Cancellation of a Condominium Unit for Non-Payment in the Philippines (Everything You Need to Know, June 2025 Edition)
1. Why This Topic Matters
Buying a condominium unit almost always involves paying in tranches—reservation fee, down-payment, monthly amortizations, and, later, mortgage or balloon payments. When a buyer falls behind, both the buyer’s investment and the developer’s project cash-flow are at stake. Philippine law therefore spells out precise default, notice, grace-period, refund, and registration rules that neither party can ignore. Failure to follow them exposes a developer to civil, administrative, and even criminal liability, while buyers who misunderstand the law often forfeit money they could have recovered.
2. Core Statutes and Regulations
| Instrument | Scope / Key Points | In a Nutshell |
|---|---|---|
| Presidential Decree 957 (PD 957, “Subdivision and Condominium Buyers’ Protective Decree,” 1976) | Applies specifically to the sale of subdivision lots and condominium units, whether pre-selling or ready-for-occupancy. §23–24 govern default, cancellation, grace periods, notices, and cash-surrender-value (CSV) refunds. | The primary protective law; lex specialis over general statutes. |
| Republic Act 6552 (“Maceda Law,” 1972) | General statute for any sale of real estate on installment. Many provisions echo PD 957 but with slightly different time lines (e.g., initial 60-day grace instead of 30). | Fills gaps and applies only if PD 957 is silent; buyers can invoke whichever rule is more favorable. |
| Republic Act 4726 (Condominium Act, 1966) | Defines condominium ownership; §20 lets a condominium corporation place a lien for unpaid association dues, eventually leading to a judicial foreclosure sale—different from PD 957 cancellation. | Relevant after turnover when the buyer already holds a CCT. |
| Republic Act 11201 (2019), creating the Department of Human Settlements and Urban Development (DHSUD) and the Human Settlements Adjudication Commission (HSAC) | Transferred HLURB’s licensing + adjudicatory powers to DHSUD (permits) and HSAC (disputes). | Today, HSAC hears cancellation/refund cases; developers still register projects & cancellations with DHSUD/Registry of Deeds (RD). |
| HSAC / former-HLURB Resolutions (e.g., BR-656-98, BR-922-13, BR-001-21) | Flesh out documentary forms for notices, affidavits of cancellation, CSV computation, and RD annotation procedures. | Check the latest template before filing. |
Hierarchy rule: PD 957 › Maceda Law › Civil Code. If PD 957 speaks, it controls.
3. When Is a Buyer “In Default”?
| Scenario | Statutory Trigger | Common Contract Trigger |
|---|---|---|
| Pre-turnover installments (Contract to Sell) | Misses one installment → 30-day PD 957 grace automatically starts. | “Failure to pay two consecutive monthly amortizations” is typical, but the law’s 30-day grace prevails. |
| Post-turnover mortgage (bank/Pag-IBIG) | Governed by the loan/mortgage contract; PD 957 no longer applies; lender may foreclose under banking laws. | Miss the 90-day arrears mark → bank files extrajudicial foreclosure. |
| Association dues / assessments | Unpaid for 3 months → lien under Condominium Act §20; corporation may sue or foreclose. | By-laws often mirror §20. |
4. Statutory Grace Periods and Buyer Rights
| Total Installments Already Paid | Grace Period to Pay Arrears Only | Post-Cancellation Cash-Surrender-Value (CSV) Refund |
|---|---|---|
| < 2 years | 30 days (PD 957) or 60 days (Maceda) ← buyer may choose the longer. | None; payments may be forfeited, but many contracts (and HSAC decisions) still require refund of reservation fees if developer breached first. |
| ≥ 2 years | 1 month per year of paid installments (e.g., 3 years paid → 3-month grace), but not > 3 years total. | ≥ 50 % of all payments, +5 % for every year beyond 5 years, capped at 90 %. Payment must be in cash or certified check within 30 days from cancellation. |
Tip: The law protects installment buyers. Lump-sum “spot cash” purchases and post-turnover mortgages are outside PD 957’s CSV refund scheme.
5. Developer’s Step-by-Step Cancellation Procedure (PD 957)
Issue “Notice of Default / Grace Period” (Registered Mail or Personal):
- Marks Day 0 of the statutory 30-day (or longer) grace.
- Must state exact arrears and last day to cure.
If Still Unpaid, Issue “Notice of Cancellation / Demand for Rescission”:
- At least 30 days ahead of intended cancellation date.
- Must warn that contract will be rescinded and indicate CSV amount calculable on that date.
Execute & Notarize an “Affidavit of Cancellation” after Day 60+ (or later if grace extended).
- Attach both notices, registry receipts, and computation of CSV.
Refund Buyer: Deliver cash / manager’s check simultaneously or within 30 days of notarization.
File with:
- DHSUD: For record-keeping (formerly HLURB).
- Registry of Deeds: Annotate cancellation on the master title or CCT; remove buyer’s adverse claim.
Report to HSAC (optional but prudent) if an ejectment or refund dispute is already pending.
Non-Compliance Consequences: • Cancellation is void → buyer may demand reinstatement. • Developer directors/officers face administrative fines and up to ₱20,000 per violation, plus civil damages and even estafa charges if intent to defraud is proven.
6. Buyer Options During Default Window
| Option | Requirements | Practical Effect |
|---|---|---|
| Cure | Pay arrears + late interest within grace. | Contract resumes as if no default occurred. |
| Assignment | Find a substitute buyer and notify developer before cancellation. | Assignee steps into buyer’s shoes. |
| Suspend Payment (PD 957 §23, 2nd ¶) | Show that developer failed its obligations (delay in completion, turnover defects). | No interest/penalty; default clock pauses. |
| File HSAC Complaint | Any time — ask for injunction, refund, moral damages. | HSAC may stop cancellation and/or award CSV + damages. |
7. Distinguishing Pre-Selling, RFO, and Post-Turnover Defaults
Pre-Selling (Usually Contract to Sell):
- Title still in developer’s name.
- PD 957 cancellation is administrative, not judicial.
Ready-For-Occupancy (Unit already built but not yet turned over):
- Same PD 957 rules.
After Turnover (Buyer now holds CCT; bank mortgage):
- Bank/Lender forecloses under Act 3135 (extrajudicial foreclosure); CSV rules do not apply.
- Condo corporation may simultaneously file a §20 lien for association dues.
8. Interaction with Reservation Agreements and Down-Payments
Reservation fees are typically fully forfeitable if the buyer never signs a Contract to Sell—unless the developer itself is in delay or misrepresented facts. Once the CTS or Purchase Agreement is signed, the reservation fee becomes part of “total payments” for CSV computation.
9. Selected Supreme Court & HSAC Decisions
| Case | G.R. No. / Year | Take-Away |
|---|---|---|
| Solid Homes v. Payawal (G.R. 84614, 2000) | Developer who skipped the two-step notice lost the cancellation case; buyer got CSV + damages. | |
| Fil-Estate Properties v. Sta. Clara (HSAC, CA-G.R. SP 82078, 2004) | Grace period under PD 957 applies even if contract states “automatic cancellation after 60 days.” | |
| Spouses Abella v. Court of Appeals (G.R. 169123, 2013) | Maceda Law still supplements PD 957; buyer may invoke longer 60-day grace if he paid <2 data-preserve-html-node="true" years. | |
| Moldex Realty v. Pagunsan (HSAC Decision, 2019) | Developer cannot refuse CSV by alleging “liquidated damages” clause. |
10. Practical Compliance Checklist (Developers)
- □ Draft installment contracts mirroring PD 957/Maceda timelines.
- □ Keep proof of mailing (registry receipts, return cards).
- □ Use DHSUD-prescribed Notice and Affidavit templates.
- □ Compute CSV before sending the second notice.
- □ File RD annotation immediately after cancellation to avoid double sale.
11. Practical Tips (Buyers)
- Act within the grace period—even a token payment can sometimes stop the clock if the developer accepts it.
- Document all communications; email plus registered mail is safest.
- If the project is delayed or defective, suspend payments in writing under PD 957 §23; you cannot be penalized while defects persist.
- Negotiate restructuring: Developers often allow penalty waivers or lengthened terms rather than lose CSV cash.
- File with HSAC early if you suspect the developer will not honor the CSV or notices are defective.
12. FAQs
| Question | Short Answer |
|---|---|
| Can a developer keep 100 % of what I paid if I defaulted after only one year? | Yes, if it complied with the 60-day Maceda grace + 30-day cancellation notice and you paid < 2 years. |
| Does PD 957 protect buyers who used bank financing? | No—once the bank releases full payment to the developer and you sign a Deed of Absolute Sale, you are dealing with a mortgage issue, not an installment sale. |
| Can the condo corporation eject me for unpaid dues? | It must sue for judicial foreclosure under RA 4726 §20; eviction follows foreclosure sale, not PD 957 cancellation. |
| My notices were emailed only—valid? | PD 957 and HSAC require written notices served personally or by registered mail. Pure email service is a fatal defect. |
13. Penalties and Liability
- Administrative: up to ₱50,000 per violation (DHSUD scale, 2025).
- Civil: Refund + 6 % legal interest + moral/exemplary damages + attorney’s fees.
- Criminal (PD 957 §38): Fine up to ₱20,000 and/or imprisonment 5 years if fraud is proven (e.g., selling already-cancelled units).
14. Summary
Cancellation of a condominium unit for non-payment is never automatic in Philippine law. It requires statutory grace periods, twin notices, notarized cancellation, cash-surrender refunds, and proper registration. PD 957 is the governing charter, supplemented by the Maceda Law where favorable, enforced today by DHSUD and adjudicated by HSAC. Buyers have powerful remedies—but only if invoked on time—while developers who scrupulously follow the step-by-step process can lawfully recover inventory without protracted litigation.
This material is for general information as of June 19 2025. It is not legal advice; consult a Philippine lawyer or HSAC practitioner for case-specific guidance.