RESEARCH ON APARTELLES, CONDOMINIUMS AND CONDOTELS

1. APARTELLE VS. CONDOMINIUM

1.1 Definition

An apartelle, sometimes referred to as an ’apartment hotel’, is any building or edifice containing several
independent furnished units, regularly leased for dwelling on a more or less long term basis to its
tenants.1 Apartelle units are distinct from hotel rooms, as the former will usually allow for cooking, and
provide for simple kitchen facilities inside.2 Moreover, an apartelle is usually rented on a monthly basis,
instead of rooms made available on a nightly basis.3

Californian legislature has defined an apartment hotel is defined as a “hotel wherein apartments are
rented for fixed periods of time, either furnished or unfurnished, to the occupants of which the keeper
supplies hotel food, if required.”4 The New York Multiple Dwelling Law imposes certain requirements
before an establishment may be considered as an apartment hotel, to wit:

For the purposes of this chapter "multiple dwellings" are divided into two
classes: "class A" and "class B."
xxx
A "class A" multiple dwelling is a multiple dwelling that is occupied for
permanent residence purposes. This class shall include tenements, flat houses,
maisonette apartments, apartment houses, apartment hotels, bachelor
apartments [… ]
For the purposes of this definition, "permanent residence purposes" shall
consist of occupancy of a dwelling unit by the same natural person or family
for thirty consecutive days or more and a person or family so occupying a
dwelling unit shall be referred to herein as the permanent occupants of such
dwelling unit.5

The apartment hotel is not a new development, but has been around since the 1900s and has been used
interchangeably with “family hotel”, or “residential hotel” to refer to hotels with a practice of renting
apartments for fixed periods, with the lessees or guests being treated in all respects like transient guests
of the house.6

While apartelles remain undefined under Philippine statute, the term has been used by the hospitality
and tourism industries to refer establishments offering accommodations and modest hospitality services
at a more affordable price point, compared to standard hotels. A brief price scan of the top-rated

1
Quezon City Ordinance No. SP-2200, S-2013, Sangguniang Panglungsod of the City of Quezon City [Revised
Quezon City Comprehensive Zoning Ordinance], § 5 (February 11, 2013).
2
Rules and Regulations Implementing the Code on Sanitation of the Philippines, P.D. No. 856, § 2.3 (1997).
3
Black’s Law Dictionary, What is an Apartment Hotel, available at https://thelawdictionary.org/apartment-hotel/
(last accessed January 28, 2019).
4
CALIFORNIA LEGISLATURE ASSEMBLY, Assembly Bills, Original and Amended 3 (Vol. 2 1935)
5
New York Multiple Dwelling Law § 4, par. 8(a) available at
https://www1.nyc.gov/assets/buildings/pdf/MultipleDwellingLaw.pdf (last accessed January 29, 2010). (emphasis
supplied)
6
JOHN E. SHERRY, The Laws of Innkeepers: For Hotels, Restaurants, and Clubs 33 (3rd ed. 1981).
apartelles online reveal that the establishments offer rooms at a rate of PhP1,000 or less per night,
evidently lower than the average room offered by hotels:

Name of Establishment Location Average room

rate per night
Makati Apartelle Montojo, Makati PhP1,083
El Rico Suites Metropolitan Avenue, PhP1,399
Manila
Frederick's Apartelle Sierra Madre, Mandaluyong PhP998
Domestic Guesthouse Budget Domestic Road, Pasay PhP1,384
Hotel
Boni Apartelle Boni Avenue, Mandaluyong PhP1,158
Leez Inn Manila Malate, Manila PhP1,051
Regina Hometel Pio del Pilar, Makati PhP1,392
Broadway Court Apartelle New Manila, Quezon City PhP1,202
Rumi Apartelle Angeles City PhP842
Paradise Apartelle South Triangle, Quezon City PhP1,100

Compared to foreign jurisdictions which have laws which set restrictions on the length of stay or other
requirements before an accommodation may be considered as an apartelle, there is no such law in the
Philippines. It may be said, therefore, that apartelles are very nearly similar, if not identical to budget
hotels.

A condominium is defined by the Condominium Act, as “an interest in real property, consisting of a
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.”7 While a condominium unit owner is an owner in fee simple of his individual unit, he likewise
binds himself into a contract of co-ownership with other unit owners or the condominium corporation.8

1.3 Key Differences

From the foregoing, it is apparent an apartelle is different from a condominium. Apartelles are nearer
in concept to hotels than to condominiums. The by-laws of the Hotel and Restaurant Association of the
Philippines, a non-stock non-profit organization representing the unification of the private hotel and
restaurant industry in the Philippines, aggregates apartelles together with other similar establishment
providing lodging or short-term accommodations for travelers, vacationers and other guests, for
purposes of classifying their member-organizations, to wit:

Article III: MEMBERSHIP

1. Classes of members: There shall be seven classes of members namely: (1)

Regular 2) Allied 3) Associate 4) Affiliate 5) Chapter 6) Honorary 7) Life

7
An Act to Define Condominium, Establish Requirements for its Creation, and Govern its Incidents [Condominium
Act], Republic Act No. 4726, § 2 (1966).
8
Revelina Limson v. Wack Wack Condominium Corporation, G.R. No. 188802, February 14, 2011.
 2. Regular members: Duly Licensed Hotel division members shall include
hotels, resort, inns, apartelles, and pension houses.9

As their services are similar to a standard hotel rental, apartelles provide accommodation to transient
guests, and other value adding services such as air conditioning, meals, concierge services and similar
offerings. However, there is no ownership vested upon transients and guests, even if the room is for a
long-term rental.

This is contrasted from a condominium unit, which, as seen from the definition under the law,
contemplates a real property interest over the unit and the co-owned common areas, as evidenced by
the issuance of a condominium certificate of title (“CCT”) upon the perfection of the contract of sale, or
full payment of the purchase price of the unit, in accordance with the agreement between the buyer
and the condominium project developer. In Dixon v. Robbins, the U.S. Supreme Court defined hotels as
any place where transient guests are received and lodged.10 The owner of a CCT is not a transient or a
guest in his own condominium unit.

Moreover, there are several laws which govern the development and sale of condominium projects,
such as R.A. No. 4726 or the Condominium Act, P.D. No. 957 or the Subdivision and Condominium
Buyers’ Protective Decree, and other regulatory issuances from the relevant government agencies such
as the Housing and Land Use Regulatory Board (HLURB), and the Housing and Urban Development
Council (HUDCC).

In comparison, as apartelles provide for lodging and meals to the public, such developments would
merely have to comply with general sanitation laws, and other requirements set by the different local
government units with respect to the requirements of a business permit.

2. CONDOTELS

2.1 Definition

A portmanteau of ‘condominium’ and ‘hotel’, the condotel is used to describe real estate developments
with residential and hotel components. A condotel is a condominium project that has units for rent for
short term occupancy, food and telephone service, daily cleaning, concierge, and other services similar
to a hotel. 11 It is operated as a commercial hotel, even though the units are individually owned.12 Some
condotels consist of a traditional hotel with primary residences that are not rented out to the public,
while others integrate the condominium units within the hotel property.13

9
By-Laws, Hotel and Restaurant Association of the Philippines, cited in An In-depth Study on the Hotel and
Restaurant Industry in the Philippines, p. 125, August 17, 2001, available at
https://dirp4.pids.gov.ph/ris/taps/tapspp0105.pdf (last accessed January 28, 2019). (emphasis supplied)
10
Dixon v. Robbins, 246 N.Y. 169 (N.Y. 1927)
11
Revised Quezon City Comprehensive Zoning Ordinance § 5
12
Andrew L. Benioff, Scotsman Guide Media, Condo? Hotel? Or Both at the Same Time? available at
https://www.scotsmanguide.com/Commercial/Articles/2006/09/Condo--Hotel--Or-Both-at-the-Same-Time-/ (last
accessed January 28, 2019).
13
Jim Butler, Using Condo Hotels for Financing a New Hotel Development: Traditional Condo Hotel Structures as
Non-Securities, November 5, 2015, available at https://businessmirror.com.ph/2015/04/07/ronald-lim-father-of-
condotel-concept-in-phl/ (last accessed January 28, 2019).
However, unlike simple condominium units, where owners may use their units as they please, condotel
unit owners do not have complete dominion over their units, as these may be rented out as hotel
rooms, in accordance with the management or rental agreement with the developer or hotel operator.14
Moreover, the management rules for condotels are typically more stringent compared to condominium
developments. Typically, the purchaser has no say in the design, furniture and fixtures of the unit in
order to give the entire project a cohesive look. While condominium unit owners can typically do as they
please with their respective units, any change in the structure or appearance of a condotel is usually
prohibited.15

The purchase of a condotel property is not equivalent to a timeshare. With a condotel property, buyers
are actually purchasing a piece of real estate, while in timeshares, buyers purchase the privilege to stay
at a resort or other development for a certain number of days in a year.16

2.2 History

The rise of the condotels marks a more recent innovation in the real estate industry. The first condotels
were built in Miami Beach in the early 1980s, with early investors using them as tax shelters.17 Now,
developers consider the condotel approach as a financing technique to fund new projects. Through the
sale of condotel units, developers are able to achieve front-end profits through the pre-selling of units,
while leveraging on the price premiums that a hotel-managed unit can command.18

In the Philippines, condotels have emerged as a viable and attractive property investment. The large
OFW base makes the condotel development a particularly good investment for those who work abroad
and come back to the Philippines for vacations of short duration.19 For the OFW, the condotel unit can
serve as their second home while they are in the Philippines, and in the meantime, earn income while
they are abroad, through a profit share or dividend payout.20 Key players in both the real estate and
hospitality sectors, such as Pacific Concord Properties (of the Lancaster Brand of condotels)21,
DoubleDragon Properties, Corp. (of Hotel 101),22 and Sta. Lucia Hotel Management (of the Sta. Lucia

14
Theresa S. Samaniego Condotel, A Secure, Smart Investment, PHIL. DAILY INQ., September 01, 2012, available at
https://business.inquirer.net/79658/condotel-a-secure-smart-investment (last accessed January 28, 2019).
15
Megaworld Development Corporation, Condos and Condo Hotels: Similarities and Differences, September 16,
2014, available at https://blog.megaworldatthefort.com/condos-and-condo-hotels-similarities-and-differences/
(last accessed January 28, 2019).
16
Amy Bradley-Hole, What, Exactly, is a Condotel?, available at http://www.nbcnews.com/id/19330081/ns/travel-
travel_tips/t/what-exactly-condotel/#.XE6MPNIzaM9 June 20, 2007 (last accessed January 28, 2019).
17
Joel Greene, The History of Condo Hotels, available at https://www.condohotelcenter.com/ask-expert/history-
of-condo-hotels.html (last accessed January 28, 2019).
18
Butler, supra note 13.
19
Leony Garcia, Ronald Lim: Father of ‘Condotel’ Concept in PHL, BUSINESS MIRROR, April 7, 2015 ,available at
https://businessmirror.com.ph/2015/04/07/ronald-lim-father-of-condotel-concept-in-phl/ (last accessed January
28, 2019).
20
Amy R. Remo, Condotels in a Nutshell, PHIL. DAILY INQ., February 25, 2017 , available at
https://businessmirror.com.ph/2015/04/07/ronald-lim-father-of-condotel-concept-in-phl/ (last accessed January
28, 2019).
21
Garcia, supra note 19.
22
Amy R. Remo, ‘Condotel’ Investment 101, PHIL. DAILY INQ., March 10, 2018 available at
https://business.inquirer.net/247451/condotel-investment-101 (last accessed January 28, 2019).
group)23 have all thrown down the gauntlet in a bid to attract investors and expand into underdeveloped
markets.

2.3 Condotel Operations

The management and operation of condotels involve complex, and sometimes, competing interests
among the different components of the development. Condotel unit purchasers are concerned with
preserving their unit’s value, which may lead to a situation where they would want to control the
operating costs, to the detriment of the unit value.24 On the other hand, the hotel owner or operator’s
paramount concern is its control over the hotel brand, and the power of the condominium’s governing
board, relative to its ability to increase or decrease operating costs, or other actions which may
ultimately affect the hotel brand.25 The goal is to undertake a program which will achieve a symbiotic
and viable interaction between the hotel component and the residential component of the condotel
development.26

a.) Brand Issues

Certain condotel developments are undertaken by a developer, together with a hotel operator. Some of
the most recognized names in luxury hotel franchises operate units in condotels, such as the Marriott,
Ritz-Carlton, and the Four Seasons, among others.27 To maintain brand equity, hotel operators would
allow condotel developments to use the brand and its trademarks, provided that there is strict
compliance with certain requirements, such as the maintenance of the condotel’s appearance and
condition, restrictions on actions by the condominium management which may jeopardize or reduce
brand equity or goodwill, and restrictions on the condotel unit owners’ use of the hotel’s brand and
trademarks.28

b.) Hotel Management Agreement

The hotel management or rental agreement is another key area of concern in the operation of a
condotel. The operation structure of a condotel would need to address the concerns and outline the
rights and responsibilities of the different stakeholders, chief of which are the property developer, hotel
operator, and the condotel unit owner.29 The management agreement may also affect a unit owner’s
rights. For instance, it may limit the unit owner’s use of shared amenities (such as the pool, sauna, etc.),

23
Remo, supra note 20.
24
Stuart M. Saft, Structuring Condominium Hotel, New York Law Journal – Special Section, March 11, 2013,
available at https://www.hklaw.com/files/Uploads/Documents/Articles/Saft031113.pdf (last accessed January 28,
2019).
25
Id.
26
International Society of Hospitality Consultants, Condotel Task List available at https://ishc.com/wp-
content/uploads/Hotel_Task_List.pdf (last accessed January 28, 2019).
27
Romana King, Condo-hotels: Automatic Returns, or So You Think, available at
https://www.moneysense.ca/columns/condo-hotels-automatic-returns-or-so-you-think/ (last accessed January 28,
2019).
28
Saft, supra note 24.
29
Id.
or charge an additional amount for the same.30 It may also provide for the allocation of costs of common
services between the condotel and the hotel operator, or it may provide that unit owners who utilize
such services will be separately charged.31

c.) Unit Owners Profit Participation

Different developers have different ways of guaranteeing to unit owners their returns or shares in the
profits from the operations. In general, units sold to the investors and unit owners are made part of the
hotel rental pool for a set period of time, often with a lease buy-back agreement. Under this option, the
unit owners may usually live in their unit for a set number of days in a year.32 In another arrangement,
the hotel owners or developers make the rental pool mandatory, and investors do not enjoy the same
option to live in their purchased units.33

3. CONDOTEL MASTER DEED: WHETHER OR NOT A CONDOTEL DEVELOPER MAY RETAIN THE EXCLUSIVE RIGHT TO
OPERATE A CONDOTEL

3.1 Restrictions on Ownership or Use: Enabling Master Deed or Declaration of Restrictions

As a condotel property is still essentially a condominium property, albeit subject to certain restrictions in
the management agreement, the concepts applicable to the ownership of a condominium unit are
applicable to a condotel.

Under Section 9(1) of the Condominium Act, the Master Deed may empower the managing body of the
condominium to enforce the provisions of the deed of restrictions.34 In Twin Towers Condominium Corp.
v. CA, the Supreme Court discussed the nature and binding effect of the Master Deed:

The Master Deed binds ALS since the Master Deed is annotated on the
condominium certificate of title of ALS' Unit. The Master Deed is ALS' contract
with all Condominium members who are all co-owners of the common areas
and facilities of the Condominium. Contracts have the force of law between
the parties and are to be complied with in good faith. From the moment the
contract is perfected, the parties are bound to comply with what is expressly
stipulated as well as with what is required by the nature of the obligation in
keeping with good faith, usage and the law. Thus, when ALS purchased its Unit
from petitioner, ALS was bound by the terms and conditions set forth in the
contract xxx.35(emphasis supplied)

As the Master Deed is essentially a contract between the unit owner and the developer, general
contract law is applicable. Article 1306 of the New Civil Code provides for the principle of the autonomy

30
Peter Prozanski, Managing a Condominium-Hotel Project: Some Considerations from a Legal Perspective
available at http://peterproszanski.net/articles/managing-a-condominium-hotel-project (last accessed January 28,
2019).
31
Saft, supra note 24.
32
Investopedia, What is a Rental Pool, July 31, 2018, available at https://www.investopedia.com/terms/r/rental-
pool.asp (last accessed January 28, 2019).
33
Hotelier Middle Eastern, How Rental Pool Investments Work, available at
http://www.hoteliermiddleeast.com/21999-how-rental-pool-investment-works/ (last accessed January 28, 2019).
34
Condominium Act ,§9(1).
35
Twin Towers Condominium Corp. v. Court of Appeals, G.R. No. 123552, February 27, 2003.
of contracts: "Contracting parties may establish such stipulations, clauses terms and conditions as they
may deem convenient provided they are not contrary to law, morals, good customs, public order or
public policy."36 Contractual obligations have the force of law between the parties and should be
complied with in good faith. The Supreme Courts has held that it “will not save the litigant from his bad
bargains, protect him from unwise investments, relieve him from disadvantageous contracts, or annul
the effects of his foolish acts unless there has been a violation of law.”37

In application of the foregoing laws and principles, it would seem that a developer may indicate in the
master deed that it retains the exclusive right to operate a condotel development. However, this is
subject to the limitations of propriety and good faith.

As to the question of whether the provision in the master deed, that the operation of the condotel shall
pertain exclusively to the developer; in measuring the propriety of the said provision, reference must be
had to industry practice, as well as to the specific agreement governing the particular development.

3.2 Propriety of Exclusive Operation of a Condotel Development

For a hotel to operate smoothly when a different person owns each unit, it is imperative for a
management company to have a contract with the owners. The management company can be either the
developer of the property, or a group directly related to the developer.38

Hotel management may take on different forms. A hotel may be under the management of its owners,
which is the typical set-up for smaller or family-owned establishments.39 However, the management
may be outsourced to a third party operator under a hotel management contract is becoming an
increasingly accepted form of hotel operation.40 Separating the ownership from the operation through a
hotel management contract allows a developer to leverage on the expertise of an experienced hotel
operator, while giving the flexibility to expand.41

Thus, it is submitted that, depending on the condotel development and the governing agreement, the
developer may provide that it will be under the exclusive management of a third party hotel operator.
It may also manage the development on its own. In either case, as a general proposition, the unit
owners do not have any involvement with the management and operation of a condotel development
since their participation will be relevant in the initial investment, as well as their profit-sharing
arrangement.

36
An Act to Ordain and Institute the Civil Code of the Philippines [CIVIL CODE], Republic Act No. 386, art. 1306
(1950).
37
Campos v. Bank of the Philippine Islands, G.R. No. 207597, May 30, 2016.
38
Anwar Elgonemy, How do Condo-Hotels Work, available at
https://www.condohotelcenter.com/articles/a72.html (last accessed January 28, 2019).
39
International Lawyers Kingdom of Thailand, The Hotel Management Agreement: Hotel Operating Models in
Thailand available at https://pugnatorius.com/hotel-management-agreement/ (last accessed January 28, 2019)
40
Addleshaw Goddard, Owners, Operators & Outsourcing, available at
https://www.addleshawgoddard.com/globalassets/insights/retail-and-consumer/food-beverage-outlet-
management-contracts-and-the-synergies-with-hotel-management-contracts.pdf (last accessed January 28, 2019).
41
International Lawyers Kingdom of Thailand, The Hotel Management Agreement: Hotel Operating Models in
Thailand