Condo Reservation Cancellation & Refund Entitlements in the Philippines (updated 30 May 2025; Philippine law unless otherwise stated)
1. Why this matters
Buying a condominium unit almost always starts with a reservation agreement and a modest “reservation fee.” What happens to that money—and to everything else you have already paid—if you or the developer walk away is governed not only by the fine-print of the contract but also by a tight web of special statutes, housing-agency rules and Supreme Court rulings that override any private stipulation to the contrary.(Respicio & Co.)
2. Principal legal sources
| Law / issuance | What it covers | Core refund rule |
|---|---|---|
| P.D. 957 (Subdivision & Condominium Buyers’ Protective Decree, 1976) | All sales of subdivision lots and condominium units, from reservation stage onward | Developer fault ➜ 100 % refund of “total amounts paid” plus legal interest (Sec. 23).(Respicio & Co., Lawphil) |
| R.A. 6552 (Maceda Law, 1972) | Any residential real-estate sale on installment, including condos | Buyer default/cancellation (after at least 2 yrs of payments) ➜ 50 % cash-surrender value + 5 % per year beyond the 5th, capped at 90 % (Sec. 3).(Lawphil, RESPICIO & CO.) |
| R.A. 4726 (Condominium Act, 1966) | Ownership incidents & basic condo concepts; refund issues handled instead by PD 957 & Maceda Law.(Lawphil) | |
| HLURB/DHSUD rules (e.g., Board Res. 922-2014; HSAC Rules of Procedure 2021) | Form of reservation contracts, mediation before filing cases, escrow of payments, filing fees.(Legaldex, Home Security Affairs Council) | |
| Recent Supreme Court guidance | 2023 ruling: seller’s notice of cancellation must be notarised to be valid under the Maceda Law.(Supreme Court of the Philippines) |
Hierarchy: Statutes and agency rules are public-interest legislation; any “non-refundable” clause that diminishes the buyer protections below these minimums is void.(RESPICIO & CO.)
3. Nature of a reservation agreement
- It is a pre-contract that merely holds the chosen unit and price for a limited period (typically 30 days).(RESPICIO & CO.)
- The fee is treated as part of the purchase price once a Contract-to-Sell (CTS) is signed; otherwise, its refundability depends on (i) the agreement’s own terms and (ii) whether the developer committed any statutory breach or misrepresentation.(Respicio & Co.)
- Developers must use plain-language, DHSUD-pre-approved templates and disclose the exact refund formula and timeline.(RESPICIO & CO.)
4. Common cancellation scenarios & statutory entitlements
| Scenario | Statutory anchor | Buyer’s minimum monetary recovery |
|---|---|---|
| A. Buyer backs out during the “cool-off” / hold-period (before CTS) | Contract + agency guidelines | Usually full reservation fee minus small admin charge (practice: ₱3 000–₱5 000).(RESPICIO & CO.) |
| B-1. Buyer falls short before 2 yrs of instalments | Maceda Law Sec. 4 | ● 60-day grace period to pay arrears. ● If still unpaid, developer may cancel and keep all payments already made after proper notice. |
| B-2. Buyer cancels or defaults after ≥ 2 yrs of instalments | Maceda Law Sec. 3 | Cash-surrender value = 50 % of all payments; + 5 % for every full year beyond the 5th, max 90 %.(RESPICIO & CO.) |
| C. Developer delay, non-completion, misrepresentation, no licence-to-sell | PD 957 Sec. 23; Civil Code 1191 | 100 % refund of total payments (incl. reservation) + legal interest (currently 6 % p.a.) and possible damages.(Respicio & Co., RESPICIO & CO.) |
| D. Mutual rescission / negotiated settlement | Any basis | Parties may agree on any amount not less than statutory minimums; quitclaims below the floor can be voided in HSAC.(RESPICIO & CO.) |
5. How the numbers are computed
- Identify “total payments.” Include the reservation fee, down payment, monthly “equity” and bank charges that went straight to the developer.(RESPICIO & CO.)
- Apply the applicable formula (Maceda - buyer default; PD 957 - developer fault).
- Add legal interest (simple, 6 % p.a.) from date of notarised demand until developer actually pays. Supreme Court and HSAC apply the 2019 BSP rate revision.(RESPICIO & CO.)
Example: Buyer paid ₱1 000 000 over 4 years, then defaults. • Cash-surrender value = ₱1 000 000 × 50 % = ₱500 000. • No +5 % additions yet because the 5-year threshold has not been reached.
6. Procedural roadmap if the developer refuses to refund
Notarised demand letter citing PD 957 or Maceda (keep proof of receipt).(Respicio & Co.)
Conciliation / mediation at the project’s DHSUD regional office (free).(DHSUD)
Adjudication before the Human Settlements Adjudication Commission (HSAC).
- Filing fee: ₱1 440 + variable amount on refund claim.(Home Security Affairs Council)
- Decisions are executory; HSAC sheriffs may levy the developer’s bank accounts.(RESPICIO & CO.)
Appeal to the Court of Appeals within 15 days; then to the Supreme Court on pure questions of law.
7. Jurisprudence highlights (condensed)
| Case (year) | Holding |
|---|---|
| Orbe v. Filinvest (G.R. No. 190706, 2021) | Maceda Law applies to residential condo sold on installment; buyer entitled to § 3 refund despite “non-refundable” clause.(eLibrary) |
| SC PIO media briefer (Jan 2023) | Seller’s Maceda-Law cancellation notice must be notarised; mere letters or e-mail insufficient.(Supreme Court of the Philippines) |
| HSAC Case No. R-III-23-02 (2024) | Developer who collected fees without a Licence-to-Sell ordered to return 100 % of payments + 6 % interest + ₱50 000 moral damages. (Cited in agency digest).(Home Security Affairs Council) |
8. Practical tips for buyers
- Verify the project’s Licence-to-Sell on the DHSUD portal before paying any reservation.(Respicio & Co.)
- Keep every official receipt, bank proof and chat thread—they are your evidence.(RESPICIO & CO.)
- Send demands by registered mail or personal service with receiving stamp to start interest clock running.
- Compare Maceda v. PD 957; invoke the statute that yields the larger refund.(RESPICIO & CO.)
9. Compliance checklist for developers
- Escrow reservation fees until CTS execution.(RESPICIO & CO.)
- Use DHSUD-cleared contracts; strike “automatic forfeiture” clauses.(RESPICIO & CO.)
- Issue notarised grace-period notices and cancellation notices.(Supreme Court of the Philippines)
- Report cancelled reservations in quarterly project status reports.(RESPICIO & CO.)
10. Frequently asked questions
| Question | Short answer |
|---|---|
| Is the reservation fee always refundable? | No. It depends on the contract unless the developer committed statutory violations, in which case PD 957 allows a full refund.(Respicio & Co.) |
| Does Maceda Law cover spot-cash buyers? | No. Only installment sales. Spot-cash refunds rely on contract and general Civil-Code rescission.(RESPICIO & CO.) |
| Can a buyer demand interest? | Yes—legal interest (6 % p.a.) is routinely awarded from date of demand until full payment.(RESPICIO & CO.) |
| Prescription period? | Ten (10) years counted from the developer’s breach or from cancellation, being an action on a written contract.(RESPICIO & CO.) |
11. Bottom line
Statutory buyer-protection rules trump any “non-refundable” fine print.
- Buyer default: cash-surrender value under the Maceda Law after only two years of instalments.
- Developer fault: full restitution with interest under PD 957, no matter how small the reservation fee or how big the down-payment.
- Effective enforcement means following the notice → mediation → HSAC sequence and keeping meticulous paper-trails.
Disclaimer: This article is for informational purposes only and is not a substitute for personalised legal advice. Laws, agency guidelines and jurisprudence evolve; consult Philippine counsel for specific situations.