Can a buyer get a refund if he cancels installment

payment on a property he bought?

Since most property buyers purchase a lot, house and lot,
townhouse or a condominium unit on installment basis, and since
most of these properties are sold on a pre-selling basis, they
inevitably ask themselves:

Can I get a refund from the developer if…

1. by some twist of fate, I suffer a reversal of fortune (loss of a

job, business failure) and can no longer continue paying the
monthly amortization? or...
2. the developer fails to develop the subdivision or
condominium project according to the approved plans and
within the (promised) time limit?

The answer is YES. There are two laws that entitle a buyer to a
refund under the 2 varying scenarios above. Let us start with the
first scenario.

Maceda Law (Republic Act 6552) also known as the Realty

Installment Buyer Protection Act

This law applies to residential properties including condos where

the buyer has paid at least two years of monthly installment
(including installment payment made on down payment or equity)
and defaults on the succeeding payment/s.

If the buyer decides to cancel the purchase, he is entitled to a

50% refund of the total installment payments made including down
payment, deposits or options or reservation fee.

If the buyer defaults and cancels after making three or four years
of monthly installment payments, he is entitled to the same
percentage of refund , 50%.

However, if he defaults and cancels after making 5 years of

installment payments, he is entitled to an additional 5% or 55%
refund. The buyer is entitled to an additional 5% refund every year
thereafter but the refund should not exceed 90% of total payments
made.

Thus, the buyer gets a 60% refund if he cancels after paying 6

years of monthly installments, 65% if after 7 years, 70% if after 8
years, 75% if after 9 years, 80% if after 10 years, 85% if after 11
years and 90% if after 12 years. He shall not get any additional
refund if he cancels after the 13th year as 90% is the maximum
allowable refund under the Maceda Law.

So far, I have only answered the issue of refund relating to a buyer

who lost the financial capability to make installment payments on
the property he bought.

We will now go into how a buyer can get a full refund in case the
developer fails to deliver the property as promised.

We shall look at the buyer’s right to a refund resulting from the developer’s
failure to deliver a project according to the approved plans within the
promised time of completion.

August of year 2012, I received an email from someone who said:

(This is an abridged version of a rather long email)

March 2011, I bought a unit from Aurora Heights along Katipunan

Ave., Quezon City, a project of First Homes, a subsidiary of Eton
Properties. I am still paying for the down payment as they have an
installment scheme for the 30% DP. They committed that turn
over date would be end of 2013 and construction would start late
2011.

It’s now more than a year and I have not seen any construction in
the area. I live near the project site and pass by it everyday on my
way to work that’s why I know that no construction is ongoing.

I could not believe the blatant disregard of this developer for the
investors as we were never notified what was causing the
construction delay. That’s when I decided to call their Customer
Service. Apparently, the community around the area is protesting
the building of the condominium.

We were not told when construction would commence as they

were given a Temporary Restraining Order by the courts.

I have asked if there are options to pull out my investments but

they said that I cannot. It is stipulated in the contract. Is this
lawful? Can we get our money back?

Yes, you can get your money back as you are protected by PD
(Presidential Decree) 957.

PD 957 or the Subdivision and Condominium Buyer’s Protective

Decree

Like the Maceda Law, PD 957 is an old law that was promulgated
during the time of President Ferdinand Marcos. PD 957’s main
objective is to protect real estate buyers from fraudulent and
manipulative developers who aggravate the economic, social and
moral condition of the Filipino people.

Such fraudulent and manipulative practices of developers include

but are not limited to the following:
 1. reneging on their representations and obligations to provide
and properly maintain subdivision roads, drainage,
sewerage, water systems, lighting systems, and other similar
basic requirements, thus endangering the health and safety
of home and lot buyers
2. failure to deliver titles to the buyers or titles free from liens
and encumbrances, and to pay real estate taxes, and
fraudulent sales of the same subdivision lots to different
innocent purchasers for value

Note: PD 957, as originally decreed, gave the National Housing

Authority exclusive jurisdiction to regulate the real estate industry.
Such jurisdiction was transferred to the Housing and Land Use
Regulatory Board (HLURB) in 1986.

PD 957 is rather long; I shall only delve on its salient points that
are relevant to the issue at hand: Refund in case of the
developer’s failure to deliver the project as promised.

For our purpose, the most important provision of the law is found
in Title IV, Section 23.

Non-Forfeiture of Payment No installment payment made by a

buyer in a subdivision or condominium project for the lot or unit he
contracted to buy shall be forfeited in favor of the owner or
developer when the buyer, after due notice to the owner or
developer, desists from further payment due to the failure of the
owner or developer to develop the subdivision or condominium
project according to the approved plans and within the time limit
for complying with the same. Such buyer may, at his option, be
reimbursed the total amount paid including amortization interests
but excluding delinquency interests, with interest thereon at the
legal rate.
How does PD 957 safeguard the welfare of home buyers?

Every project, whether it’s a subdivision or a condominium, goes

through a stringent series of applying for and seeking approval of
several permits, clearances and certificates from a number of
government agencies, primarily from HLURB. Among others,
these are the Development Permit, Certificate of Registration and
License to Sell.

In the developer’s application for a Certificate of Registration, the

following are attached as annexes:

1. Sworn registration statement –is basically a promise by the

developer to comply with all the rules and regulations pertaining to
the project and to be responsible for all the facilities,
improvements, infrastructures and similar developments thereon
2. Certified true copy of titles
3. Duly audited balance sheet
4. Articles of Incorporation, By-laws and latest annual corporate
report to SEC
5. Copy of brochure, circular or prospectus for advertisement
6. Sample copy of Contract to Sell
7. Affidavit signifying willingness to change name (in case there is
a project already registered whose name is similar to that of the
developer’s)
8. Environmental Compliance Certificate (from the DENR)
9. Approved verified survey plan
10. In case of a condominium, a Master Deed with declaration of
restrictions duly annotated at the back of the title/s and plans
registered with the Register of Deeds
11. Sanggunian Resolution or Ordinance approving the
subdivision plan or Development Permit
12. Approved subdivision plan by the LGU. In case of a
condominium, approved development permit from the HLURB
13. Engineering plans
14. Topographic plan
15. Project study
16. Recent tax declaration
17. Permit to operate deepwell and a water resistively test
18. Bill of materials and cost of estimates
19. Barangay clearance

The developer’s compliance with the above requirements shall

result to the issuance of the Certificate of Registration by the
HLURB. Said certificate, however, does not authorize the
developer to sell or pre-sell his project unless he shall first obtain a
License to Sell from the same office.

The License to Sell is issued upon determination that the

developer is of good repute, that his business is financially stable
and the proposed sale of lots or condominium units to the public
will not be fraudulent.

Note that the documents attached to the application for a

Certificate of Registration; and the License to Sell are public
documents that are open for inspection to anyone who might be
interested in the project.

The most important part of the License to Sell is the Program of

Development which indicates the project’s time of completion.
Whereas, for the Registration, the development plan is the most
important. Deviations or failure to comply with these are the ones
referred to in Title IV, Section 23 of PD 957. These are the
promises or warranties made by the developer and failure to
deliver them shall entitle the buyer to a full refund. Claims in the
developer’s brochures, prospectus, printed matters, letters or in
any form of advertisement also constitute a warranty.
Note on time of completion:

Title IV Section 20 PD 957 mandates that:

"The developer shall construct and provide the facilities,

improvements, infrastructures and other forms of
development,…which are offered and indicated in the approved
subdivision or condominium plans, brochures, prospectus,
printed matters, letters or in any form of advertisement, within
one year from the date of the issuance of the license to sell …or
such other period of time as may be fixed by the Authority.”

With high-rise condominiums and expansive subdivisions being

the norm nowadays, the one year time of completion in the law
has become unrealistic. Today, a high-rise condominium tower of,
say, 35 to 40 storeys tall takes an average of 3 ½ to 4 years to
complete. For most buyers, what‘s important is the immediate start
of construction.

To the email sender

Although the cause of delay of the construction of Aurora Heights

Residences is the Temporary Restraining Order issued by the
court resulting from the protestation of the people in its vicinity, the
developer’s problem is not your problem.

You bought a unit on the assumption that doing so would be

problem-free.

You were told that construction of the condominium would start

late 2011 and turnover date would be end of 2013. Two years
seems to be an unrealistic period to construct a high-rise building.
Such promise was most likely made to you by the developer’s
brokers or agents. As such, the developer is liable for any claims
or assertions made by its sales people.

Go back again to Title IV Section 23 of PD 957.

Before desisting from further payment, you must first notify in

writing the developer of your intention and invoke this provision of
PD 957. In said notice, be clear that you are asking for a full
refund plus interest on the total amortization you paid.

File a letter of complaint at the HLURB and attach a copy of your

letter to the developer as an annex. For good measure, copy
furnish Housing Tsar VP Jejomar Binay, Chairman of the Housing
and Urban Development Coordinating Council (HUDCC).

On the assertion of the Customer Service staff that you cannot

pull out you investment because it is stipulated in the contract, any
stipulation in a contract that is contrary to law is null and void.