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Law: Refund for Delayed Subdivision, Condominium Project

Can you ask for a refund when the subdivision or condominium project is delayed or the developer failed to complete the project at the prescribed time?


For whatever reasons, the developer canceled the condo project, did not complete the condo project, or failed to deliver the condo project as promised. There are condo projects in Cebu that are considered as abandoned (e.g. Riviera Condo fronting the St. Joseph Mabolo Church), incomplete development and delayed turn-over. Some of these condo projects are issued with Ceased and Desist Order (CDO) by the Housing ad Land Regulatory Board (HLURB). You can check the subdivision and condo projects in Cebu issued by HLURB with CDO as of May 2019.


Generally, Filipinos are patient home buyers. We don't mind a month or two delay in the delivery of our units. However, we cannot tolerate unreasonable and long delay. While we cannot ask for a refund due to change of mind, we can demand a refund of our money due to delayed delivery of the unit as promised.



So, what is our basis for saying that the developer is delayed in the delivery of the project or the unit? Answer: Time of completion. HLURB Board Resolution 926, series of 2015, deals with the issue on Time of Completion of the condominium or subdivision projects. A delayed project is failure of the developer/owner to complete the condo project within the period of time fixed by the HLURB. The time of completion is stipulated in the Contract to Sell, License to Sell, and in advertising materials as required by law.


Let us discuss this topic.


I. TIME OF COMPLETION


HLURB 2015 GUIDELINES ON TIME OF COMPLETION


The Housing and Land Use Regulatory Board (HLURB) 2015 Guidelines on Time of Completion (effective February 15, 2016) aims "to provide a uniform application, interpretation, usage, and implementation of Board Resolution No. 926, Series of 2015 in order to ensure that all projects,... are completed within one year from the date of issuance of the license to sell of the project or within such other period of time as may be fixed in accordance with this Guidelines." (Emphasis added)


"Time of Completion" is defined as "the period of time fixed by the HLURB within which the owner or developer shall develop and complete the project, including the construction and provision of facilities, improvements and other forms of development, including water supply and electrical facility."


ONE YEAR FROM THE DATE OF ISSUANCE OF THE LICENSE TO SELL


Section 5 of the General Rules and Guidelines states: "Within one year from the date of the issuance of the license for the project or such other period of time as may be fixed by the HLURB in accordance with this Guidelines, every owner or developer shall construct and provide the facilities, improvements, infrastructures and other forms of development including water supply and electrical facilities, which are offered and indicated in the approved project plans, brochures, prospectus, printed matters, letters or any form of advertisement. " (Emphasis added; see also Section 20 of PD 957)


RESTRICTIVE GRANT OF ADDITIONAL TIME TO DEVELOP THE PROJECT


Allowances and contingencies in the work program or program of development includes: (1) inclement weather, (2) prolonged or repeated power failures, (3) shortage of construction supplies or materials, and (4) other similar incidents. These are the acceptable reasons for delay in the project.


Section 6 deals with the requirements to grant for additional time or extension to complete the subdivision or condo development subject to the approval of the HLURB. The Guidelines enumerated the conditions for granting approval of additional time, such as: (a) sub-soil condition, (b) fortuitous events, and (c) lawful orders.

The developer/owner shall notify all condo unit buyers or owners of its intent to apply for additional time to complete the development of the project.


II. BASIS FOR TIME OF COMPLETION


TIME OF COMPLETION IN PROGRAM OF WORK


One of the features of the Guidelines is the unbundling of periods of completion for land development and completion and delivery of housing component.


Period of completion of land development is based on the submitted program of development. The program of development refers to work program submitted for approval by the developer/owner upon application for the project's Certificate of Registration and License to Sell (CR/LTS). This program of development shall be the primary basis for fixing the period of completion of the project.


Upon completion of the project's land development, the developer/owner shall apply for the issuance of Certificate of Completion for Land Development (COCLD) from the Regional Field Office where the project is registered. "If upon ocular inspection the project is found to have been completed in accordance with the approved time of completion, a COCLD shall be issued in accordance with the existing rules and guidelines of the HLURB."


Moreover, even after the issuance of COCLD, the developer/owner has "the obligation to maintain the roads, alleys, sidewalks, playgrounds, amenities, facilities, improvements infrastructures or other forms of developments represented or promised in brochures, advertisements and other sales propaganda, until proper donation or turnover of the same. "


TIME OF COMPLETION IN CONTRACT TO SELL


Time of completion and delivery of unit purchased is based on the Contract to sell or any purchase agreement.


The time of completion must be explicitly provided in the contract to sell or any purchase agreement. In the absence of such provision, the period of completion and delivery of unit shall not exceed 12 months (one year) from the date of purchase.


Upon completion of the housing component, the HLURB shall issue a Certificate of Completion for Housing Component (COCHC).


TIME OF COMPLETION IN LICENSE TO SELL


In the License to Sell (LTS), the developer/owner is required to state the Time of Completion, including the month, day, and year.


TIME OF COMPLETION IN ADVERTISEMENT


The date of completion of the project and date of completion and delivery from the date of purchase of any housing unit, if applicable, is a mandatory statement in any advertisement of the project.


III. LEGAL REMEDIES IN CASE OF NON-COMPLETION OF PROJECT


Section 23 of PD 957 on Non-Forfeiture of Payments states: "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."


DESIST PAYMENT


Upon notice, buyer may desist payment upon failure of the developer/owner to develop the condominium project according to the approved plans and within the period fixed by HLURB.


NON-FORFEITURE OF PAYMENTS


In such a case, payments made by the buyer shall not be forfeited in favor of the developer/owner.


DEMAND FOR REFUND


Buyer may opt to be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate.


How much is the refund? Based on PD 957, the refund is 100% of the total payments less penalty interest plus legal interest.


Refund on Installment Sales


If you buy on installments, there are two (2) types of refund:

(1) Right to refund applies when the developer fails to complete the development within the required period. Refund is 100% of total payments. (Presidential Decree 957)


(2) Right to refund applies as a requisite for cancellation of contract due to delinquency when the buyer has paid at least 2 years. Refund is 50% of total payments; additional 5% per year after the 5th year. (Maceda Law RA 6552) Check our discussion of the Maceda Law.


Other conditions when you can demand FULL REFUND are: (1) the developer canceled the condo project and (2) incomplete development such as no swimming pool when they advertised one. Under Section 20 of PD 957, the developer is bound to provide the facilities, improvements, etc. as stated in the plans within the approved Time of Completion.


However, you cannot demand a refund when you just changed your mind in buying a condo unit or you don't like your neighbor. This is why you must hire a competent agent who can properly guide you to come up with the decision to buy the condo unit.


Refund on Fully Paid Sales


If you fully paid, under Art. 1191 of the Civil Code, the injured party can seek remedies such as (a) the power to rescind or (b) enforce fulfillment of the contract, with damages in either case if the obligor does not comply with what is incumbent upon him. Article 1385 of the Civil Code expressly and clearly states that "rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest." Thus, full return of the money at the prevailing market value of the property, not just purchase price plus interest. This is a complicated issue, consult your lawyer if you have a case.


IV. CONCLUDING REMARKS


To summarize the main points in this article, the HLURB issued the 2015 Guidelines on Time of Completion to "provide a uniform application, interpretation, usage, and implementation of Board Resolution No. 926, Series of 2015" which is "one year from the date of issuance of the license to sell of the project" subject to extension due to "justifiable causes" as enumerated in Section 6 of the Guidelines.


Under the Guideline, the land development is separated from the housing component. The Certificate of Completion for Land Development (COCLD) is issued upon completion of the land development and Certificate of Completion for Housing Component (COCHC) is issued upon completion of the housing component.


As a general rule, the Time of Completion is "within one year from the date of the issuance of the license for the project or such other period of time as may be fixed by the HLURB." The Time of Completion for land development is based on the program of work. The Time of Completion for the condo unit is based on the date of the Contract to Sell (for installment sales) or Contract of Sale (spot cash sales).


In non-completion of condo projects, the following are the buyer's legal remedies:

(1) Desist payment with prior notice to the developer; (2) In such a case, payments made by the buyer shall not be forfeited in favor of the developer/owner;

(3) Demand refund (100% of the total payments less penalty interest plus legal interest).


The 2015 Guidelines on Time of Completion covers all subdivision projects (residential, commercial, farm lots, and industrial subdivision), condo projects (residential and commercial condo), and similar projects such as cemeteries, memorial parks, and columbaria.

In this blog, we discuss real estate laws to inform home buyers of their rights. For your specific case, you have to visit the HLURB to seek legal remedies. If not resolved, you can hire a competent lawyer for legal resolution of your case.


For more information about the topic or any inquiries about buying a property in Cebu, please contact us at 0908-301-7398 or send us an email at cebuhousefinder@yahoo.com. We help home buyers to find their dream house at the best price and location… for free!

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