Canceling Pre‑Selling Condominium Purchase Agreements in the Philippines

A comprehensive legal guide for buyers, sellers, brokers, and practitioners

1. Overview

Buying a pre‑selling condominium unit (i.e., a unit that has not yet been built or turned over) is common in the Philippines because it locks in introductory prices. It is also the stage at which most buyers decide—often for financial, personal, or legal reasons—to pull out of the deal. Canceling a pre‑selling purchase, however, is not as simple as “walking away.” Philippine law provides a layered framework of statutes, regulations, and case law that governs cancellation, refunds, and penalties. This article gathers those rules in one place and walks you through:

the statutory bases for rescission or cancellation;
the practical steps and notice requirements;
how much money you can get back—and when;
what happens if you default versus if the developer defaults;
special considerations (taxes, mortgages, bank‑financed units, foreign buyers, etc.); and
litigation and administrative remedies.

Important: This material is for general information only and is not legal advice. Consult a Philippine lawyer or accredited real‑estate broker for advice on your specific facts.

2. The Legal Framework

Instrument	Scope & Key Provisions Relevant to Cancellation
Presidential Decree 957 (Subdivision and Condominium Buyers’ Protective Decree, 1976)	§ 23–24: Right to a full refund with 6 % interest if the developer fails to complete or deliver; administrative sanctions and license revocation; requires notice and approval for material changes in plans.
Republic Act 6552 (Maceda Law, 1972)	Protects buyers in installment sales of real property (including condos). Gives: (a) grace periods, (b) refund of 50 % of total payments after ≥ 2 years; plus +5 % per year beyond 5 years, capped at 90 %. Applies even if the contract is styled as “Contract to Sell.”
Civil Code (Arts. 1191, 1654, 1381, 1390)	General right of rescission for substantial breach; rules on mutual restitution and damages.
DHSUD–HLURB Rules (latest IRR, 2020 & later)	Administrative process: mediation ↠ adjudication ↠ writ of execution; filing fees; 30‑day developer response time; enforcement by sheriffs.
Special Banking & Consumer Regulations	BSP Circular 439 (if unit is mortgage‑backed), RA 7394 (Consumer Act) on deceptive marketing, Anti‑Dummy Law for foreign buyers.

3. Typical Contract Forms and Why They Matter

Reservation Agreement – usually 30 days; almost always non‑refundable, but may be credited to down‑payment.
Contract to Sell (CTS) – obliges the buyer to complete payments; ownership transfers only upon execution of the Deed of Absolute Sale (DOAS).
CTS with Bank Financing – after paying the “equity” (often 10–20 %), the buyer’s bank pays the balance on loan take‑out.

Cancellation rights, grace periods, and refund math differ depending on which stage you are in.

4. Grounds for Cancellation

A. Developer‑Triggered (Buyer is not in default)

Failure to complete or deliver the unit on schedule (PD 957 § 23).
Material alteration of plans without buyer’s written consent.
Misrepresentation or fraudulent sales tactics.
License suspension/revocation by DHSUD.
Insolvency or abandonment of the project.

B. Buyer‑Triggered

Exercise of statutory right to refund under RA 6552 (after ≥ 2 years of installments).
Unilateral withdrawal for convenience (allowed by contract, usually with forfeiture of reservation fee and sometimes a penalty).
Default in installments (developer may cancel you; see § 5‑B).

5. Step‑by‑Step Cancellation Procedures

5‑A. If the Developer Is at Fault

Step	What to Do	Tips
1	Review your CTS/DOAS and official timetable.	Note any “tolerance period” (commonly 6–12 months) written into the contract.
2	Serve a written Demand–Rescission Letter citing PD 957 § 23/24 and RA 6552 if applicable.	Send by registered mail and email for proof.
3	Allow 15–30 days for voluntary refund.	Some contracts shorten or waive this; statutes override shorter periods.
4	File a Complaint with DHSUD Adjudication Office (AO).	Attach CTS, receipts, and proof of notice; pay filing fee ≈ ₱1,500 + 0.1 % of claim over ₱100k.
5	Mediation Stage (15 days).	Settlement rate is high; you can agree on staggered refund or unit swap.
6	Adjudication & Decision (60–90 days typical).	Decision is immediately executory; sheriff can garnish the developer’s escrow account.
7	Execution & Collection (Sheriff’s return).	Interest of 6 % per annum is standard on refunds.

5‑B. If You Are in Default (Buyer‑Initiated Cancellation or Developer’s Cancellation)

Grace Periods under the Maceda Law
- < 2 years of installments: 60‑day grace period to pay arrears.
- ≥ 2 years: 1 month grace per year of paid installments (e.g., 30 months paid ⇒ 2 months + home stretch).
Notice of Cancellation
- Developer must send a 30‑day notice of cancellation or demand to vacate after grace period lapses.
Refund Entitlement
- ≥ 2 years paid ↠ refund = 50 % of all payments $see § 6‑A$.
- < 2 years ↠ usually no refund, reservation & payments forfeited (unless CTS says otherwise).
Possibility of Reinstatement
- You may still pay the arrears until actual cancellation is registered with DHSUD.

6. How Much Will You Get Back? (Refund Calculations)

6‑A. Maceda Law Refund Schedule

Years of Installments Paid	Statutory Minimum Cash Surrender Value (CSV)
< 2 years	0 % (but check contract)
≥ 2 – 5 years	50 % of total payments
> 5 years	50 % + 5 % per year of payments beyond the 5th year
Cap	90 % of total payments

“Payments” include amortizations, down‑payments, and accepted deposits. Penalties and interest are excluded.

6‑B. PD 957‑Based Full Refund

If cancellation is due to developer’s fault (delay, misrepresentation, unlicensed project), buyer is entitled to:

100 % of payments made (including the reservation fee);
6 % interest per annum, computed from each payment date; and
Damages/attorney’s fees if bad faith is proven.

6‑C. Deductions & Offsets

Item	Deductible?	Notes
Documentation stamps & notarial fees	Yes, if expressly agreed.
Bank transfer fees	Yes, minor.
“Processing/administrative fee”	No, if it exceeds 10 % of payments (HLURB precedent).
Association dues, utilities	Yes, if unit is already turned over.

7. Special Situations

Bank‑Financed Units – If the bank has already taken out the loan, the buyer must settle with the bank; Maceda refund comes after mortgage redemption.
Foreign Buyers – Limited to 40 % of project; refunds must be in foreign currency if payments were.
Assignments & Transfers – If you assigned the CTS, only the assignee may cancel; ensure deed of assignment is notarized and reported to DHSUD.
Death of Buyer – Heirs may exercise refund rights; estate tax implications apply.
Tax Credits – Documentary Stamp Tax (DST) on the voided sale is not refundable, but input VAT may be credited by the developer.

8. Remedies Against the Developer

Forum	Remedy	Prescriptive Period
DHSUD‑AO	Rescission, refund, damages ≤ ₱5 M	1 year from cause of action
Regular Trial Court	Rescission, specific performance, damages > ₱5 M	4 years (Art. 1391) or 6 years (written contracts)
Small‑Claims/MTC	Rare; if claim ≤ ₱400 k	4 years
SEC / BSP	If developer is a corporation engaged in REIT or bank‐financed	Various

9. Developer Penalties

Administrative fines: up to ₱50,000 per violation + ₱1,000/day of continuing offense (DHSUD schedule).
Suspension / Revocation of License to Sell (project‑specific).
Criminal liability: fine or imprisonment under PD 957 for willful violations.

10. Notable Case Law

Spouses Abellera v. Court of Appeals (G.R. 129077, December 4 2000) – Maceda Law applies to condominium CTS; buyer got 50 % refund.
Fil‑Estate Properties v. Henares (HLURB Case No. REM‑021213‑11482) – Full refund + interest ordered when project delayed > 24 months.
Francel Realty v. Sycip (G.R. 170574, February 13 2013) – PD 957 remedies are cumulative with Civil Code rescission.
Pioneer Highlands Condo Corp. v. FCC (CA‑G.R. SP 115433) – Reservation fees are refundable when developer fails to disclose mortgage encumbrance.

11. Practical Checklist for Buyers

Stage	Action Items
Pre‑Purchase	Verify developer’s License to Sell and Project Registration on the DHSUD portal.
Considering Cancellation	Gather CTS, official receipts, emails, marketing materials; diarize payment dates.
Sending Demand	Use a lawyer’s letterhead; cite PD 957 § 23 & RA 6552; demand refund within 15 days.
During Mediation	Be open to options: unit trade, staggered refund, or joint sale to a new buyer.
Litigation Strategy	Compute refund, interest, moral & exemplary damages; prepare to post docket fee if filing in RTC.
Post‑Cancellation	Secure a Quitclaim that clearly states the amount refunded; request DHSUD annotation to bar double sales.

12. Frequently Asked Questions

Does the Maceda Law still apply if my payments are through a bank? Yes, refund is based on total buyer payments (equity + amortizations), but the bank’s mortgage must first be settled or assigned.
Can the developer forfeit everything if I paid less than two years? Generally yes, unless your CTS or the developer’s policy grants a goodwill refund.
Are reservation fees always lost? No. HLURB has repeatedly ordered their refund when the developer is at fault.
What if the project is 80 % finished but delayed? You may choose between refund (PD 957 § 23) or compel completion with damages.

13. Conclusion

Canceling a pre‑selling condo purchase is procedurally demanding but legally feasible. The pivotal questions are:

Who is in breach?
How long have you been paying?
What does your contract say—and is any clause contrary to PD 957 or RA 6552?

Armed with the statutes above, a paper trail of payments, and timely notices, you can recover a substantial part—sometimes all—of what you have paid. When in doubt, engage a real‑estate lawyer to strategize between administrative relief and court action, and to ensure that your cancellation really frees you from future liabilities (mortgage, taxes, association dues).

Canceling Pre‑Selling Condominium Purchase Agreements in the Philippines