Can you ask for a refund when a subdivision or condominium project is delayed, or if the developer fails to complete it on time?
If a developer cancels a condo project, fails to complete it, or doesn’t deliver as promised, you may wonder about your options. In Cebu, some condo projects are considered abandoned, like the Riviera Condo near St. Joseph Mabolo Church. Others face incomplete development or delayed turn-overs. The Housing and Land Use Regulatory Board (HLURB) issues Cease and Desist Orders (CDO) for these projects. You can check the HLURB’s list of projects with CDOs as of May 2019.
Filipino homebuyers are generally patient, tolerating minor delays. However, significant and unreasonable delays are unacceptable. While refunds are not possible for changing your mind, you can demand a refund if the unit’s delivery is significantly delayed.
So, what constitutes a delay?
Answer: Time of completion.
HLURB Board Resolution No. 926, Series of 2015, addresses project completion timelines. A project is considered delayed if the developer fails to complete it within the timeframe set by HLURB, as outlined in the Contract to Sell, License to Sell, or promotional materials.
I. Time of Completion
HLURB 2015 Guidelines on Time of Completion
The HLURB’s 2015 Guidelines (effective February 15, 2016) aim to standardize the application of Board Resolution No. 926, Series of 2015. These guidelines require projects to be completed within one year from the license issuance or another specified period.
“Time of Completion” refers to the period set by HLURB for developing and finishing the project, including construction and facilities, such as water supply and electrical facility.
One Year from License Issuance
Section 5 of the Guidelines mandates that within one year from the license issuance, developers must complete all promised facilities and improvements, including water and electrical systems, as per approved plans and advertising.
Extensions for Development
Acceptable reasons for delays include inclement weather, power failures, material shortages, and other similar incidents. For additional time or extensions, developers must get HLURB’s approval, citing reasons like sub-soil conditions or force majeure. Developers must notify buyers if they intend to apply for an extension.
II. Basis for Time of Completion
The time of completion for a condominium or subdivision project is a critical aspect governed by specific guidelines and contractual agreements. This timeline dictates when the developer is obligated to complete the development and deliver the units to the buyers. Several key documents and processes establish this timeframe:
1. Program of Work
The Program of Work is a foundational document submitted by the developer to the Housing and Land Use Regulatory Board (HLURB) during the application process for the project's Certificate of Registration and License to Sell (CR/LTS). This document outlines the detailed schedule and scope of work for the entire project, including the construction of facilities, infrastructure, and other development components.
Land Development: The Program of Work specifies separate timelines for land development, such as roads, drainage, water, and electrical systems. This separation ensures that land development progresses according to a planned schedule before the construction of housing units begins.
Certification of Completion for Land Development (COCLD): Upon completing the land development phase, developers must apply for a COCLD from the Regional Field Office where the project is registered. This certificate confirms that the land development has been completed according to the approved plans and within the stipulated time frame.
The Program of Work is a binding document that serves as the primary basis for setting the project's time of completion. It ensures that both the developer and buyers have a clear understanding of the project timeline and what is to be delivered.
2. Contract to Sell
The Contract to Sell (CTS) is a crucial document that outlines the terms and conditions of the sale of a condo unit, including the time of completion and delivery of the unit to the buyer.
Explicit Time Frame: The CTS must explicitly state the time of completion for the housing component, detailing when the unit will be ready for turnover to the buyer. This provision ensures transparency and sets clear expectations for the buyer regarding when they can take possession of the property.
Default Time Frame: If the CTS does not specify a time frame, the HLURB mandates that the completion and delivery of the unit must occur within 12 months (one year) from the date of purchase. This regulation protects buyers by providing a standard timeframe, ensuring that the developer delivers the unit promptly.
Upon completion of the housing component, developers are required to apply for a Certificate of Completion for Housing Component (COCHC). This certificate serves as proof that the housing units have been completed in accordance with the approved plans and are ready for occupancy.
3. License to Sell
The License to Sell (LTS) is a document issued by the HLURB authorizing the developer to market and sell the condominium units. The LTS must include specific details regarding the time of completion, including the exact month, day, and year when the project is expected to be finished.
This information is crucial for potential buyers, as it provides a clear and legally binding timeline for when they can expect to receive their units. The inclusion of precise dates in the LTS helps prevent ambiguities and misunderstandings regarding project timelines.
4. Advertisements
All promotional materials and advertisements for the project must clearly state the time of completion. This includes specifying the date by which the project will be completed and, if applicable, the delivery date for individual units.
Mandatory Disclosure: This requirement ensures that buyers are fully informed about the project's timeline before making a purchase decision. It also holds the developer accountable for any claims made in their marketing materials.
Consistency Across Platforms: The information regarding the time of completion must be consistent across all platforms, including brochures, websites, and other forms of advertising. This consistency helps maintain transparency and trust between the developer and the buyers.
By establishing a clear basis for the time of completion through these documents and guidelines, the HLURB ensures that developers adhere to agreed-upon schedules and deliver projects as promised. This framework protects buyers from potential delays and ensures they have legal recourse if developers fail to meet their obligations.y timeline.
III. Legal Remedies for Non-Completion of Condo Projects
Section 23 of PD 957
This section specifies that buyers cannot forfeit installment payments if a project isn’t completed as planned. Buyers can request a refund of all payments made, excluding delinquency interest, with legal interest added.
1. Desist Payment
If a developer fails to complete a condominium project according to the approved plans and within the stipulated timeframe, buyers have the right to stop making further payments. This right is protected under Section 23 of Presidential Decree No. 957. However, buyers must provide prior notice to the developer, stating their intention to desist from payments due to the project's non-completion.
2. Non-Forfeiture of Payments
When a buyer decides to stop payments due to the developer's failure to complete the project, the payments made up to that point cannot be forfeited in favor of the developer. This means that the developer cannot keep the money already paid if they fail to deliver the project as agreed. This provision safeguards buyers' financial interests and ensures they do not lose their investment due to the developer's shortcomings.
3. Demand for Refund
Buyers can demand a full refund of all payments made, including amortization interests, under Section 23 of PD 957. However, delinquency interests (penalties for late payments) are excluded from this refund. The refund also includes interest at the legal rate, ensuring that buyers are compensated for the time their money was held by the developer.
Refunds for Installment Sales:
Right to Refund (PD 957): If the developer fails to complete the development within the required period, buyers are entitled to a full refund of all payments made. This provision applies regardless of the payment method, ensuring that buyers who paid in installments are equally protected.
Maceda Law (RA 6552): This law provides additional protections for buyers who have paid at least two years of installments. If the contract is canceled due to delinquency, buyers are entitled to a refund of 50% of the total payments made. Additionally, they are entitled to an extra 5% refund for each year beyond the fifth year of payments. This law aims to protect long-term installment buyers from losing a significant portion of their investment.
Other Grounds for Full Refund:
Project Cancellation: If the developer cancels the condo project, buyers can demand a full refund.
Incomplete Development: Buyers can also request a full refund if the project is incomplete, such as when promised amenities (like a swimming pool) are not provided. Under Section 20 of PD 957, developers are required to deliver all facilities and improvements as stated in the plans and within the approved Time of Completion.
Refunds for Fully Paid Sales:
For buyers who have fully paid for their units, the Civil Code provides additional remedies. Article 1191 allows the injured party to either rescind the contract or enforce its fulfillment, with potential damages. Article 1385 specifically mandates that rescission creates the obligation to return the object of the contract, along with its fruits, and the purchase price with interest. This means that the buyer can demand the full return of their money, adjusted for the current market value of the property. However, due to the complexity of these cases, it's advisable to consult a lawyer for precise guidance and to ensure all legal requirements are met.
IV. Conclusion
To summarize, the HLURB’s 2015 Guidelines set a standard for project completion within one year of the license issuance, with extensions allowed for justifiable causes. Completion is split into land development and housing components, each with its own certificate.
Buyers have legal remedies for incomplete projects, including:
Desist Payment: Stop payments with notice.
Non-Forfeiture of Payments: Payments remain with the buyer if the project is incomplete.
Demand Refund: Full refund of payments, minus penalty interest plus legal interest.
These guidelines apply to all subdivision and condo projects, including commercial and residential properties.
This guide is for educational purposes only. Consult a lawyer for advice on your specific situation. If you have any questions or need personalized assistance, contact us at 0920 207 5035 or email cebuhousefinder@yahoo.com. We're here to guide you every step of the way, ensuring a smooth and confident buying experience.