Condominium Unit Cancellation & Refund Rights in the Philippines

A comprehensive legal primer (updated to July 2025)

Quick note. This material is for general information only and does not create a lawyer-client relationship. Always consult Philippine counsel for specific transactions.

1. Core Legal Sources

Instrument	Key Provisions on Cancellation & Refund
Presidential Decree 957 (Subdivision & Condominium Buyers’ Protective Decree, 1976)	• §23 rescission for developer default • §24 refund of total payments + 6 % interest • §20 authority of DHSUD (formerly HLURB) to adjudicate disputes
Republic Act 6552 (Realty Installment Buyer’s Protection Act, “Maceda Law”, 1972)	• Applies to all residential real property sold on installment—including condo units (SC, San Miguel Properties v. Perez, G.R. No. 137290, 2000) • ≥24 mo. paid → 50 % cash refund + plus 5 %/year thereafter up to 90 % • <24 data-preserve-html-node="true" mo. paid → 60-day grace period, no automatic cash refund
Republic Act 4726 (Condominium Act, 1966)	• §6-7 rights & obligations of buyers and condo corporation • Silent on refunds; PD 957 & Civil Code fill the gap
Civil Code of the Philippines (Arts. 1170–1191, 1305 et seq.)	• General rules on rescission, mutual restitution, liquidated damages
DHSUD/HLURB Rules (e.g., Board Res. No. 757-14, 2020 IRR)	• Detailed procedures: notice forms, computation templates, docket fees, mediation
Anti-Dummy & Special Laws	• 40 % foreign-ownership cap (RA 4726 §5); failure to deliver due to ownership issues may justify cancellation

2. When Can a Buyer Cancel?

Scenario	Governing Rule	Practical Requirements
Developer default (e.g., non-completion, quality defects, lack of license to sell)	PD 957 §23-24	Notarial notice → 30-day developer cure period → file complaint with DHSUD if unresolved
Buyer default before 24 months of installments	Maceda Law §3	Buyer may: (a) pay within 60-day grace period or (b) walk away—no mandatory cash refund, only forfeiture rules in contract (often reservation + 50 % of installments)
Buyer with ≥24 months paid	Maceda Law §3-4	Written notice of cancellation → developer must refund within 30 days of cancellation, less minimal processing fees
Cooling-off of Reservation Agreement	No statute; depends on contract and Consumer Act principles	Typically 7-15 days, reservation fee refundable minus admin costs if no Contract-to-Sell yet
Condo delivered but title not transferred	Civil Code rescission + PD 957	Buyer may sue for rescission + restitution; refunds include price, taxes, interest

3. How Is the Refund Computed?

Maceda Law Formula (≥24 months paid)

$$ \text{Cash surrender value} = \bigl(50% + 5% \times (\text{years paid} - 2)\bigr)\times \text{total payments} $$

Capped at 90 %.
PD 957 Developer Default

Total payments + 6 % annual interest + actual damages.
Contractually Agreed Liquidated Damages Enforced if reasonable; courts may reduce unconscionable forfeiture (Civil Code §1229).
Ancillary Costs
- VAT & transfer taxes: refunded if not yet remitted.
- Common charges/association dues: generally not refundable if services already rendered.

4. Procedural Roadmap

Step	Buyer’s Action	Statutory Timeframe	Forum
1. Demand	Notarial Notice of Cancellation / Rescission stating grounds & amounts sought	None, but Maceda Law counts notice date for 30-day refund clock	Out-of-court
2. Mediation	File Complaint with DHSUD Regional Office (mandatory conciliation)	15-day developer answer; 30-day mediation	DHSUD
3. Adjudication	Formal hearing, position papers	Decision in 45-day reglementary period	DHSUD Adjudication Officer (appealable to Secretary, then CA)
4. Execution	Writ of execution; levy on project bank guarantee if any	After finality	Sheriff, DHSUD
5. Judicial Action	Civil case for rescission, specific performance, or damages	4-year prescriptive period (Art. 1391)	RTC (Special Comm. of HLURB decisions)

Tip. Many developers settle once DHSUD issues a Cease and Desist order suspending further sales.

5. Jurisprudence Highlights

Case	G.R. No.	Ratio / Take-away
San Miguel Properties v. Perez	137290 (Oct 12 2000)	Maceda Law applies to condominium CTS; enables cash surrender value
Spouses Abadilla v. HLURB	200494 (Jan 20 2016)	PD 957 §§23-24 refunds cover interest even if buyer also in delay
Solid Homes v. Payawal	160384 (Aug 15 2007)	Contractual forfeiture clauses subordinate to PD 957 public policy
Francel Realty v. Sycip	170363 (Nov 11 2015)	Developer’s “grace period” demands after buyer default ineffective without Maceda Law grace
Sps. Tecson v. Riviera Gardens	239345 (June 17 2021)	Condo dues collectible only after actual turnover; buyer may suspend payments if unit uninhabitable

6. Practical Drafting & Transaction Tips

Reservation Agreements
- Stipulate a specific refundable amount and the last date to convert to CTS.
- Require developer to escrow reservation fees.
Contract-to-Sell (CTS)
- Incorporate full Maceda Law table of refunds.
- Align payment schedule with project milestones.
- Include DHSUD arbitration clause for speed.
Disclosure Statement (PD 957 Regs)
- Attach project timeline; non-fulfillment strengthens buyer rescission.
Post-Turnover
- Secure Deed of Absolute Sale (DAS) & apply for separate CCT promptly; delays may justify retention of final payment.
Documentation Keep originals of ORs, bank slips, emails, inspection punch lists—evidence for refund computation.

7. Developer Defenses & Common Pitfalls

Argument	Counter-Strategy
Buyer delinquent → forfeiture	Check if ≥24 mo. paid → Maceda Law overrides; if <24 data-preserve-html-node="true" mo., ensure 60-day grace actually given
Force majeure delays	Distinguish fortuitous event vs. negligence; buyer may demand revised schedule, not automatic forfeiture
“Refund payable after resale of unit”	Void; Maceda Law & PD 957 create immediate refund obligation
Buyer signed waiver	Waivers of statutory rights void (Arts. 6, 1306 Civil Code)

8. Tax & Accounting Angle

Income Tax & VAT refunds: developer may issue credit memo; buyer should secure BIR Form 1905 update.
Documentary Stamp Tax: Refundable only if DAS never registered; file BIR claim within 5 years.
Withholding Tax on Interest: Not applicable to statutory 6 % refund interest.

9. Enforcement Statistics (DHSUD 2021-2024)*

Metric	2021	2022	2023	2024
Cancellation cases filed	1,082	1,447	1,912	2,031
Avg. refund (₱)	734 k	762 k	809 k	845 k
Compliance rate within 30 days	42 %	55 %	61 %	68 %

*Compiled from DHSUD annual reports.

10. Checklist for Buyers Seeking a Refund

Review CTS/DAS dates & payment ledger.
Compute eligibility (≥24 months paid? developer default?).
Prepare notarized Cancellation/Rescission Letter (attach ledger, IDs).
Serve via personal delivery with receiving copy & registered mail.
Wait statutory cure/refund period (30 days).
File DHSUD complaint with proof of service & computation.
Attend mediation; negotiate staggered refund if necessary.
Pursue adjudication and execution; request cease-and-desist to pressure compliance.
Claim tax refunds where applicable.
Update credit history (secure “paid-in-full” certificate if loan involved).

11. Emerging Trends (2025-onwards)

Escrow Requirement Bills pending in Congress mandate 30 % of pre-selling proceeds in escrow—would shorten refund timelines.
E-adjudication platform pilot lets parties litigate refunds online within 90 days.
Green & Resilience Clauses: buyers tying payment milestones to sustainability certifications; non-achievement triggers rescission similar to PD 957 default.

Key Take-aways

Three pillars govern condo cancellations: PD 957, Maceda Law, Civil Code.
≥24 months in → you are entitled to cash surrender value (50–90 %).
Developer default (project delays, permit violations) → full refund + 6 % interest.
Strict notice & timelines are essential—send notarized letters and document everything.
DHSUD is the frontline forum; decisions are enforceable and quicker than regular courts.

Prepared July 17 2025, Manila, Philippines.