Can we really avoid a fraudulent real estate sale? In subdivision and condominium project, just ask for the License to Sell of the project where your unit is located.
In early 70s, the Marcos Administration was alarmed of many fraudulent transactions in Philippine real estate. In response, President Marcos issued the Presidential Decree No. 957 or the Subdivision and Condominium Buyer's Protective Decree (1976). This is popularly called PD 957.
The purpose of PD 957 is to protect the home buyers from fraudulent acts by “many real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems, and other similar basic requirements, thus endangering the health and safety of home and lot buyers.”
While PD 957 has been effective in protecting not only the subdivision and condominium buyers but also sellers, dealers, and developers. From time to time, Congress introduced amendments to address current issues and concerns.
I will not discuss all the amendments in PD 957 (maybe in the future as I plan to discuss this very important law on real estate) but focus only to the two important documents issued to the developers, namely: the Certificate of Registration and the License to Sell.
HLURB/DHSUD
The Housing and Land Use Regulatory Board (HLURB) — Department of Human Settlements and Urban Development (DHSUD) — is the government agency mandated to implement the provisions of PD 957 or the Subdivision and Condominium Buyer's Protective Decree (1976).
Prior to the creation of the HLURB, the National Housing Authority (NHA) exercised the exclusive jurisdiction to regulate the real estate transactions in accordance to the provisions of PD 957. Under EO 648, the NHA regulatory function was transferred to the Human Settlement Regulatory Commission (HSRC), later renamed as Housing and Land Use Regulatory Board (HLURB). It is renamed again as Department of Human Settlements and Urban Development (DHSUD) under Republic Act 11201 signed on February 14, 2019 by President Rodrigo Duterte.
The DHSUD has several bureaus: Bureau of Environmental, Land Use and Urban Planning and Development; Housing and Real Estate Development Regulation Bureau, and 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 are required to be registered in and licensed by the HLURB (DHSUD).
The HLURB (DHSUD) has the regulatory function for the issuance, suspension, revocation and even the outright denial of registration and license to developers, their subdivision and condo projects, and those involved in the selling of their projects. It also exercises adjudicatory functions to hear and settle disputes between subdivision lot or condominium unit buyer and developer.
CERTIFICATE OF REGISTRATION
The Certificate of Registration is a certification issued by HLURB (DHSUD) to the property developer after satisfactory compliance with the Subdivision Standards and Regulation.
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 process and requirements for the registration of the developer is discussed in Section 7, Rule IV of the Revised Implementing Rules and Regulations for PD 957.
The developer/owner is required to register his/her subdivision or condominium project to the HLURB (DHSUD) and submit the following basic requirements (the list below is not complete):
Developer Profile, Business Address, and Financial Capacity. In the case of a corporation, the developer submits a copy of the article of incorporation, authorization from the Securities and Exchange Commission and/or the appropriate government agency to engage in the development and selling of the subject project.
Approved subdivision or condominium plan such as electrical plan duly signed by a professional electrician, zoning certificate, environmental compliance certificate, conversion order (from agricultural to residential land), permit to operate a deep well, building permits, etc.
Approved advertisement of the project such as circular, prospectus, brochure, letter, etc. Recently, the HLURB (DHSUD) issued Board Resolution No. 922 requiring developers to get HLRUB approval prior to release an advertisement “to ensure that the public and prospective buyers of any lot including any building or improvements thereon, or any unit in a project are protected from fraudulent practices and manipulations through close supervision and regulation of persons engaged in the practice of real estate service with a project.”
Approved Contract to Sell. Sample copy of Contract to Sell to be used in the public offering of lots, units or lots and units. When amendments shall be effected on the form contract submitted for notification/approval by HLURB (DHSUD), pro-forma affidavit signifying willingness to change project name.
Title of the property free from all liens or encumbrances. If the property is under mortgage, it is sufficient if the instrument of mortgage contains a stipulation that the mortgagee shall release the mortgage on any subdivision lot or condominium unit as soon as the full purchase price for the same is paid by the buyer.
Only credible developers with financial capacity to develop a subdivision or condominium project can be given the Certificate of Registration.
The Certificate of Registration is the first layer of defense against fraudulent real estate transaction. As required by law, this certificate of registration must be displayed in the visible area in the developer's office.
The HLURB (DHSUD) will monitor the compliance of the developer. And it can impose penalty such as revocation of the registration.
From time to time, the HLRUB (DHSUD) issued Cease and Desist Orders (CDO) to non-compliant developers in a particular subdivision or condominium project.
LICENSE TO SELL
The selling of a disposable subdivision lot or condominium unit is prohibited without the requisite license to sell.
Section 5 of PD 957 states: "Such owner or dealer to whom has been issued a registration certificate shall not, however, be authorized to sell any subdivision lot or condominium unit in the registered project unless he shall have first obtained a license to sell the project within two weeks from the registration of such project."
A registered developer is not yet authorized to sell any subdivision lot or condominium unit in the registered project unless he shall have 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)
The License to Sell of the project is the second layer of defense against fraudulent real estate transaction. As required by law, this License to Sell must be displayed in the visible area in the developer's office.
To protect property buyers, the HLURB (DHSUD) shall do the following:
Issue the License to Sell only to developer of good repute.
Issue the License to Sell after satisfactory submission of all the requirements.
Require developer to display the License to Sell in a conspicuous place in its office.
Make it a habit to ask for the License to Sell of the lot only, house-and-lot, or condo unit that you are planning to buy. You can ask the HLURB (DHSUD) for the LTS of the specific project.
SOME REMARKS
The issuance of the Certificate of Registration to the developer and the License to Sell for the subdivision and condominium project will give the home buyers a peace of mind that the developer has legal personality and financial capacity to undertake the subdivision or condominium project. For convenience, only ask about the License to Sell of the subdivision or condominium project where your unit (house or condo) is located. Remember that the LTS is project specific. In subdivision project, if your unit is located in Phase II, look for the LTS of the Phase II project. In condomunium, if your unit is located in Tower 2, look for the LTS of the Tower 2 project.
The HLURB (DHSUD) is mandated to monitor, visit the project, and impose appropriate penalties, if any violation. It has adjudicatory functions to hear and settle disputes between subdivision lot or condominium unit buyer and developer.
For more information about the topic or any inquiries about buying a property in Cebu, please contact us at 0920-207-5035 or email us at cebuhousefinder@yahoo.com. We help home buyers to find their dream house at the best price and location… for free!