their laundry outside or have pets in their property if they wanted to. Again, notwithstanding the case where even if all the laws, regulations and rules were iron clad against these things yet you had to try to enforce the rules against occupiers who ignored those rules (you can see how this could be a headache in itself)... I was wondering how the really big boys in the business handle these issues.

What I mean is, for example, Ayala (including Avida and Alveo) and even SM are making housing developments: condos and gated communities (SM just condos I think) where, of course, the buyers even get the plot of land on which their house sits - which means a whole bunch of property rights much more than what you may be giving away in your development. Even so, I imagine that these big corporations would never think of EVER ceding control of the whole development for years and years even after all units have been built, sold and occupied and families there grow and grow (not least of all is the consideration of the unending stream of lucrative association fees set at a high rate and other service/management/maintenance contracts).

How do they do it? How do these big boys ensure that they get their way in the development FOREVER? (Unless of course these big corporations decide to sell those management rights in the future...) What is the power of the \"majority\" property owners in this case? And as an aside: can they (these big developers), and do they, lock in their rights to association dues and management rights forever? Does this happen overseas as well?

Do some research. I would love to hear what answers anyone comes up with. (Let me give the first JOKE answer: they hire a big name lawyer!) I think these considerations are in the minds of all large developments from big name corporations.



Offline c_a_p_t_a_i_n_r_o_n

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Re: Best Legal Structure for a Condo Project?
« Reply #27 on: June 05, 2009, 11:23:53 PM »
Captain

Thanks kindly. Time to do some homework. Are you aware of other luxury priced condo properties that use this formula successfully.


I believe ALL condos are bought on a leasehold basis EVERYWHERE, some places it\'s a 999 year lease, others 99 years
There\'s usually a nominal yearly ground rent (£1, $1) to the freeholder so no one forgets who owns the actual land

When buying a condo from previous owner/lessee it\'s important to know how many years left on his original lease......if there\'s only a few.....caveat emptor 

Offline philippineexplorer

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Re: Best Legal Structure for a Condo Project?
« Reply #28 on: June 06, 2009, 11:30:26 AM »
It\'s sounding better all the time. I knew we\'d get there eventually with so many intelligent participants on the Forumn here. So even if most are leasehold as Captain says, can they still be marketed as Condos. Seems must more appealing than apartments ya think.

Offline tom.inbigdtexas

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Re: Best Legal Structure for a Condo Project?
« Reply #29 on: June 06, 2009, 11:55:56 AM »
I believe ALL condos are bought on a leasehold basis EVERYWHERE, some places it\'s a 999 year lease, others 99 years
There\'s usually a nominal yearly ground rent (£1, $1) to the freeholder so no one forgets who owns the actual land

Captainron,

With all due respect (uh-oh, this means this SOB is fixing to disagree ;D) in the U.S. the ownership structure of condominiums is that each unit of the building or complex are owned individually, whereas the common areas and the land on which the complex sits is owned jointly by all of the individual unit owners in fractional amounts.  Leases are not involved in condominium ownership.

Tom

I was wondering how the really big boys in the business handle these issues.

Even so, I imagine that these big corporations would never think of EVER ceding control of the whole development for years and years even after all units have been built, sold and occupied and families there grow and grow.   

How do they do it? How do these big boys ensure that they get their way in the development FOREVER?

Bowlofsopas,

The answer is they do not keep, or want, control after the project is sold out. For a subdivision, they make their money by buying a tract of land, selling the lots at an aggregate price many, many times the purchase price of the original tract of land, make a big profit on the building of each house... and when the subdivision is near sold out, turn over control to the homeowners association and go on to their next project.

Same basic premise for a condominium, which as noted above results in the total sale of both the units and land upon which it is constructed.

Why would they want the headaches associated with a subdivision or condo as it ages... when they no longer own any part of it.

If they do wish to control, or retain future profit potential of, a piece of land used for residential or similar use, they build an apartment complex, a resort or other entity whereby they retain ownership of the land and lease the individual units or dwellings.

Too bad you and I don\'t have a few tens of millions to spare, we could partner up and build something.  ;D

Tom

Dallas, Tx, USA
Mactan, Cebu, PH