Buying property directly from a developer is the safest way to acquire a lot, house-and-lot, or condo unit. However, there have been reports of unfinished or abandoned subdivision and condominium projects. These issues can often be avoided if the homebuyer performs due diligence.
License to Sell (LTS)
The main defense for homebuyers against real estate scams is the License to Sell (LTS), issued by the Housing and Land Use Regulatory Board (HLURB), now known as the Department of Human Settlements and Urban Development (DHSUD), as per Republic Act 11201 signed on February 14, 2019, by President Rodrigo Duterte.
PD 957: Subdivision and Condominium Buyer's Protective Decree
In the early 1970s, the Marcos Administration was concerned about fraudulent real estate transactions in the Philippines. In response, President Marcos issued Presidential Decree No. 957, known as the Subdivision and Condominium Buyer's Protective Decree (1976).
The law aims to protect homebuyers from fraudulent acts by real estate developers who fail to fulfill their obligations, such as maintaining subdivision roads, drainage, sewerage, water systems, and other basic requirements, thus endangering the health and safety of buyers.
Over the years, PD 957 has been revised to address evolving real estate practices. The Implementing Rules and Regulations for PD 957 were updated in 2009.
HLURB (DHSUD) Registration and License
The HLURB, now DHSUD, is the government agency responsible for implementing PD 957. Before the creation of the HLURB, the National Housing Authority (NHA) regulated real estate transactions under PD 957. The NHA’s regulatory functions were later transferred to the Human Settlement Regulatory Commission, which became the HLURB, and is now DHSUD.
The DHSUD has several bureaus, including the Bureau of Environmental, Land Use and Urban Planning and Development; the Housing and Real Estate Development Regulation Bureau; and the Homeowners Associations and Community Development Bureau. The HLURB was reconstituted into the Human Settlements Adjudication Commission.
All developers of subdivision and condo projects, and those involved in real estate transactions, must be registered and licensed by the HLURB (DHSUD). The DHSUD regulates the issuance, suspension, and revocation of registration and licenses and handles disputes between buyers and developers.
DEVELOPER'S CERTIFICATE OF REGISTRATION
The Certificate of Registration is issued by the HLURB (DHSUD) to developers who meet the Subdivision Standards and Regulations.
Section 4 of PD 957 states: "The registered owner of a parcel of land who wishes to convert the same into a subdivision project shall submit his subdivision plan to the [HLURB] which shall act upon and approve the same, upon a finding that the plan complies with the Subdivision Standards' and Regulations enforceable at the time the plan is submitted."
The registration process and requirements are detailed in Section 7, Rule IV of the Revised Implementing Rules and Regulations for PD 957. Basic requirements include:
Developer Profile, Business Address, and Financial Capacity: For corporations, include the articles of incorporation and authorization from the Securities and Exchange Commission.
Approved Plans: Submit approved subdivision or condominium plans, including electrical plans, zoning certificates, environmental compliance certificates, and permits.
Approved Advertisements: Submit approved advertisements, such as circulars or brochures. Recently, the HLURB (DHSUD) issued Board Resolution No. 922 requiring developer approval before advertising.
Approved Contract to Sell: Provide a sample Contract to Sell and an affidavit agreeing to changes if necessary.
Title of Property: The title must be free from liens or encumbrances. If under mortgage, the mortgagee must agree to release the mortgage once the purchase price is fully paid.
These requirements ensure that only credible developers with the financial capacity to complete projects receive a Certificate of Registration.
Your first defense against fraudulent real estate transactions is the developer's Certificate of Registration, which must be displayed prominently in the developer's office as required by law. The HLURB (DHSUD) monitors developer compliance and can impose penalties, including registration revocation. It also issues Cease and Desist Orders (CDOs) to non-compliant developers in specific subdivisions or condominium projects.
LICENSE TO SELL OF THE PROJECT
Selling a subdivision lot or condominium unit without a License to Sell is prohibited.
Section 5 of PD 957 states: "An owner or dealer with a registration certificate cannot sell any subdivision lot or condominium unit without first obtaining a License to Sell within two weeks from the project's registration."
A registered developer is not yet authorized to sell any subdivision lot or condominium unit in the registered project unless he has first obtained a license to sell.
The process and requirements for the registration of the developer is discussed in Section 8, Rule IV of the Revised Implementing Rules and Regulations for PD 957. (see below)
Your second layer of defense against fraudulent transactions is the License to Sell. This license must be displayed prominently in the developer's office.
To protect buyers, the HLURB (DHSUD) will:
Issue the License to Sell only to reputable developers.
Issue the License only after all requirements are met.
Require the License to Sell to be displayed prominently.
Verify the License to Sell for any property you plan to purchase. You can also request the LTS for specific projects from the HLURB (DHSUD).
Remarks
The Certificate of Registration and License to Sell help ensure that a developer has the legal and financial capacity to undertake a project. Always check the License to Sell for the specific project where your unit is located, as the LTS is project-specific.
The HLURB (DHSUD) monitors compliance, conducts site visits, and imposes penalties for violations. It also resolves disputes between buyers and developers. This discussion is for educational purposes only. Consult your lawyer for advice on your specific case. For any questions, contact us.
If you’re planning to buy a residential lot, house-and-lot, or condo unit, get in touch with us at 0920 207 5035 or email cebuhousefinder@yahoo.com for free assistance.
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