Buyer’s Rights Against Developers Without a License to Sell in Property Forfeiture Cases (Philippine Context)

Why this matters

In the Philippines, selling subdivision lots or condominium units without a valid License to Sell (LTS) is prohibited. When an unlicensed developer tries to forfeit your payments or take back the property (whether by contract cancellation, re-takeover, or similar tactics), several statutes and regulations kick in to protect you. This article maps out—end to end—your rights and remedies, what agencies handle what, and how to respond strategically.

Core legal pillars

Subdivision and Condominium Buyers’ Protective Decree (P.D. 957)
- Requires developers to register projects and secure an LTS before offering or selling.
- Imposes administrative, civil, and criminal liability for violations.
- Provides buyer protections on non-forfeiture, grace periods, and remedies like rescission with refund, specific performance, and damages—especially for failures to develop or for unlawful sales practices.
Real Estate Sales on Installment (Maceda Law, R.A. 6552)
- Applies to installment buyers of real property (including condominium units in practice).
- Limits forfeiture of payments, grants grace periods, and provides the cash surrender value (CSV) upon cancellation after certain thresholds.
Human Settlements institutional framework (R.A. 11201 and related rules)
- DHSUD (Department of Human Settlements and Urban Development) regulates licensing, project registration, and developer compliance.
- HSAC (Human Settlements Adjudication Commission) hears and decides buyer-developer disputes (e.g., rescission, refund, damages, specific performance).
- Local governments (building/occupancy permits, development clearances) also interact with the compliance picture.

What “no License to Sell” means, legally

Pre-sale is illegal unless the developer has both project registration and an LTS for the specific project (and phase/tower, if phased).
Advertising, accepting reservations, collecting down payments, or signing contracts prior to LTS issuance are prohibited acts.
Corporate officers responsible for the sale can be held personally liable (administratively and criminally), not just the company.

Key practical effect: An unlicensed sale seriously undermines any contractual forfeiture clause the developer tries to enforce. Authorities and courts typically view forfeiture provisions in unlicensed sales as invalid or unenforceable, and will favor refunds and buyer-protective remedies.

Buyer protections against forfeiture (the essentials)

1) Non-forfeiture and grace periods

If you’ve paid < 2 years of installments
- You’re entitled to at least a 60-day grace period to pay arrears without interest before cancellation can be effective.
- Cancellation also requires proper written notice served to you.
If you’ve paid ≥ 2 years of installments
- You’re generally entitled to one month of grace for every year of payment, without interest.
- If cancellation still happens, you’re entitled to a Cash Surrender Value (CSV)—at least 50% of total payments made, plus an additional percentage per year after the 5th year (capped).
Unlicensed sale factor: Where the developer has no LTS, adjudicators commonly treat forfeiture as impermissible, leaning toward refunds (often with legal interest), even beyond the CSV framework.

2) Rescission with refund (and interest)

You can rescind the contract on account of illegality (no LTS), misrepresentation, or failure to comply with PD 957 standards.
Typical relief includes full or substantial refund of payments with legal interest, cancellation of the contract, and release of any encumbrances annotated against the title.

3) Specific performance

If you still want the property, you may demand that the developer comply with the law (secure LTS, complete development per approved plans, deliver title on time).
However, a developer who sold without LTS may face sanctions; while specific performance is available, many buyers instead opt for rescission + refund for speed and certainty.

4) Damages and penalties

You may claim actual damages (e.g., financing costs, rent, transfer charges), moral/exemplary damages in appropriate cases, plus attorney’s fees.
Selling without LTS exposes developers/officers to administrative fines and criminal penalties.

Effect on typical “forfeiture” scenarios

Scenario A: Developer cancels contract and keeps your payments

If no LTS existed at the time of sale, the cancellation and forfeiture are highly vulnerable to being struck down.
Remedies: Rescission + refund (often full or substantial) with interest, and invalidation of the forfeiture. If you’ve crossed Maceda thresholds, CSV minimums apply as a floor—but unlawful sales can justify more favorable relief.

Scenario B: “Reservation fee is non-refundable”

Non-refundable reservation language is commonly overridden by PD 957/Maceda protections and the unlicensed sale violation.
You may recover the reservation fee as part of your refund.

Scenario C: Developer threatens foreclosure or re-takeover

If the contract is rooted in an unlicensed sale, authorities tend to halt or nullify forfeiture-style actions tied to that sale.
You can seek status quo orders, injunctions, and ultimately rescission/refund through HSAC.

Proving the lack of a License to Sell

Ask the developer for a copy of the LTS and project registration (they must display LTS details in ads and sales offices).
Independently verify with DHSUD regional office (or its online registry, if available).
Check dates: The LTS must have been issued before your reservation/contract and must cover your specific unit/phase/tower.

Tip: A developer who obtained an LTS only after taking your money was still in violation for the earlier acts.

Where and how to file

1) Administrative/Adjudicatory route (HSAC)

Relief sought: rescission with refund + interest; specific performance; damages; injunction to stop forfeiture; penalties.
What to file: Verified complaint, proof of payments, the contract/reservation documents, sales materials, correspondence, and evidence of no LTS at the time of sale.
Why HSAC: It has primary jurisdiction over buyer-developer disputes under PD 957 and related laws.

2) Regulatory/Enforcement route (DHSUD)

Relief sought: Sanctions against the developer (administrative fines, suspension of permits, referral for criminal action).
What to file: Complaint or request for investigation, attaching proof of unlicensed sale.

3) Criminal complaint

Selling without LTS is a punishable offense. You may coordinate with DHSUD or file with the proper prosecutor’s office.

4) Civil courts (as needed)

For injunctions (e.g., to stop foreclosure or re-takeover) and enforcement of judgments, or to address issues beyond HSAC’s purview.

Strategy: choosing remedies

Want out + money back? Prioritize rescission + refund at HSAC; align with DHSUD enforcement to pressure compliance.
Want the unit? Consider specific performance but weigh project risk and timeline; ensure LTS is obtained and development is compliant.
Facing imminent forfeiture/eviction/foreclosure? Seek urgent injunctive relief while pursuing your main case.

Evidence checklist

Contract to Sell/Deed of Sale, reservation agreement, official receipts, bank documents
Advertisements, brochures, social media posts (showing sale before LTS)
Correspondence acknowledging no LTS (or refusal to show it)
Certifications or search results from DHSUD (and local permits as context)
Proof of developer delays/failures (site photos, progress reports, notices)

Money matters: what you can recover

Refund of payments (down payment + installments + allowable charges)
Reservation fee (despite “non-refundable” labels, in illegal sales these are commonly returned)
Legal interest (computed from dates of payment or demand, depending on rulings)
CSV (Maceda) as a minimum floor when applicable—but unlicensed sale cases often justify more than CSV
Damages (actual, sometimes moral/exemplary) and attorney’s fees, when warranted

Common developer defenses—and typical counters

“Buyer defaulted; forfeiture is contractual.”
- Counter: Contractual forfeiture cannot override PD 957/Maceda; no LTS vitiates their right to keep your money.
“We got the LTS later; cured already.”
- Counter: Violations occur at the time of sale or even at reservation. Subsequent licensing doesn’t erase liability or buyer remedies.
“Reservation fees are always non-refundable.”
- Counter: Not in unlawful sales. Authorities routinely order their return.
“This is purely a civil matter.”
- Counter: Selling without LTS is also a regulatory and criminal concern; pursue HSAC + DHSUD tracks.

Practical timelines and expectations

Documentation wins cases. Assemble proof of payments and the absence (or post-dated issuance) of LTS.
Parallel tracks help. Filing with HSAC for refund while asking DHSUD to sanction the developer increases leverage.
Interest runs. Even if the matter takes time, legal interest typically accrues on refundable amounts.

Frequently asked questions

Q: I only paid a reservation and one monthly installment. Do I have rights? Yes. Grace period + notice rules still apply; in unlicensed sales, refund is commonly ordered regardless of the low payment history.

Q: Does Maceda Law apply to condos? Maceda’s non-forfeiture principles are widely applied to residential installment sales (including condos), and PD 957 directly covers condominium projects. In practice, adjudicators use the most buyer-protective framework that fits.

Q: The developer is threatening to cancel unless I sign a waiver. Avoid signing “quitclaims” or waivers, especially if no LTS existed. Such waivers are routinely invalidated when they waive statutory rights.

Q: Can I stop paying while I sue? Consult counsel; in unlicensed sales and serious PD 957 violations, suspension of payments and injunctions have been granted, but strategy depends on your facts.

Step-by-step action plan

Request LTS (copy and number) from the developer. Note the issuance date and scope (tower/phase).
Verify with DHSUD (regional office).
Compile evidence (payments, ads, contracts, notices).
Send a formal demand: rescission/refund (or specific performance) citing PD 957 and unlicensed sale; demand legal interest.
File with HSAC for adjudication; seek injunction if facing forfeiture/eviction/foreclosure.
Lodge a DHSUD complaint for regulatory action and referral for criminal sanctions, if warranted.
Pursue enforcement (writs, annotation cancellations) once judgment is issued.

Bottom line

When a developer sells without a License to Sell, any attempt to forfeit your payments or oust you is on shaky legal ground. Philippine law (PD 957, Maceda, and related rules) arms you with grace periods, non-forfeiture, rescission with refund and interest, and damages—plus administrative and criminal levers to hold violators accountable. With targeted documentation and the right forum (HSAC/DHSUD), buyers can recover what they paid and stop abusive forfeiture in its tracks.