RESA Condominium

Slide 1Engr. Raul T. Punzalan
Engr. Raul T. Punzalan
REPUBLIC ACT NO. 4726
CONDOMINIUM ACT
AN ACT TO DEFINE CONDOMINIUM, ESTABLISH REQUIREMENTS FOR ITS CREATION, AND GOVERN ITS INCIDENTS.
COMPREHENSIVE REAL ESTATE PROPERTY APPRAISAL SEMINAR AND TRAINING (CREASAT)
A condominium is 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.
Title to the common areas, including the land, or the appurtenant interests in such areas, may be held by a corporation specially formed for the purpose (hereinafter known as the "condominium corporation") in which the holders of separate interest shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units in the common areas.
DEFINITION OF TERMS
"Condominium" means a condominium as defined in the next preceding section.
"Unit" means a part of the condominium project intended for any type of independent use or ownership, including one or more rooms or spaces located in one or more floors (or part or 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 project 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.
A condominium project can be defined as a vertical subdivision on a parcel of land and a multi-storey building structure erected thereon.
A condominium project can be a residential, commercial or industrial project .
The unit-owners enjoys a fee simple ownership on the unit and enjoys a common ownership (with the other unit-owners) on the land and the common elements of the building.
Major documents associated with a Condominium Project which the appraiser should be familiar with are:
Condominium Certificate of Title (CCT).
Master Deed and Declaration of Restrictions.
Articles of Incorporation and By-Laws of the Condominium Association or Corporation.
House Rules and Regulations.
Description of the land or lot.
Description of the building structure.
Description of the condominium units.
Statement of the nature and interest required in the units and common areas and whether title to the common areas is to be held by the condominium corporation.
Purpose for which the building and condominium units are intended.
Survey plan of the land.
Diagrammatic floor plans of the building and units and their relative locations and approximate dimensions.
Any reasonable restrictions in the rights of the unit owners and the condominium corporation not contrary to law, morals or public policy.
ADDITIONAL FACTORS AFFECTING VALUES OF CONDOMINIUM PROJECT OR UNITS
Location – relative location to center of activity, relative location of the unit within the project….
Classification – residential, commercial, industrial, …
Type of Unit – regular, corner, single level, with loft …
Size – floor area is ideal to its utility or highest and best use…
Layout – floor plan lay-out…
Highest and Best Use – maximum potential of property is realized…
Design – architectural, floor lay-out, building features…
Depreciation – condition, physical wear and tear…
VALUATION METHODS
Whether the appraiser’s assignment involves the valuation of a condominium unit or several condominium units, or the entire condominium project, the three approaches to value can be applied.
The three approaches to value –
Market Data Approach
Land: 900 sq. m. @ P60,000 P 54,000.000
Bldg: 7,560 sq. m. @ P24,000 181,440,000
Bldg ME: 7,560 sq. m. @ P 6,000 45,360,000
Swim. Pool 6,000,000
Spa & Gym 5,000,000
Development Cost P291,800,000
Selling Expenses: 5% of Devt Cost 14,590,000
Cost of Borrowed Money: Devt Cost x 60% x 12% x 2 years 42,020,000
Developer’s Profit: 30% 87,540,000
Total Cost P444,704,000
Average Selling Price: P444,704,000 / 6,048 sq.m. = P 73,500 per sq.m.
Based on market research, going prices of condo units in the area ranges from P70,000 to P75,000 per sq.m. Therefore, project is feasible.
SUBJECT
VALUATION OF A CONDOMINIUM UNIT BY INCOME APPROACH
The value of a condominium unit is the present worth of the rental income plus the reversion value of the unit at the end of lease contract.
Rental Income:
124 sq. m. @ P350 per sq.m. per month x 12 months P 520,800
Present Worth Factor as annuity for 5 years at 10% x 3.79079
Present Value of Rental Income P 1,974,200
Plus: Reversion Value of Condominium Unit
Value of Unit at end of contract x present worth factor
124 sq.m. @ P 60,000 per sq.m. = P 7,440,000
Present Worth Factor (lump sum) x 0.62092 P 4,620,000
Indicated Value P 6,594,200

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