The 40% Rule Explained in Detail
Republic Act 4726 (The Condominium Act) permits foreigners to own units in a condominium project, provided that foreign ownership does not exceed 40% of the total number of units. This applies on a building-by-building basis. A 100-unit building can have up to 40 foreign-owned units. Once this quota is filled, the building is 'foreign-full' and no new foreign buyers can purchase until existing owners sell to other foreigners or to Filipino buyers.
What Foreigners Cannot Own
Foreigners may NOT own: (1) Land in their personal name — this is constitutionally prohibited, (2) Townhouses with land title in their name, (3) House-and-lot packages. However, foreigners may own condominiums freehold, and may lease land for up to 50 years (renewable for 25 more years). Foreign corporations with 40% or less foreign equity may own land for commercial use.
Practical Due Diligence Steps
Before committing to purchase: (1) Request the current foreign ownership percentage from the developer's legal department or condominium corporation, (2) Verify via the condominium corporation's master deed, (3) If buying resale, confirm the seller is foreign (foreign quota transfers with the unit) or Filipino (consuming 1 quota slot), (4) Engage a licensed Philippine real estate attorney to confirm quota status and draft the purchase documents, (5) Ensure all purchase funds enter the Philippines through BSP-registered banking channels to qualify for repatriation rights.