Implementing Rules and Regulations of RA 9904 – The Magna Carta For Homeowners and Homeowners’ Associations

d. By being listed as a prospective beneficiary or awardee of ownership rights under the Community Mortgage Program, Land Tenurial Assistance Program, and other similar programs.

Section 6.   Termination of Homeownership. – Homeownership ends by:

a. Terminating ownership through conveyance of the property by sale, assignment or donation; or

b. Any other legal transfer of ownership, which shall automatically authorize the association to deny homeowner rights to the transferee under this section.

Section 35. Disaffiliation from the Federation. – An association, by a resolution passed by the majority of its board of directors or trustees, and duly approved by majority of its total membership, may sever its membership from the federation which shall take effect after a written notice of disaffiliation is filed with the federation and the Regional Office.

Section 36. Memorandum of Disaffiliation. – Upon receipt of the notice of disaffiliation by a constituent association, the Regional Office shall enter a memorandum thereof in the records of the federation and the disaffiliating association, a copy of which shall be furnished the concerned parties.

Section 37. Effects of Disaffiliation. – Upon disaffiliation, the federation loses its powers and privileges as set forth in the articles of association and by-laws over the disaffiliating association, while the latter loses its entitlement to the rights and privileges arising from membership in the federation. The disaffiliation shall be without prejudice to the settlement of any obligation incurred by the federation and constituent associations against each other.

RULE 7

DISSOLUTION OF THE ASSOCIATION

Section 38. Methods of Dissolution. – A homeowners association may be dissolved voluntarily or involuntarily.

Section 39.   Voluntary Dissolution where No Creditors are Affected. – If the dissolution of an association does not prejudice the rights of any creditor having a claim against it, the dissolution shall be effected as follows:

a. The issuance of a Board Resolution authorizing the dissolution of the association:

[1]   Notice sent to all members of the Board, in accordance with the notice requirements of the by-laws, setting a date for a Meeting for the purpose of the dissolution of the association;

[2]   In the meeting called for the purpose, a majority of all the members of the Board shall be necessary for the approval of the Board Resolution dissolving the association;

[3]   The Board Resolution shall likewise state the date of the General Assembly which shall consider the dissolution of the association;

b. A majority vote of all the members, duly notified beforehand, shall be required to dissolve the association. The Notice shall be –

[1]   Personally served or sent by registered mail to the members at least thirty (30) days before the scheduled meeting;

[2]   Published once a week for two (2) consecutive weeks in a newspaper of local circulation where the principal office address of the association is located, or, if there is none, in a newspaper of general circulation once a week for two (2) consecutive weeks;

[3]   Posted at the bulletin board of the association and in other strategic and conspicuous places within its territorial boundaries.

c. The Regional Office shall be furnished copies of the Resolutions of the board of directors/trustees and the general assembly of members dissolving the association, both of which shall be signed and certified as correct by a majority of the members of the Board of Directors/Trustees and countersigned by the Secretary.

d. The Regional Office shall issue the certificate of dissolution upon determination that the application has complied with all the foregoing requirements and that it is not contrary to law.

Section   40.   Voluntary  Dissolution  where  Creditors  are  affected.  – Where the dissolution of an association may prejudice the rights of any creditor, the following procedure shall be followed:

a. The association shall conduct the meetings and all solemnities required for the notice as stated in the first two (2) subsections of the immediately preceding section;

b. Upon completion of the foregoing, a petition for dissolution shall be filed with the Regional Office which shall have the following requirements:

[1]   The petition shall be signed by a majority of its board of directors or trustees or other officers of the association having the management of its affairs;

[2]   The petition shall be verified by its president or secretary or one of its directors or trustees, and shall set forth all claims and demands against it, and that its dissolution was resolved upon by the affirmative majority vote of its members at a meeting called for that purpose;

[3]   The resolutions of the board and the general membership attesting to the consent of the majority of both the members of the Board and the general membership shall be attached to the petition, including proof of publication of the notice, its personal service or service by registered mail to all members and posting;

c. If the petition is sufficient in form and substance, the Regional Office shall, by an order reciting the purpose of the petition, fix a date on or before which objections thereto may be filed by any person, which date shall not be less than thirty (30) days nor more than sixty (60) days after the entry of the order. Before such date, a copy of the order shall be published at least once a week for three (3) consecutive weeks in a newspaper of local circulation in the municipality or city where the principal office of the association is situated, or if there is no such newspaper, then in a newspaper of general circulation in the Philippines, and a similar copy shall be posted for three (3) consecutive weeks in three (3) public places in such municipality or city and in the bulletin board of the association.

d. Upon five (5) day’s notice, given after the date on which the right to file objections as fixed in the order has expired, the Regional Office shall proceed to hear the petition and try any issue made by the objections filed; and if no such objection is sufficient, and the material allegations of the petition are true, it shall render judgment dissolving the association and ordering such disposition of its assets as justice requires, and may appoint a management committee to collect such assets and pay the debts of the association.

Section 41. Dissolution by Shortening Corporate Term. – A voluntary dissolution may be made by amending the articles of association to shorten the term of the existence of the association. A copy of the amended articles of association shall be submitted to the Regional Office in accordance with these rules. Upon approval by the Regional Office of the amended articles of association or expiration of the shortened term, as the case may be, and upon such terms as may protect the rights of creditors whose claims against the association may be affected, the association shall be deemed dissolved without any further proceedings.

Section 42. Involuntary Dissolution. – The association may be dissolved by the Regional Office upon the filing of a verified complaint and after proper notice and hearing on the grounds provided by existing laws, rules and regulations.

RULE 8

POST-REGISTRATION

Section 43. Requirements after registration. – Within thirty (30) days from the issuance of the certificate of association, the homeowners association shall submit the following to the Regional Office:

a. Tax Identification Number;

b. BIR Certification/Official BIR stamps or receipts; and,

c. Updated master list of members and their authorized representatives, if any, with their corresponding signatures as attested by the association secretary.

Section 44. Books Required for Stamping. – In addition to the preceding requirements and within the same period, the association shall submit the following books in blank forms to the Regional Office for stamping or marking as official association books:

a. Cash Receipts Book (CRB) and Cash Disbursement Book (CDB) duly registered with the Bureau of Internal Revenue (BIR); and,

b. Ledger and journal duly registered with the Bureau of Internal Revenue (BIR).

Section 45. Books to be kept. – Every association shall keep and carefully preserve a record of all transactions and minutes of meetings of the general membership and the board of directors or trustees, setting forth, in detail, the date, time and agenda, proof of notice, whether the meeting was regular or special, and the significant acts done or ordered in the meeting.

Section 46. Annual Reports. – Within ninety (90) days from the close of the fiscal period, the association shall submit to the Regional Office the following books and documents concerning its operations during the preceding accounting period:

a. General information sheet detailing the names of the members of the board of directors or trustees, including the executive and other accountable association officers;

b. Latest financial statement certified correct by the treasurer and auditor of the association and attested to by the Chairman of the Board or the President, and externally audited, preferably, by an independent Certified Public Accountant; and,

c. Certified true copy of the master list of members and the compiled resolutions duly certified by the association secretary and attested to by the Chairman of the Board or the President.

Section 47. Resolutions Delisting or Expelling Association Members in Land Tenurial Projects. – In cases of CMP, GLAD and other similar land tenurial projects/arrangements, the resolution delisting/expelling members from the association, and the corresponding substitutions, if any, shall be submitted to the HLURB, within thirty (30) days from its adoption. Otherwise, the delisting or expulsion of members shall not be enforceable.

Section 48. Financial and Other Records. – The association is enjoined to observe the following, with regard to its funds, financial and other records:

a. The association or its managing agent shall keep financial and other records sufficiently detailed to enable the association to fully declare to each member the true statement of its financial status. All financial and other records of the association including, but not limited to, checks, bank records and invoices, in whatever form these are kept, are the property of the association. Each association’s managing agent shall turn over all original books and records to the association immediately upon termination of the management relationship with the association, or upon such other demand as is made by the board. An association’s managing agent is entitled to keep association records. All records which he managing agent has turned over to the association shall be made reasonably available for the examination and copying by the managing agent;

b. All records involving the affairs of the association shall be available for examination by all owners, holders of mortgages on the lots, and their respective authorized agents upon reasonable advanced notice, during normal working hours at the office of the association: Provided, That holders of mortgages on lots may have access to the information about the property held in mortgage with the consent of the registered owner;

c. A financial statement of the association shall be prepared annually by an auditor, the treasurer and/or an independent certified public accountant within ninety (90) days from the end of the accounting period to be posted in the association office, bulletin boards, or other conspicuous places within the subdivision/village, and to be submitted to the HLURB; and,

d. The funds of the association shall be kept in accounts in the name of the association and shall not be joined with the funds of any other association, or any person responsible for the custody of such funds.

RULE 9

THE HOMEOWNERS ASSOCIATION

Section 49. Rights and Powers of the Association. – An association shall have the following rights and powers:

a. Subject to consultation and with the approval of a simple majority of the members, adopt and amend the articles of association and by-laws, rules and regulations, pursuant to existing laws and regulations;

b. In behalf of its members, institute, defend, or intervene in litigation and/or administrative proceedings affecting the welfare of the association and the subdivision/village as a whole, excluding, however, disputes that are not the responsibility of the association;

c. Regulate the use, maintenance, repair, replacement and modification of common areas and cause additional improvements to be made part of the common areas: Provided, that the aforementioned do not contradict the provisions of the approved subdivision plan;

d. Regulate access to, or passage through the subdivision/village roads for purposes of preserving privacy, tranquility, internal security, safety and traffic order: Provided, that: [1] public consultations are held; [2] existing laws and regulations are met; [3] the authority of the concerned government agencies or units are obtained; and, [4] the appropriate and necessary memoranda of agreement are executed among the concerned parties;

e. Hire, discharge or contract managing agents and other employees, agents and independent contractors to ensure the full functioning and operation of the association;

f. Subject to consultation with and the approval of a simple majority of the association members, acquire, hold, encumber and convey in its own name any right, title to or interest in real or personal property: Provided, that such approval of a simple majority of the association members shall not be required for the acquisition, holding, encumbrance and conveyance of personal properties in amounts not exceeding ten percent (10%) of the association’s cash holdings for its use in the course of its normal operations;

g. Ensure the availability of quality water services at a reasonable price and, at its option, after consultation with the general membership, administer and manage the waterworks system of the subdivision;

h. Upon consultation, grant easements, leases, concessions and authority to use common areas and petition for or consent to the vacation of streets and alleys: Provided, that the said grant of easements, leases, concessions and authority shall not be applicable to access roads, main interconnecting roads, alleys and sidewalks within the subdivision;

i. Impose or collect reasonable fees for the use of open spaces, facilities, and services of the association to defray necessary operational expenses, subject to the limitations and conditions imposed under the law, the regulations of the board and the association’s by-laws;

j. Cause compliance with regard to height regulations, easements, use of homes, buildings, edifices, or structures that may be built within the subdivision, in accordance with the National Building Code, zoning laws, HLURB rules and regulations, existing local ordinances, and existing deeds of restriction;

k. Subject to consultation and with the approval of a simple majority of the association members, allow the establishment of certain institutions such as, but not limited to, schools, hospitals, markets, grocery stores and other similar establishments that will necessarily affect the character of the subdivision/village in terms of traffic generation, and/or opening the area to outsiders which may result in the loss of privacy, security, safety, and tranquility to its residents, in accordance with the National Building Code, zoning laws, existing local ordinances, HLURB rules and regulations, and existing jurisprudence: Provided, That such prior approval shall not be necessary for the establishment of sari-sari stores, home industries and similar small-scale business enterprises within the subdivision/village classified as socialized housing;

l. Suspend privileges of and services to and/or Impose sanctions upon its members for violations and/or noncompliance with the association’s by-laws, rules and regulations;

m. Petition for the creation of a separate barangay, independently or together with neighboring subdivisions: Provided, that all the requirements of the Local Government Code of 1991 are met; and,

n. Exercise any other powers conferred by the by-laws and the HLURB necessary for the governance and operation of the association.

Section 50. Composition of the Board. – Unless otherwise provided in the by-laws, the board shall be composed of at least five (5) but not more than fifteen (15) elected members of the association.

Section 51. Association Officers. – Unless otherwise provided in the by-laws, an association shall have the following executive officers who shall be responsible for the management of the association’s business: president, vice-president, secretary, treasurer and auditor. The board may create other management positions in the association as may be necessary.

Section 52. Qualifications of Officers. – A director and officer of an association –

a. Must be legal age;

b. Must be a member in good standing;

c. Must be an actual resident of the subdivision, housing or relocation project for at least six (6) months as certified by the association secretary or in default thereof, by a member having personal knowledge thereof; and,

c. Has not been convicted by final judgment of an offense involving moral turpitude.

The legitimate spouse of a member may be a candidate in lieu of the member.

Section 53. Disqualifications of Officers. – The by-laws shall provide for reasonable disqualifications of candidates for director and/or officer to protect the association and its members from interests inimical or inconsistent with its purpose, or practices detrimental to the welfare thereof, such as but not limited to the following:

a. Those found guilty of having committed fraud, falsification, defalcation, or any other act inimical to the interests of the association;

b. Former officers and directors of the association who have not turned over the books, monies and records of the association during their term, in the interest of enforcing faithful discharge of their duties, transparency and accountability; or,

c.   Those who refused to comply with the lawful orders of the HLURB.

Section 54. Duties and Responsibilities of the Board of Trustees/Directors. – In addition to the duties and responsibilities stated in the by-laws of the association, the board shall have the following duties and responsibilities:

a. Regularly maintain an accounting system using generally accepted accounting principles, and keep books of accounts, which shall be open for inspection to any homeowner and duly authorized representatives of government agencies upon request, during reasonable hours on business days;

b. Collect reasonable fees, dues and assessments that may be provided for in the by-laws and approved by a majority of the members;

c. Collect reasonable charges for assessments, and after due notice and hearing by the board in accordance with the procedures as provided in the by-laws, and rules and regulations adopted by the board, charge reasonable fines for late payments and for violation of the by-laws, rules, and regulations of the association, in accordance with a previously established schedule adopted by the board and furnished to the homeowners;

d. Propose measures to raise funds and the utilization of such funds and submit the same for consideration of the members of the association; and,

e. Undergo a free orientation by the HLURB or any other competent agency deputized by it on how to conduct meetings, preparation of minutes, handling of accounts, laws and pertinent rules and regulations within thirty (30) days after election or appointment.

f. Discharge the duties and responsibilities provided for in the association’s by-laws; and,

g. Exercise such other powers as may be necessary and proper in accordance with this Act and for the accomplishment of the purposes for which the association was organized.

The board shall act in all instances on behalf of the association, except to amend the articles of association, to dissolve the association, to elect members of the board or to determine the qualifications, powers and duties, or terms of office of the board, and other instances that require the vote or approval of the members themselves. In the performance of their duties, the officers and members of the board shall exercise the degree of care and loyalty required by such position.

Section 55. Relationship with LGUs. – Homeowners associations shall complement, support and strengthen LGUs in providing vital services to their members and help implement local government policies, programs, ordinances, and rules.

a. Associations are encouraged to actively cooperate with LGUs in furtherance of their common goals and activities for the benefit of the residents of the subdivisions/villages and their environs;

b. Where the LGUs lack resources to provide for basic services, the associations shall endeavor to tap the means to provide for the same. In recognition of the associations’ efforts to assist the LGUs in providing such basic services, association dues and income derived from rentals of their facilities shall be tax-exempt: Provided, that such income and dues shall be used for the cleanliness, safety, security and other basic services needed by the members, including the maintenance of the facilities of their respective subdivisions/villages;

c. LGUs shall, upon due notice, hold public consultations with the members of the affected associations, through their officers and directors, where proposed rules, zoning and other ordinances, projects and/or programs affecting their jurisdiction and surrounding vicinity are to be implemented prior to the effectivity or implementation of such rules, zoning, ordinances, projects or programs: Provided, that in cases of zonal reclassification within the subdivision/village, the views of the simple majority of homeowners shall be obtained;

d. Such public consultations shall conform to the manner as specified in Rule  XI,  Article  54  of  the  Implementing  Rules  and  Regulations  of Republic Act N0. 7160, otherwise known as the Local Government Code of 1991.

Section 56 . Relationship with National Government Agencies. – The associations shall complement, support and strengthen the efforts of the National Government Agencies in providing vital services to their members and help implement the national government policies and programs.

a. Associations are encouraged to actively cooperate with National Government Agencies (NGAs) in the furtherance of their common goals and activities for the benefit of the residents of the subdivisions and its environs; and,

b. NGAs shall consult the associations where proposed rules, projects and/or programs may affect their welfare.

RULE 10

ELECTIONS

Section 57. Holding of Elections. – A homeowners association shall hold regular membership meetings or elections on the time or date set forth in its by-laws.

Section 58. Proxies. – Association members may vote in person or by proxy in all meetings of members. Proxies shall be in writing, signed by the member and filed before the scheduled meeting with the association secretary. Unless otherwise provided in the proxy, it shall be valid only for the meeting for which it is intended. No proxy shall be valid and effective for a period longer than three (3) years at any one time unless earlier revoked by the member.

Section 59. Failure of Election. –

a. When a regular or special election cannot be held or conducted due to lack of quorum as defined under the association by-laws or for any other serious cause such as violence, terrorism, force majeure, and other analogous causes of such a nature that the holding of a free, orderly and honest election should become impossible, the ElectionCommittee shall call for another election within a period of thirty (30) days from the date of the failed election or the cessation of the cause for such failure of election.

b. In case a regular or special election is not held, the following shall be submitted by the association to the Regional Office:

[1]   Notice of postponement of the regular or special membership meeting; and,

[2]   Affidavit of non-holding stating categorically the reasons why no election was conducted in accordance with the provisions of the association by-laws.

The notice or affidavit shall be executed by the Secretary and attested to by its President and shall be filed with the Regional Office within five(5) days from the date of the scheduled election.

c. If the reasons stated in the affidavit of non-holding of election are found to be without merit, the Regional Office shall order the director/ trustee and officers of the association to immediately call for the conduct of the election within fifteen (15) days from receipt of the Order. The director/trustees and officers who failed to comply with the order of the Regional Office shall be held, jointly and severally, liable therefore.

The Regional Office shall call a special election for the officers of the association and set the rules that shall govern the conduct thereof in consultation with the members thereof.

The Regional Office shall designate its responsible officials to supervise the conduct of the special election with the participation of the Federation as observer. Within ten (10) working days after the date of the election, said election supervisor shall submit a report to the Regional Office stating, among others, the following:

[1]   Whether the special election was held as scheduled;

[2]   Time of the commencement and end of election; and,

[3]   The following information as appearing in the report of the committee on election of the homeowners association: [a] number of qualified voters; [b] Number of votes cast; [c] Number of votes received by individual candidates; d) Protest registered on the day of election, if any; and, e) such other information relevant and necessary in the conduct of election.

Section 60. Hold-Over. – Where there is failure to elect a new set of directors or officers, the incumbent directors/trustees/officers shall be allowed to continue in a hold-over capacity until their successors are elected and qualified, subject to compliance with the preceding sections of this Rule on the non-holding or postponement of regular and special elections. In no case shall the hold-over term of the officers/directors/trustees exceed two (2) years.

Section 61. Election Contests. – Election contests and their resolutions shall be governed by the by-laws of the association. Unless otherwise provided by the Association’s by-laws, the election contest shall be in writing and filed by any of the aggrieved candidate/s within five (5) days after the proclamation of the winning candidates, specifically stating the grounds thereof. The duly constituted Election Committee of the Association shall decide on the controversy brought before it within the non-extendible period of five (5) days.

The aggrieved candidate/s may file the necessary complaint before the HLURB Regional Office within ten (10) days from receipt of the decision of the Election Committee. The complaint shall be accompanied by a certification that the dispute was referred to, and resolved by the appropriate committee duly constituted by the association.

In the absence of an Election Committee and Grievance Committee or refusal to issue the certification, an affidavit attesting to this fact shall be made further stating that complainant has exhausted administrative remedies, which shall be attached to the complaint.

Section 62. Turnover of Records and Properties by Outgoing Directors/ Officers. – To ensure the orderly turnover of the management of an Association, the outgoing directors and officers of an Association shall turn over all Association books, records, properties and other assets, to the new set of directors and officers within sixty (60) days from the election of the new Board.

Section 63. Election Reports. – Within fifteen (15) days from the date of any regular or special election, the association shall submit the following to the Regional Office:

a. Proof of notice of election;

b. A copy of the notice sent to the members or posted in conspicuous places stating the time, date and place of the election;

c. Attendance sheet signed by the members and attested by the Secretary;

d. Notarized minutes of elections prepared and signed by the committee which supervised the election of the association;

e. Election returns duly certified by the committee which supervised the election of the association; and,

f. Master list of qualified voters as certified by the association secretary and treasurer.

RULE 11

DUTIES AND RESPONSIBILITIES OF THE HLURB

Section 64. Duties and Responsibilities of the HLURB. – In addition to the powers, authorities and responsibilities vested in it by Republic Act No. 8763, Presidential  Decree  No.  902-A,  Batas  Pambansa  Blg.  68  and  Executive  Order No. 535, Series of 1981, as amended, the HLURB shall:

a. Regularly conduct free orientation for officers of homeowners associations or deputize another competent agency to conduct the orientation;

b. Formulate and publish a Code of Ethics and Ethical Standards for board members detailing prohibited conflicts of interest;

c. Register all associations, federations, confederations or umbrella organizations of the associations;

d. Hear and decide intra-association and/or inter-association controversies and/or conflicts, without prejudice to filing civil and criminal cases by the parties concerned before the regular courts: Provided, That all decisions of the HLURB are appealable directly to the Court of Appeals;

e. Formulate the rules or manner of verification and validation of petitions for the removal of director/s or trustee/s of the association or dissolution of the board;

f. Exercise the same powers over federations, confederations or umbrella organizations of the associations;

g. Formulate, in consultation with the representatives of associations, federations, confederations or umbrella organizations of the associations, standard nomenclatures to be used for the associations’ books of accounts, and a standard articles of association and by-laws for homeowners association for reference purposes;

h. Formulate, in consultation with the representatives of associations, federations, confederations or umbrella organizations of the associations, the guidelines in regulating the kinds of contributions and fees that may be charged and/or collected by associations; and,

i. Call upon the Philippine National Police, other law enforcement agencies, and other instrumentalities of the government, if necessary, for the enforcement of its functions.

Section 65. Verification and Validation of Petition for Removal of Director or Trustee. – The following procedure shall be observed in case of removal of a director or trustee of an association

a. A director or trustee may be removed from office, through a verified petition duly signed by the majority members of an association, for any cause provided in the by-laws of the association;

b. The duly signed petition, subscribed and sworn to before a notary public, shall be submitted to the Regional Office of the HLURB for purposes of verification and validation. Within five (5) days from receipt of the petition, the Regional Office shall determine whether the petition complies with the required formalities and based on any of the grounds or causes for removal provided under the by-laws. Upon being satisfied that the petition is sufficient in form and substance, the Regional Office shall determine, based on its record, whether the petition is signed by majority of the members of the association concerned;

c. If the Regional Office determines that the petition is not signed by the required number of the members of the association, it shall then dismiss the petition and shall inform the member who filed the petition of its decision, furnishing a copy thereof to the board and the director or trustee subject of the petition;

If, on the other hand, the petition is signed by the required number of the members of the association, the Regional Office shall then proceed with the validation of the petition. The Homeowners Association Administration Division of the Regional Office shall compare the signatures appearing in the petition with the records on file with the Regional Office;

d. The Homeowners Association Administration Division shall then prepare a report on the conduct of validation and submit the same to the Regional Officer/Director. The Regional Director/Officer shall then issue an order validating the petition and the removal of the director or trustee, furnishing a copy thereof to the director/trustee concerned and the board;

e. Within sixty (60) days from the receipt of the order from the Regional Director/Officer, an election shall be called by the remainder of the board for the purpose of determining who shall hold office for the unexpired term of the removed director or trustee;

f. The director or trustee who has been removed shall have the right to question his removal on the sole ground of the validity of the cause relied upon by the members of the association, through a petition filed before the Regional Office within fifteen (15) days from receipt of the order of his removal; and,

g. The pendency of the petition filed by the director or trustee shall not prevent the board from conducting the special election called for the purpose of filling up the vacancy. In the event the HLURB decides that the removal is invalid, the removed director or trustee shall then be reinstated to his former position and serve the remainder of his term. The tenure of the person who replaced the removed director from the time of his election up to the time of the reinstatement of the latter shall be respected.

Section 66. Dissolution of the Board. – In the event two-thirds (2/3) of the association’s members submit a verified petition for the dissolution of the board, the following procedure shall be observed:

a. The petition for the dissolution of the board shall be based solely on the grounds or causes provided in the association’s by-laws;

b. The procedure provided in subsections (b) to (g) of the immediately preceding Section shall be observed;

c. Until the new board members shall have been elected and qualified, the HLURB shall designate an interim board: Provided, That such board shall be composed of association members in good standing: Provided, further, That such interim board members shall not be eligible to run in the election called for the purpose of replacing the members of the dissolved board.

This procedure shall also be adopted if a majority of the members of the board is removed, which shall be considered as a dissolution of the entire board.

Section 67. Monitoring. – The Regional Office may, motu proprio or upon report or request of an interested party, inspect and examine documents, books and records, and investigate transactions and activities of the association for the purpose of ascertaining and enforcing its compliance with laws, rules and regulations being implemented by HLURB, and in proper cases, impose appropriate sanctions.

Section 68. Examination of Financial Transactions. – After the submission by the association of the annual reports required to be submitted, the Regional Office shall conduct an examination and evaluation thereof within fifteen (15) days from receipt and shall complete the review and evaluation within an equal period of fifteen (15) days.

If the Regional Office finds that the documents submitted are incomplete or inconsistent with generally accepted accounting principles, the Regional Office shall issue a notice to the association for the submission of the pertinent books and records, including but not limited to its audited balance sheet or income statement, cash book, ledger and journal, or cash flow statement. For this purpose, the Regional Office may also conduct its own examination and evaluation of the required reports of the association in its designated administrative office upon prior notice to the concerned association when circumstances warrant.

Section 69. Show Cause Order. – If, after investigation or upon evaluation of the reports, it appears that a violation of existing laws, rules and regulations of HLURB has been committed by the homeowners association, the Regional Office shall require the association, its directors/trustees and officers to submit a sworn statement explaining why no sanctions should be imposed for the reported violation within ten (10) days from receipt thereof.

Section 70. Evaluation. – Upon receipt of the sworn statement, the Regional Office shall determine if any violation exists. If the Regional Office determines that no violation was committed, it shall issue an order considering the matter as terminated.

If the BOD/Trustees and officers fail or refuse to submit the sworn statements as required herein, the Regional Office may make a determination on the basis of the records at hand and shall apply the penalties and sanctions provided under Section 23 of the RA No. 9904.

Section 71. Independent Audit; when necessary. – If, upon evaluation, the Regional Office finds ambiguity or inconsistency in the documents submitted, it may require the board of directors of the association to engage, at its own expense, the services of an independent auditor who shall conduct and review the said financial records, and finish the same within thirty (30) days from receipt of the HLURB order. The independent auditor shall be an accredited CPA of the Board of Accountancy and the Securities and Exchange Commission (SEC). Thereafter, the association shall submit the report of the independent auditor.

RULE 12

FINAL PROVISIONS

Section 72.   Prohibited Acts. – It shall be prohibited for any person:

a. To compel a homeowner to join the association, without prejudice to the provisions of the deed of restrictions, its extensions or renewals as approved by the majority vote of the members or as annotated on the title of the property; the contract for the purchase of a lot in the subdivision project; or an award under a CMP project or a similar tenurial arrangement;

b. To deprive any homeowner of the right to avail of or enjoy basic community services and facilities provided that the dues, charges, and other fees for such services have been duly paid;

c. To prevent any homeowner who has paid the required fees and charges from reasonably exercising the right to inspect association books and records;

d. To prevent any member in good standing from participating in association meetings, elections and referenda;

e. To deny any member due process in the imposition of administrative sanctions;

f. To exercise rights and powers as stated in Section 10 of the Act in violation of the required consultation and approval of the required number of homeowners or members;

g. To unreasonably fail to provide basic community services and facilities and maintain, repair and replace their residential abode.

Section 73. Penalties and Sanctions. – Any person who, intentionally or by gross negligence, violates any provision of law, rules and regulations, fails to perform duties and functions mandated by law and/or violates the rights of the members, shall be punished with a fine of not less than Five Thousand Pesos (Php5,000.00) but not more than Fifty Thousand Pesos (Php50,000.00) and permanent disqualification from being elected or appointed as member of the board, officer or employee of the association, without prejudice to being charged before a regular court for violations of the provisions of the Revised Penal Code, Civil Code and other pertinent laws.

If the violation is committed by the association, the members, officers, directors or trustees of the association who have actually participated in, authorized, or ratified the prohibited act shall be held liable.

If the violation is committed by the employees and agent who acted in gross violation of the provisions of the Act, the officers, directors or trustees, or incorporators of the association shall be jointly and severally liable with the offending employees, agents, and the association.

Section 74. Application of HLURB Rules of Procedure. – The existing HLURB Rules of Procedure, insofar as not inconsistent with this Rules shall govern the adjudication process involving the associations, its members, officers and directors or trustees.

The provisions of the Corporation Code of the Philippines and the Rules of Court, as amended, shall be applied in suppletory character.

Section 75. Amendments. – This Rules, or any provision thereof, may be amended by the HLURB.

Section 76. Separability Clause. – If any provision of this Rules is declared invalid or unconstitutional, the remainder of the Rules shall remain valid and subsisting.

APPROVED, this  24th day of June , 2011, Quezon City.

(Sgd.) HON. JEJOMAR C. BINAY

Vice-President of the Philippines

and Chairman, HUDCC

Attested By:

(Sgd.) CHARITO B. LANSANG

Board Secretary