You purchased a property (house or condo unit) from a developer. You paid the reservation fee, signed the notarized Contract to Sell, and started paying the monthly equity of the down payment. Later, you discovered that the developer lacks a certificate of registration and license to sell. This might cause you to panic, right?
Does this mean the sale is invalid?
The sale is still valid, but the developer will face penalties. Sections 29 and 30 of Rule VI of the Revised Rules and Regulations of PD 957 (2009) outline these penalties:
Section 29. Administrative Fines Any owner or dealer who fails to register an existing subdivision project or condominium project within the period prescribed under these rules and regulations shall be penalized in accordance with the approved schedule of fines. The implementation and payment of these administrative fines shall not preclude criminal prosecution of the offender under Section 39 of the Decree. Section 30. Criminal Penalties Any person violating any provisions of these rules shall be guilty of an offense and shall suffer the penalties provided for under Section 39 of the Decree.
The Supreme Court has stated that as long as the Contract to Sell includes the essential elements of a valid contract, it remains legal and binding for both parties.
What are your options?
You can either:
Cancel the purchase and demand a refund, or
Proceed with the sale at your own risk.
If the developer delivers the unit as promised in the Contract to Sell (and there are no legal issues with the title), and you have fulfilled your obligations (full payment and other closing expenses), the sale is considered completed. You would then execute the Deed of Sale, have it notarized, obtain all necessary documents, and transfer the title to your name.
Once this is done, the sale is valid. You can occupy the house, and the land title will be in your name. If no legal issues arise regarding your purchase or the title transfer, then you should be in the clear.
However, problems may arise if the developer fails to deliver the promised unit or if there are issues with the title.
A Supreme Court Case
In Sps. Co Chien v. Sta. Lucia Realty & Dev., Inc., et al., G.R. No. 162090 (2007), the Supreme Court ruled:
A review of the relevant provisions of P.D. 957 reveals that while the law penalizes the selling of subdivision lots and condominium units without a Certificate of Registration and License to Sell from the HLURB, it does not automatically render a contract void if otherwise validly entered into.
The Court explained:
The penalty imposed by the decree is the general penalty provided for the violation of any of its provisions. It is well-settled in this jurisdiction that the clear language of the law shall prevail. This principle particularly enjoins strict compliance with provisions of law which are penal in nature, or when a penalty is provided for the violation thereof. With regard to P.D. 957, nothing therein provides for the nullification of a contract to sell in the event that the seller, at the time the contract was entered into, did not possess a certificate of registration and license to sell. Absent any specific sanction pertaining to the violation of the questioned provisions (Secs. 4 and 5), the general penalties provided in the law shall be applied. The general penalties for the violation of any provisions in P.D. 957 are provided for in Sections 38 and 39. As can clearly be seen in the aforequoted provisions, the same do not include the nullification of contracts that are otherwise validly entered. (emphasis added).
In short, the penalty imposed by the decree is the general penalty for any violation of its provisions. The law does not specify that the absence of a registration certificate and license to sell will nullify a validly entered contract. Therefore, the general penalties apply, but they do not include the nullification of contracts that are otherwise valid.
In the case of an unregistered developer or sales agent, or a project without a License to Sell, the contract remains binding if it meets all the essential elements and does not contradict the law, morals, good customs, public order, or public policy. Always request a notarized Contract to Sell or a Contract of Sale.
The unregistered owner, developer, dealer, broker, or salesperson will face penalties, but this does not invalidate validly entered contracts.
This provides a legal remedy for buyers who purchase from unregistered developers or sales agents or projects without a License to Sell. However, it is crucial to be cautious and conduct thorough due diligence to protect your investment.
RELEVANT REAL ESTATE LAWS
PD 957 — The Subdivision and Condominium Buyers Protective Decree (1976)
PD 957 was enacted by the Marcos administration to address fraud and swindling in real estate sales. It defines the roles of owner, developer, and dealer:
Owner: The registered owner of the land subject to a subdivision or condominium project.
Developer: The person who develops or improves the subdivision or condominium project for the owner.
Dealer: Anyone directly engaged in buying, selling, or exchanging real estate, either full-time or part-time.
In this blog, "developer" refers to entities that may include owners, developers, and dealers. Note that these roles can vary, with some entities specializing in development while others focus on sales.
Broker and Salesman
Broker. - "Broker" shall mean any person who, for commission or other compensation, undertakes to sell or negotiate the sale of a real estate belonging to another.
Salesman. - "Salesman" shall refer to the person regularly employed by a broker to perform, for and in his behalf, any or all functions of a real estate broker.
Brokers and salespersons are regulated by the Housing and Land Use Regulatory Board (HLURB), now part of the Department of Human Settlements and Urban Development (DHSUD) as of February 14, 2019.
RA 9646 — Real Estate Service Act (RESA) of the Philippines
RA 9646 aims to professionalize the real estate industry. It requires real estate agents to be registered and accredited by the PRC/HLURB (DHSUD).
"No person shall practice or offer to practice real estate service without registration." (Sec. 29, RA 9646)
I completed a 120-hour seminar and review for broker exams, covering all aspects of real estate transactions and pertinent laws.
Accreditation of Salespersons
To become an accredited real estate salesperson, one must attend the Salesperson's PRC Accreditation Seminar (now 15 units) and apply for registration with the Professional Regulatory Board of Real Estate Service. Once approved, the applicant can seek accreditation with HLURB/DHSUD.
If you buy a property from a developer or deal with a non-registered real estate agent, the absence of registration and license does not invalidate the Contract to Sell as long as it is valid. However, always request the Certificate of Registration and License to Sell from the developer and project. This will give you peace of mind and help ensure that you are buying a legitimate property with no legal issues.
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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