What Can Buyers Do If a Developer Has No License to Sell or Fails to Deliver the Property on Time?
Purchasing a condominium unit or subdivision lot is often one of the most significant financial investments a person can make. To protect buyers from fraudulent and unscrupulous real estate practices, Philippine law imposes strict requirements upon developers before they may offer properties for sale and mandates compliance with development and delivery schedules.
Unfortunately, some developers sell units without first securing the required License to Sell, while others fail to complete and deliver projects within the promised period. When these violations occur, buyers are not left without recourse. Philippine laws provide several remedies that may be pursued before the Department of Human Settlements and Urban Development (DHSUD), the Human Settlements Adjudication Commission (HSAC), and the courts.
The Requirement of a License to Sell
Sections 4 and 5 of Presidential Decree No. 957, otherwise known as the “Subdivision and Condominium Buyers’ Protective Decree,” require that a developer first secure both a Certificate of Registration and a License to Sell from the DHSUD before selling or offering for sale any subdivision lot or condominium unit to the public.
The purpose of the License to Sell requirement is to ensure that the project is legitimate, financially viable, and capable of being completed in accordance with approved plans and specifications.
Moreover, the sale or advertisement of subdivision lots or condominium units without a valid License to Sell constitutes a violation of the law and may subject the developer to liabilities.
Delayed Development and Delivery of the Project
Under Section 20 of P.D. No. 975, developers are likewise obligated to develop the subdivision or condominium project according to the approved plans and within the time represented to buyers.
A developer’s failure to complete the project or deliver the property within the promised period may constitute a violation of P.D. No. 957.
In many instances, buyers continue paying monthly amortizations despite the developer’s failure to complete the project, resulting in substantial financial prejudice.
Remedies Available to Buyers
1. Suspension and/or Refund of Payments under Section 23 of P.D. No. 957
One of the most important protections granted to buyers under P.D. No. 957 is the right to suspend payments under Section 23 thereof.
Where the developer fails to develop the project according to the approved plans and within the time limit for compliance therewith, the buyer may suspend further payments until the developer fulfills its obligations.
Moreover, such buyer may, at his or her option, be reimbursed the total amount paid, including amortization interests but excluding delinquency interests, together with interest thereon at the legal rate.
This remedy prevents the buyer from being compelled to continue paying for a property that has not been properly developed or delivered.
To learn more about the steps to take in obtaining a refund of payments, you may visit: https://dhsud.gov.ph/buyers-awareness-rights-and-general-remedies-hred-faqs/
2. Cancellation or Rescission of the Contract
A buyer may seek the cancellation or rescission of the Contract to Sell, Deed of Sale, or other purchase agreement when the developer has substantially breached its obligations.
Grounds therefor may include the sale of subdivision lots or condominium units without a License to Sell, failure to complete the project, failure to deliver the property within the agreed period, material deviations from the approved plans and specifications, and other substantial violations of P.D. No. 957. It must be noted, however, that each case is evaluated based on its particular facts and circumstances and may likewise depend on the provisions of the applicable contract or purchase agreement.
Upon rescission, the buyer may demand the return of the payments made, subject to applicable laws, contractual stipulations, and the circumstances of the case.
3. Refund of Payments
Buyers who validly rescind the contract may seek the refund of all amounts paid, including reservation fees, down payments, and amortizations.
Depending on the circumstances of the case, buyers may likewise be entitled to recover legal interest on the amounts refunded, reckoned from the date of demand until full payment.
4. Filing of an Administrative Complaint Before DHSUD
The DHSUD has jurisdiction over complaints involving violations of Presidential Decree No. 957 and related housing laws.
An aggrieved buyer may file an administrative complaint seeking refund of payments, contract rescission, specific performance, compliance with development obligations, damages, and other appropriate reliefs.
The DHSUD may likewise impose administrative sanctions upon erring developers.
5. Specific Performance
Instead of rescinding the contract, a buyer may compel the developer to comply with its obligations through an action for specific performance.
This remedy may be appropriate where the buyer still desires to acquire the property and merely seeks the completion of the project and delivery of the unit or lot in accordance with the contract and approved plans.
6. Recovery of Damages
A buyer who suffers losses due to the developer’s violations may seek damages under the Civil Code.
Depending on the facts, recoverable damages may include Actual or compensatory damages, Moral damages, Exemplary damages, and Attorney’s fees and litigation expenses.
Damages may be awarded where the developer acted in bad faith, fraudulently, or in a manner contrary to law and public policy.
7. Criminal Liability of the Seller or Developer
Certain violations of P.D. No. 957 may give rise to criminal liability.
The sale of subdivision lots or condominium units without the requisite License to Sell, as well as other prohibited acts under the law, may subject the responsible officers of the developer to criminal prosecution and the penalties provided under Section 39 of P.D. No. 957.
Moreover, when the sale is attended by deceit or fraudulent misrepresentations, the circumstances may likewise give rise to criminal liability for Estafa under the Revised Penal Code.
Practical Steps for Buyers
Before initiating legal action, buyers should first send a formal written demand to the developer and gather all relevant documents and evidence. These may include the Reservation Agreement, Contract to Sell or Deed of Sale, official receipts and other proof of payments, promotional materials and advertisements, correspondence with the developer, project brochures and marketing materials, DHSUD certifications regarding the developer’s License to Sell, and other documents evidencing the developer’s representations, obligations, and alleged violations.
Gathering these documents at the outset can significantly assist in evaluating the available legal remedies and in substantiating any claims that may be filed against the developer. Given the significant financial implications of real estate transactions, buyers who encounter such violations should promptly seek legal advice to protect their rights and determine the most appropriate course of action under the circumstances.