Property Developer Has No License to Sell from HLURB

Ms. J asks:

I bought a subdivision lot and already made several downpayments. I discovered that the property developer does not possess a License to Sell from the HLURB. Can I get a refund?

Lawyers Online PH answers:

The rights of a buyer of a subdivision lot in a subdivision project are laid down in Presidential Decree No. 957, otherwise known as “[t]he Subdivision and Condominium Buyers’ Protective Decree” (“PD 957”).

We note that you did not attach the Contract to Sell (“Contract”) that you and the developer entered into when you purchased the property. Thus, given that we are not privy to the contents of the Contract, we will not be able to discuss whether or not said Contract is valid. As a result, the general alternative rights detailed below will be under the assumption that said Contract is valid.

In your case, you have two general alternative rights as a buyer:

1st Alternative Right: Proceed with the sale

You mentioned that you discovered that the property developer does not possess a License to Sell from the Housing and Land Use Regulatory Board ("HLURB"). According to Sec. 5 of PD 957, a developer is required to possess a License to Sell before it can sell subdivision lots. The same law provides for administrative fines and other penalties in case of violation of, or non-compliance with its provisions, such as failure to obtain a License to Sell prior to selling subdivision lots to the public. PD 957, however, does not state that a Contract to Sell shall be declared void if a developer does not have the required License to Sell.

This was clarified in a case decided by the Supreme Court in 2013 (Moldex Realty, Inc. vs. Flora A. Saberon, G.R. No.176289, April 8, 2013), where it held that although the said law penalizes the developer for selling subdivision lots without a license to sell, nothing is stated in the said law declaring a contract to sell null and void if executed by a developer who lacks the said license to sell. Thus, in your case, even if the developer does not have a License to Sell, if all the requisites of a valid contract are present when you executed the Contract to Sell with the developer, then said Contract is valid and the sale of the property may still proceed.

In sum, the absence of a License to Sell will only expose the developer to penalties and administrative fines, but the Contract to Sell shall remain valid.

2nd Alternative Right: Demand for a Full Refund

Sec. 23 of PD 957 provides that a buyer may be refunded the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate, when the developer of a subdivision project fails to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same.

Thus, in your case, a full refund shall be allowed only when the developer fails to complete the property according to the approved plans, and within the period agreed upon.

Based on the earlier assumption that the Contract is valid, and despite the absence of a License to Sell by the developer, we recommend that you continue to pay your monthly amortization. Your failure to pay your monthly amortization may result in the rescission of the contract to sell you entered into with the said subdivision developer.

In sum, your general alternative rights as buyer are: (1) proceed with the sale; or (2) demand for a full refund, in the event that the developer fails to complete the subdivision project according to the approved plans and within the time limit for complying with the same.