Many property buyers in the Philippines unknowingly invest in subdivision or condominium projects being sold without the required Certificate of Registration or License to Sell from the Department of Human Settlements and Urban Development (DHSUD). Others unknowingly deal with individuals who falsely represent themselves as licensed real estate brokers or accredited real estate salespersons. What many buyers do not realize is that these acts may constitute criminal offenses under Philippine law.
This article discusses the criminal liability of real estate developers, brokers, and salespersons under Presidential Decree No. 957 (Subdivision and Condominium Buyers’ Protective Decree) and Republic Act No. 9646 (Real Estate Service Act of the Philippines or RESA Law), as well as the legal remedies available to affected property buyers.
Why a Certificate of Registration and License to Sell Matter
Sections 4 and 5 of Presidential Decree No. 957 clearly require every owner or developer to first obtain a Certificate of Registration and a License to Sell from the DHSUD before offering any subdivision lot or condominium unit for sale.
These requirements are intended to protect the public by ensuring that:
- the subdivision or condominium project has been duly approved by the government;
- the developer has complied with applicable legal and regulatory requirements;
- the project is financially and technically capable of completion; and
- buyers are investing in a legitimate and legally authorized real estate development.
If a developer markets or sells a project without these licenses, it may be held liable under Philippine law.
Selling an Unlicensed Real Estate Project May Constitute a Criminal Offense
Many buyers assume that a developer who sells an unlicensed subdivision project merely faces administrative penalties from the DHSUD. However, the law provides otherwise.
Violations of Sections 4 and 5 of Presidential Decree No. 957 are punishable under Section 39 of the same Decree, which imposes criminal liability on any person who violates its provisions or implementing rules. Section 39 provides:
“Section 39. Penalties. Any person who shall violate any of the provisions of this Decree and/or any rule or regulation that may be issued pursuant to this Decree shall, upon conviction,be punishedby a fine of not more than twenty thousand (P20,000.00) pesos and/or imprisonment of not more than ten years: Provided, That in the case of corporations, partnership, cooperatives, or associations, the President, Manager or Administrator or the person who has charge of the administration of the business shall be criminally responsible for any violation of this Decree and/or the rules and regulations promulgated pursuant thereto.”
This means that selling subdivision lots or condominium units without a Certificate of Registration or License to Sell may expose the responsible parties to criminal prosecution, apart from administrative and civil liability.
Depending on the circumstances of the case, criminal liability may extend to:
- real estate developers;
- corporate officers who authorized or participated in the illegal sale;
- directors and responsible officers of the corporation;
- persons acting on behalf of the developer; and
- other individuals who knowingly participated in the unlawful sale of the project.
Criminal Liability of Unlicensed Real Estate Brokers and Salespersons
Philippine law likewise regulates individuals engaged in the marketing and sale of real estate, primarily through Republic Act No. 9646, otherwise known as the Real Estate Service Act of the Philippines (RESA Law).
The RESA Law further protects buyers by regulating the practice of real estate professionals. Under Section 29 of Republic Act No. 9646, no person shall practice or offer to practice real estate service in the Philippines without first obtaining the license or authority required by law.
Examples of prohibited acts include:
- representing oneself as a licensed real estate broker without a valid PRC license;
- engaging in brokerage activities without being licensed;
- acting as a real estate salesperson without proper accreditation under a licensed real estate broker;
- continuing to practice despite suspension, revocation, or expiration of the required authority; and
- falsely using professional titles or credentials to induce buyers to enter into transactions.
These prohibited acts undermine public confidence in the real estate industry and expose unsuspecting buyers to significant financial losses
The objective is straightforward: buyers should transact only with qualified and authorized real estate professionals.
Criminal Penalties Under Republic Act No. 9646
Violation of Section 29 of Republic Act No. 9646 is punishable under Section 39 of the same law. Section 39 provides:
“Section 39. Penal Provisions – Any violation of this Act, including violations of implementing rules and regulations, shall be meted the penalty of a fine of not less than One hundred thousand pesos (P100,000.00) or imprisonment of not less than two (2) years, or both such fine and imprisonment upon the discretion of the court. In case the violation is committed by an unlicensed real estate service practitioner, the penalty shall be double the aforesaid fine and imprisonment.”
Accordingly, persons who unlawfully practice real estate service without the licenses or authority required by law may be prosecuted and, upon conviction, be subjected to the penalties prescribed under the Act.
Based on the foregoing, the following criminal liabilities may arise:
- the developer may be criminally liable for violating Sections 4 and 5 of Presidential Decree No. 957, punishable under Section 39 thereof; and
- those who are not duly licensed or accredited may further be prosecuted for violating Section 29 of Republic Act No. 9646, punishable under Section 39 of the same Act.
Moreover, depending on the facts, these violations may exist independently of criminal liability for Estafa under the Revised Penal Code if fraudulent representations induced buyers to part with their money.
How Buyers Can Protect Themselves
Before paying a reservation fee, signing a Contract to Sell, or making installment payments, buyers should verify the legitimacy of both the project and the persons selling it.
As a practical guide, buyers should confirm:
- whether the subdivision or condominium project has a valid Certificate of Registration from the DHSUD;
- whether the project has a valid License to Sell;
- whether the real estate broker holds a valid Professional Regulation Commission (PRC) license;
- whether the real estate salesperson is duly accredited under a licensed broker; and
- whether the seller has authority from the developer to market the property.
Conducting these simple due diligence measures can significantly reduce the risk of investing in an illegal or unlicensed real estate project.
Legal Remedies Available to Buyers
Buyers who discover that they purchased property in an unlicensed subdivision or condominium project should immediately seek legal advice.
Depending on the circumstances, available remedies may include:
- filing administrative complaints before the Department of Human Settlements and Urban Development (DHSUD);
- instituting civil actions for rescission, refund, damages, or specific performance;
- filing criminal complaints for violations of Presidential Decree No. 957 before the appropriate City or Provincial Prosecutor;
- filing criminal complaints for violations of the RESA Law against unauthorized real estate practitioners before the appropriate City or Provincial Prosecutor; and
- where warranted by the evidence, filing criminal complaints for Estafa or other applicable offenses under the Revised Penal Code.
The appropriate legal remedy will depend on the specific facts and evidence of each case.
If you have purchased property in an unlicensed subdivision or condominium project, or if you believe you have been misled by an unlicensed real estate broker or real estate salesperson, consulting a lawyer at the earliest opportunity is essential to protect your rights and determine the appropriate legal remedies available under Philippine law.
RLV Law Office is a law firm based in Quezon City that provides legal services in real estate law, including property disputes, DHSUD complaints, criminal complaints involving illegal real estate projects, contract review, title and property concerns, and other real estate-related legal matters.