The Master Deed, Explained: Where the Philippine 40% Cap Actually Lives

Every foreign buyer looking at the Philippines learns the 40% rule within an hour. Almost nobody reads the document the rule operates on. There is no national register to query. There is a position inside one project, created by one recorded instrument and tracked in one set of corporate records, and the instrument is the Master Deed. This page is about the artefact rather than the arithmetic: what the statute requires it to contain, where inside it the ceiling actually sits, how it can be changed, and what to ask for before a reservation fee moves. For the certificate that ends up carrying your name, read the Philippine CCT, explained.

Where Does the 40% Foreign Cap Actually Live?

Start with the number itself. The figure forty does not appear anywhere in the Condominium Act. Section 5 writes a Filipino floor of sixty percent. Forty is what is left when you subtract sixty from a hundred. That matters, because the floor is written against a specific thing: the ownership of the common areas, not a count of units and not the nationality of whoever is standing in the showroom.

Section 5 then splits into two limbs, and the Master Deed is what decides which limb applies to you.

1. Common areas owned by the unit owners as co-owners. In a project constituted that way, Section 5 restricts conveyance of a unit to Filipino citizens and to corporations at least sixty percent Filipino-owned, with hereditary succession as the stated exception. Headroom is not the question here. The structure is.
2. Common areas held by a condominium corporation. Here Section 5 says a transfer is not valid where the accompanying transfer of the appurtenant membership or shareholding would cause alien interest in that corporation to exceed the limits existing law imposes. Where a project is constituted this way, the forty percent complement is the thing that bites, and headroom becomes a live question.

So the first question to put to a project is not “how full is the building”. It is “which of those two structures did the Master Deed create”. One question, one recorded document, and it changes everything that follows. For the rule in its own right, read the Philippine foreign-ownership cap, explained; for the title layer above it, TCT and CCT, and which one a foreigner can hold.

What the Master Deed Has to Contain, Item by Item

Section 4 sets a statutory minimum. A developer may put more in; it may not put less. The deed must describe:

1. The land. The parcel the project stands on, described as a parcel of land is described.
2. The building. Number of storeys and basements, number of units, and the accessories that go with them.
3. The common areas and facilities. What is shared, and therefore what is not yours alone even though you pay to maintain it.
4. The exact nature of the interest acquired in a unit and in the common areas, including the condominium corporation arrangement where the project uses one. This is the clause the rest of this page keeps returning to.
5. The intended use of the building and of the units, and the restrictions on that use.
6. A certificate of consent from the registered owner of the land and from the holders of any lien or encumbrance on it.
7. The survey plan and a diagrammatic floor plan identifying each unit, its relative location and its approximate dimensions.
8. Any reasonable restriction on alienation of a unit, so long as it is not contrary to law or public policy.

Then the step that makes all of it operative: the deed is recorded with the Register of Deeds of the province or city in which the property lies and annotated on the certificate of title for the land. An unrecorded master deed has not created a condominium project. Worth stating plainly, because a brochure and a signed reservation form are not recorded instruments, and only one of the three appears in the Register of Deeds.

How Your Share of the Common Areas Is Measured, and Why It Decides Everything

Section 2 describes a condominium as two things held together: a separate interest in a unit, and an undivided interest in common in the land and the other common areas. Section 4 then requires the Master Deed to state the exact nature of that interest. Put those together and you have the point most summaries skip.

The Master Deed is where the method of apportioning the undivided interest is written. The cap is usually stated as a share of the project’s total floor area, which is what floor-area apportionment produces: a ceiling in square metres. A deed that apportions the interest equally, one share per unit, produces a ceiling in units instead. The Act does not fix the method; the deed does. Which is why “is the building 40% full” is an under-specified question until you have read it: without the unit of measure, a percentage quoted to you has no denominator you can check.

What Is the Declaration of Restrictions, and What Does It Bind You To?

Section 9 requires the owner of a project to register a declaration of restrictions before conveying any condominium in it. Three features of that sentence do the work. It is registered, so it is a public instrument you can pull. It is registered before the first conveyance, so it pre-dates every owner in the building including the first. And it constitutes a lien upon each condominium in the project, inuring to and binding all owners. A lien, not a policy. It travels with the unit.

The Declaration names the management body and sets out how the project is governed: assessments and how they are levied, insurance, maintenance and repair, auditing of the management accounts, subordination of the lien, and the conditions under which partition may be sought. It is also where use restrictions sit, which decides whether the model you underwrote is a model the project permits.

That is the point that catches short-let buyers. A project can set minimum lease terms, require that letting run through a designated arrangement, or place units inside a managed rental pool on terms written into the project documents. None of it is concealed; it sits in a recorded instrument anyone can request. It is simply not something a buyer thinks to ask about while looking at a show unit. The Cebu and Mactan resort-scheme read is the same mechanic in one market, and the Philippine due-diligence sequence stages your payments against getting these answers first.

How Do You Answer “Is This Project Still Under 40%”?

You assemble the answer from two places, because no single document holds it. The Master Deed gives you the structure and the denominator: which limb of Section 5 applies, how the undivided interest is apportioned, what the total is measured against. That part is fixed at the Register of Deeds and does not move unless the deed is amended.

The condominium corporation gives you the current position. Section 10 makes membership attach automatically to unit ownership and terminate when the unit is sold, and gives the corporation a term co-terminus with the project. Membership and ownership are the same fact, which is why the corporation’s register is the live copy of the ratio. It moves on every transfer, so the only useful version is a written one with a date on it. Ask through your Philippine lawyer, before a reservation fee moves rather than after.

The contrast with Thailand is worth naming, because buyers who have closed there arrive expecting the wrong artefact. In Thailand the building’s juristic person issues a dated foreign quota letter stating used floor area against the statutory ceiling: one page, one number, one signature. The Philippines does the same job with two instruments, and only the first is a document you can pull from a registry. Plan the diligence around that difference, not around a letter that does not exist here.

One more piece of arithmetic belongs here, because it is what can keep a nearly full project open to you. If the member selling is already a foreign national and the buyer is also foreign, total alien interest in the corporation is the same after the transfer as before it. Nothing is added to the numerator; the same interest changes hands on the same side of the ledger. Whether a particular transfer is processed on that basis is a question to put in writing, in advance, to the condominium corporation and your Philippine lawyer, because they are the people who will process it.

Can the Master Deed Be Amended, and What Would That Change?

Yes, and the thresholds differ by instrument, which is the detail worth carrying away.

1. The Master Deed. Section 4 provides for amendment by registering an instrument executed by the registered owner or owners of the property, consented to by all registered holders of any lien or encumbrance on the land or building.
2. The Declaration of Restrictions. Section 9 provides for amendment by the vote of not less than a majority in interest of the owners. Read that as written: in interest, not a headcount. The same clause that decides how the ceiling is measured also decides how much weight your unit carries when the house rules are rewritten.
3. Disposing of the common areas. Section 16 provides that a condominium corporation shall not sell, exchange, lease or otherwise dispose of the common areas unless authorised by the affirmative vote of all the stockholders or members. Unanimity, not a majority. It is one of the strongest minority protections in the Act, and it is a reason to know precisely what the Master Deed classifies as a common area.

So a copy of the deed is a copy as of a date, exactly like the headroom figure. Pull a current Certified True Copy rather than working from a file that has been in circulation, and read the amendment clause.

A Worked Example: the Same Project, Two Apportionment Methods

The figures below are assumed inputs, chosen to show the mechanic. They are not a real project. What they demonstrate is that the Master Deed clause, not the statute, produces the answer. Take a project of 100 units with 6,000 m² of total unit floor area, common areas held by a condominium corporation, so the second limb of Section 5 applies. Sixty percent of the interest must stay Filipino, so alien interest may occupy up to the remaining forty.

Method A — interest apportioned by floor-area share. Forty percent of 6,000 m² is 2,400 m² of floor-area-weighted interest. Suppose 2,280 m² already sits with foreign members. The headroom is 2,400 minus 2,280, which is 120 m². A 96 m² unit fits inside it. A 135 m² unit does not, because 2,280 plus 135 is 2,415, and 2,415 is more than 2,400. Under this deed, the size of the unit you want is part of the eligibility question.

Method B — interest apportioned equally, one hundredth per unit. Forty percent of 100 units is 40 units. Suppose 38 are already held by foreign members. The headroom is two units, whatever their size. The 135 m² unit fits. So does the 96 m² unit. Under this deed, size has stopped mattering entirely.

Same building, same statute, same day, two different answers. The only thing separating them is a clause in a recorded instrument most buyers never open. Note also what the arithmetic does not settle: in Method A, 2,400 m² is a ceiling on interest, not a statement that 120 m² of units is for sale. Headroom and availability are different questions, and a project can have plenty of one and none of the other.

Practical Guidance: What to Request Before a Reservation Fee

Seven items, all obtainable, all worth having in writing and dated before money moves:

1. A Certified True Copy of the Master Deed and the Declaration of Restrictions, pulled from the Register of Deeds that holds the original, through your Philippine lawyer, so that what you read is certified and current as of a stated date. Pull the mother title in the same request.
2. Which limb of Section 5 the project sits under. Common areas held in common by the owners, or held by a condominium corporation. This is a one-line answer that changes everything downstream.
3. The clause stating how the undivided interest is apportioned. Floor-area share or equal allocation. Quoted from the deed, not paraphrased over a phone call.
4. A dated written statement of the current position from the condominium corporation, expressed in the same unit of measure the Master Deed uses, with the resulting headroom stated.
5. Whether the specific unit is currently held by a foreign member, and how a foreign-to-foreign transfer would be handled. Ask the corporation and your lawyer the same question and compare the two answers.
6. The use restrictions that touch your model. Minimum lease terms, any designated letting arrangement, rental-pool or mandatory-management clauses, renovation and occupancy rules.
7. The amendment clause, plus any amendment already registered. A Master Deed is amendable. Find out what has already changed and what can change next.

Get those seven and the reservation decision is arithmetic instead of atmosphere. Miss the third and every percentage quoted to you is a number without a denominator. Miss the fourth and you are relying on a figure that was true on some unspecified day.