The one route that does not depend on someone else's name
Every other page in this hub is about a wall. This one is about the door. If you want Philippine real property registered to you, with a certificate of title bearing your name, the condominium unit is the route the law gives you — because of how Republic Act No. 4726, the Condominium Act, builds the ownership.
Buyers hear this as “the 40% rule,” nod, and stop asking. That is the expensive part. The cap is real, but it does not work the way a brochure implies, and it is measured at the level of the project, not your unit.
What Section 5 actually says
The operative provision is Section 5 of RA 4726 (approved 18 June 1966):
Section 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 interests in the common areas or, in a proper case, the membership or shareholdings in the condominium corporation: Provided, However, That where the common areas in the condominium project are owned by the owners of separate units as co-owners thereof, no condominium unit therein shall be conveyed or transferred to persons other than Filipino citizens, or corporations at least sixty percent of the capital stock of which belong to Filipino citizens, except in cases of hereditary succession. Where the common areas in a condominium project are held by a corporation, no transfer or conveyance of a unit shall be valid if the concomitant transfer of the appurtenant membership or stockholding in the corporation will cause the alien interest in such corporation to exceed the limits imposed by existing laws.
Read it twice: it contains two different rules, and the building you are looking at is governed by only one of them.
Mode one: the unit owners hold the common areas as co-owners. A unit may then be conveyed only to Filipino citizens or to corporations at least sixty percent Filipino-owned, except in cases of hereditary succession. There is no foreign headroom in that structure — not 40%, not 1%.
Mode two: a condominium corporation holds title to the common areas and the land. Each unit carries a membership or shareholding in that corporation, and a transfer to a foreigner fails only if the accompanying transfer of shares would drive the alien interest past the limits existing laws impose — the sixty-forty ceiling. Most modern developments use this structure, and it is where a foreign buyer fits.
The 40 per cent figure is not inside the statute
Section 5 never says “forty percent.” It says a transfer is invalid if it causes the alien interest in the corporation “to exceed the limits imposed by existing laws.” Those other laws supply the ceiling. The practical consequence matters more than the drafting point: the number you need is not a constant you can memorise, it is a live figure in one particular corporation's books on the day you sign.
What you are actually buying
Section 2 explains why any of this works:
Section 2. 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. 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 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.
Your interest in the land is held indirectly, through the corporation. That is the hinge, and it sits with what the Supreme Court said about buildings in Beumer v. Amores (G.R. No. 195670, December 3, 2012):
To be sure, the constitutional ban against foreigners applies only to ownership of Philippine land and not to the improvements built thereon
In practice you receive a Condominium Certificate of Title in your own name, and the corporation records your membership or shares. That title is yours to sell, mortgage or leave by will, subject to the same quota when it moves to the next foreign buyer.
What the cap does not permit
Section 5 is a limit on the corporation, not a licence for it. It does not authorise a condominium corporation to carry alien interest beyond what existing laws allow; on the contrary, it makes the offending conveyance invalid. A structure marketed as a way for foreign shareholders to hold land through a condominium corporation past that ceiling is not a clever reading of Section 5 — it is the thing Section 5 refuses to validate. Nor does the section turn your unit into land.
Checking a project's quota before you reserve
The foreign quota is the item buyers assume and never confirm, usually because the agent answered confidently. What we typically look at before any money moves:
- Which of the two Section 5 modes the project uses — the master deed and the declaration of restrictions say so, and the answer is occasionally not the one the sales office gives.
- The corporation's current alien interest, sourced from the corporation itself rather than the seller, and confirmed close to signing rather than months before.
- Whether your reservation agreement makes the sale conditional on quota availability, and what happens to your reservation fee if it is not.
- For pre-selling units, the developer's authority to sell and the project registration — a quota is meaningless if the project cannot lawfully convey at all.
- Unpaid association dues, real property tax and annotations on the existing Condominium Certificate of Title — the same checks a Filipino buyer would want, set out on our title red flags page.
Where this sits in a due diligence engagement
Verifying the foreign quota is one line item in a written report we deliver before the purchase price leaves your account. Our engagements are fixed-fee and typically start at ₱100,000, scoped to the property. If the answer comes back wrong, you have lost a fee. If it comes back wrong after payment, you have lost the purchase price, and as the anti-dummy page explains, the courts will not give it back. See how our due diligence works, or book a consultation.
Frequently asked questions
Can a foreigner own a Philippine condominium unit outright?
In the right project structure, yes. Where the common areas and the land are held by a condominium corporation, Section 5 of RA 4726 allows a unit to be transferred to a foreigner so long as the accompanying transfer of the membership or shareholding does not push the alien interest in that corporation beyond the limits existing laws impose. The unit is titled in your own name under a Condominium Certificate of Title.
Does the 40% figure appear in the Condominium Act?
No. Section 5 refers to the limits imposed by existing laws on alien interest in the condominium corporation. The sixty-forty ceiling comes from the Constitution and the nationalisation laws, not from a percentage written into RA 4726 itself. That is why the figure to check is the project corporation's current alien interest, not a number you can recite.
What happens if the project has already hit its foreign limit?
Section 5 says that where the common areas are held by a corporation, no transfer or conveyance of a unit shall be valid if the concomitant transfer of the appurtenant membership or stockholding will cause the alien interest to exceed the legal limits. A sale beyond the ceiling is not a technicality to be cured later. That is why the quota is checked before a reservation fee is paid, not after.
Can a foreigner own the house but not the land it stands on?
The Supreme Court in Beumer v. Amores held that the constitutional ban against foreigners applies only to ownership of Philippine land and not to the improvements built thereon. Buildings and residential units are a different question from the land. That distinction is what makes the condominium route work, and it does not extend to the lot under a house.