Case: Developer's No License to Sell, Is the Sale Valid?

You’ve purchased a property (house or condo unit) from a developer. You paid the reservation fee, signed the notarized Contract to Sell, and started making monthly payments on the down payment. Then, you discovered that the developer lacks a certificate of registration and license to sell. This can be unsettling, right?

Does this mean the sale is invalid?

Not necessarily. The sale remains valid, though the developer will face penalties. According to Sections 29 and 30, Rule VI, of the Revised Rules and Regulations of PD 957 (2009), the penalties are:

• Section 29. Administrative Fines: Any owner or dealer who fails to register a subdivision or condominium project within the prescribed period will be fined according to the approved schedule. These fines do not prevent criminal prosecution under Section 39 of the Decree.

• Section 30. Criminal Penalties: Violating any provisions of these rules constitutes an offense, punishable under Section 39 of the Decree.

The Supreme Court has clarified that as long as the Contract to Sell contains all elements of a valid contract, it is legal and binding for both parties.

What are your options? 

You can either (1) cancel the purchase and request a refund or (2) continue with the sale, accepting the associated risks.

If the developer has delivered the unit as promised in the Contract to Sell (and there are no title issues), and you’ve completed the payment and covered closing expenses, the sale is valid. This means you can occupy the house and transfer the title to your name without problems.

However, issues arise if the developer fails to deliver the promised unit or if there are problems with the title.

Supreme Court Case:

In the case of Sps. Co Chien v. Sta. Lucia Realty & Dev., Inc., G.R. No. 162090 (2007), the Supreme Court noted: "A review of the relevant provisions of P.D. 957 reveals that while the law penalizes selling subdivision lots and condominium units without a Certificate of Registration and License to Sell by the HLURB, it does not automatically render a valid contract void."

The Court explained that the penalties imposed by the decree are general and do not include contract nullification. P.D. 957 does not provide for nullification if the seller did not have the required certificate at the time of the contract. The general penalties are detailed in Sections 38 and 39, which do not include contract nullification.

What Should You Know About Real Estate Laws?

Two important laws are relevant here:

• PD 957 (The Subdivision and Condominium Buyers Protective Decree): This law addresses fraudulent real estate sales and defines roles such as owner, developer, and dealer. Owners are landowners, developers improve the property, and dealers are involved in buying and selling.

• RA 9646 (The Real Estate Service Act): This act regulates real estate professionals, requiring registration and accreditation to practice legally. It aims to professionalize the industry and ensure that practitioners meet certain standards.

Why Work with Registered Agents?

Working with registered and licensed real estate agents is crucial for your protection. They are knowledgeable about real estate laws and market conditions, reducing the risk of misinformation and helping you avoid buyer’s remorse.

Closing Remarks:

When buying property, whether it’s a residential lot, house-and-lot, or condo unit, the absence of registration or a license to sell does not necessarily invalidate the Contract to Sell, provided the contract is valid. Always ask for the developer's Certificate of Registration and the project's License to Sell for peace of mind.

If you encounter issues, visit the HLURB/DHSUD for guidance or consult a lawyer for legal resolution.

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.