Philippine legal context — a practical, everything-you-need-to-know guide

Quick take: A reservation fee is usually treated as a non-refundable payment that holds a unit for a short period. But it’s refundable (in whole or in part) when the developer violates the law or the contract, sells without a License to Sell, materially misrepresents the project or unit, changes key terms without your consent, or when you cancel under rights granted by the Maceda Law (for installment buyers). Read on for the details and the exact steps to recover your money.

1) What exactly is a “reservation fee”?

Purpose. It temporarily takes the unit off the market while you submit requirements (IDs, income docs, loan pre-approval) and sign a Reservation Agreement and, later, a Contract to Sell (CTS) or Deed of Absolute Sale (DOAS).
Legal character. It is part of the purchase price (often credited to the down payment) but contractually designated as non-refundable if the buyer backs out for personal reasons.
Time-bound. The agreement sets a reservation period (e.g., 15–30 days). If you don’t complete requirements or pay the next milestone (e.g., start of down payment) within that window, the seller will usually forfeit the reservation.

Key insight: “Non-refundable” isn’t absolute. Clauses cannot override mandatory buyer protections under Philippine law.

2) The legal framework that governs refunds

Presidential Decree No. 957 (PD 957) — Subdivision and Condominium Buyers’ Protective Decree.
- Requires project registration and License to Sell (LTS) before selling.
- Regulates advertisements and material changes; prohibits false or misleading statements.
- Gives buyers remedies if the developer fails to develop under approved plans or delays completion/turnover.
Republic Act No. 6552 (the “Maceda Law”) — Realty Installment Buyer Act.
- Applies to buyers of residential real property on installment (includes condominium units).
- Grants grace periods and a cash surrender value (CSV) after you’ve paid at least two years of installments (50% of total payments, plus 5% per year after the 5th year, capped at 90%).
- For buyers who have paid less than two years, you are entitled to a grace period (not to a CSV) equal to at least 60 days; if the sale is canceled, developers may still keep prior payments unless the contract or policy says otherwise—but unlawful practices (e.g., no LTS, misrepresentation) change the outcome.
Republic Act No. 4726 — The Condominium Act.
- Governs condominium ownership and declarations. It doesn’t set refund rules for reservations, but interacts with PD 957 for project compliance.
Civil Code (obligations and contracts; good faith; rescission for breach/misrepresentation).
- If the seller breaches the contract or misrepresents material facts, the buyer may cancel and recover what was paid, plus damages when appropriate.
Agency regulation & adjudication.
- Disputes with developers are heard by the Department of Human Settlements and Urban Development (DHSUD) (formerly HLURB). It has jurisdiction over PD 957 and related rules, including refunds and damages against erring developers.

No general “cooling-off” rule. Unlike some consumer purchases, there is no universal cooling-off period for real-estate reservations. Your rights come from PD 957, the Maceda Law, your contract, and general Civil Code principles.

3) When is a reservation fee lawfully refundable?

Below are the most common, defensible bases for getting your reservation fee back. Any one of these can justify a refund; multiple grounds strengthen your claim.

No License to Sell (LTS) at the time of reservation.
- Selling without an LTS is prohibited under PD 957. A reservation taken before LTS issuance is a red flag. You may rescind and demand a full refund of everything paid (including the reservation fee).
Material misrepresentation or concealment.
- Examples: square meters different from advertised; promised balcony or parking isn’t part of the delivered unit; amenity set (pool, gym, retail podium) removed or significantly downgraded; view or orientation misrepresented (e.g., “unobstructed sea view” later blocked by an internal change); turnover date consistently moved without valid justification.
- You may cancel for seller fault and recover payments.
Material change in the project or unit without your written consent.
- PD 957 prohibits material alterations to the approved plans without approval and, practically, without buyer consent. If changes affect unit area, layout, finishing specs, floor, tower, or key amenities, you can rescind and seek a refund.
Failure to complete or deliver per contract (unreasonable delay).
- If turnover slips far beyond the contractual turnover date (considering allowable extensions/force majeure) and the delay is developer-caused, you can cancel and demand a refund (often with interest and/or damages).
Unit becomes unavailable through no fault of the buyer.
- If the developer re-allocates your unit, double-sells, or otherwise cannot deliver what you reserved, a full refund is due.
Financing contingency expressly stated in writing.
- If your Reservation Agreement or CTS says the sale is subject to bank or Pag-IBIG loan approval and you diligently applied but were denied (not due to your bad faith), you can invoke the condition precedent and demand the reservation back.
- If no such clause exists, developers typically forfeit the fee when the buyer fails to secure financing.
Cancellation under the Maceda Law (installment buyers).
- If you’ve already paid at least two years of installments and decide to cancel, you are entitled to a cash surrender value of at least 50% of total payments (commonly interpreted to include the reservation fee, down payment, and monthly installments), increasing by 5% per year after five years (max 90%).
- If less than two years have been paid, you get a minimum 60-day grace period to update payments before cancellation; a CSV is not mandated in this bracket, but separate PD 957 or contract breaches may still support a refund.
Unlawful sales practices.
- Forged or pre-signed blanks, hidden fees, refusal to give copies of signed documents, or refusal to show LTS/Project Registration. These can justify rescission and refunds.

4) When is a reservation fee usually forfeited?

Buyer’s change of mind unrelated to any legal breach.
Failure to comply with documentary requirements or start the down payment within the reservation period, if the developer is fully compliant and acted in good faith.
Loan disapproval where the contract does not make approval a condition and the developer did not promise to refund upon disapproval.
Breach by the buyer (e.g., bouncing checks, misrepresentation) where the contract allows forfeiture.

Pro tip: Forfeiture clauses must still pass standards of good faith and fairness. If the fee is grossly disproportionate (e.g., very high vs. short holding period) or the seller suffered no real loss, you may argue it’s an unenforceable penalty under the Civil Code.

5) Documentation you should have (and how each affects refunds)

Reservation Agreement. Check: (a) LTS details; (b) “non-refundable” wording; (c) financing contingency; (d) reservation period; (e) grounds for cancellation/refund.
Official Receipt(s). Proves payment and amount (useful for interest claims).
Project Registration & LTS. Verify issuance dates vs. your reservation date.
Marketing materials. Ads, brochures, emails, chat transcripts—evidence of representations you relied on.
CTS/Addenda. Delivery date, specs, penalties for delay, allowed variations.
Developer notices. Letters on re-scheduling, changes, or unavailability.
Your loan applications. Bank/Pag-IBIG denial letters (if claiming financing contingency).

6) Step-by-step: How to demand your refund

Freeze communications in writing.
- Email the developer and authorized broker; ask for the LTS (if not yet given), project registration number, and the status of your unit.
Ground your claim.
- Identify the legal basis: no LTS, misrepresentation, material change, delay, unit unavailability, financing contingency, or Maceda Law CSV.
Send a formal demand letter.
- Cite facts and attach proofs (receipts, ads, dated screenshots).
- State the exact amount you want refunded and where to pay (bank details).
- Give a reasonable deadline (e.g., 10 business days).
Escalate, if ignored or denied.
- DHSUD Adjudication (regional office with project jurisdiction) for PD 957-related disputes and refund/damages.
- Small Claims Court (no lawyers required) if it’s a pure money claim within the prevailing small-claims limit, with documentary evidence (receipts, contracts, emails).
- If claims include damages or contract rescission, consult counsel and consider regular civil action.
Interest and damages.
- If refund is delayed without valid cause, claim legal interest (Civil Code / Central Bank rates) from the date of extrajudicial demand until fully paid, plus damages where the developer acted in bad faith.

7) Practical scenarios (how tribunals tend to view them)

Reserved before LTS issuance → buyer backs out after learning this. Refunds are typically granted; selling without LTS violates PD 957.
Bank loan denied; no “subject to loan approval” clause. Refunds are usually denied; tribunals see the risk of financing as the buyer’s, unless the developer induced reliance or promised otherwise.
Turnover delayed 18+ months beyond contract with no valid force-majeure basis. Buyers can rescind and get refunds (often with interest; sometimes with damages).
Advertised 30 sqm unit delivered as 26 sqm; “as-built tolerance” clause exists. Tolerances are allowed but not for material deviations; a 13% area loss is typically material, supporting rescission and refund.
Developer re-assigns the reserved unit to someone else at a higher price. Clear seller breach → full refund plus possible damages.

8) Negotiation playbook (to avoid a fight)

Anchor on legality, not emotion. Lead with PD 957 / Maceda / LTS dates.
Offer a clean exit. “Refund the reservation and we quitclaim further claims.”
Escalate methodically. CC the developer’s compliance officer and DHSUD regional email on your second letter.
Keep receipts and timelines—tribunals reward well-documented claims.

9) Taxes & fees on refunds

Reservation fees have no special tax by themselves. When refunded (because the sale won’t push through), you should receive the gross amount paid.
If the developer already withheld commissions to brokers, that is an internal matter; it cannot reduce your rightful refund where the refund is legally due.

10) Frequently asked questions

Q: Can a developer write “strictly non-refundable” and keep my money no matter what? A: No. Contract clauses yield to mandatory protections (PD 957, Maceda Law, Civil Code). “Non-refundable” does not legalize sales without LTS or misrepresentations.

Q: Does the Maceda Law help me if I only paid the reservation fee and one monthly amortization? A: If you’ve paid less than two years, the law grants grace periods, not a CSV. But other legal grounds (e.g., no LTS, misrepresentation, material change, seller delay) may still require a refund.

Q: Is there a 7-day cooling-off right for condo reservations? A: There is no general cooling-off for real estate purchases. Any cooling-off must come from your contract or from specific schemes governed by special rules (e.g., certain time-share arrangements).

Q: The broker told me it’s refundable if the bank denies my loan, but the contract says non-refundable. A: Written contracts prevail. If the promise was crucial and you relied on it, you can argue misrepresentation—keep the message trail and raise it in a DHSUD complaint.

Q: Is the reservation fee part of “total payments” under the Maceda Law? A: It is commonly treated as part of the price paid, thus typically counted in computing cash surrender value, especially when officially receipted as part of the unit purchase.

11) A concise checklist before you reserve (or before you demand)

Ask for and verify the LTS number and issuance date.
Read the Reservation Agreement for: refund grounds, financing contingency, reservation period.
Secure written confirmations (don’t rely on verbal promises).
Keep all receipts and copies of ads/brochures.
For delays or changes, document the timeline and send a demand early.

12) Sample demand outline (you can adapt)

Subject: Demand for Refund of Reservation Fee — [Project/Unit] Dear [Developer],

On [date], I paid ₱[amount] as a reservation fee for Unit [details], as evidenced by OR No. [x].

I learned that at the time of reservation, the project had no License to Sell [or: there has been a material change in the [unit/specs/date], or: turnover delay beyond [date] without valid cause, or: unit unavailable, or: loan disapproval under a financing contingency].

Under PD 957 [and/or Maceda Law/Civil Code], I hereby rescind/cancel the purchase and demand a full refund of ₱[amount], within 10 business days of receipt of this letter, payable to [bank details].

If unpaid by the deadline, I will file a DHSUD complaint and seek interest and damages. Sincerely, [Name] / [Contact]

13) Bottom line

A non-refundable label isn’t the end of the story.
If the seller is at fault (no LTS, misrepresentation, material changes, delay, non-delivery), demand your money back—and be ready to escalate.
Installment buyers enjoy Maceda Law protections that can return a significant portion of payments.
Everything turns on documents and dates. Keep records tight and act promptly.

This article provides general information, not legal advice. For complex or high-value claims, consult a Philippine real-estate or consumer-protection lawyer to assess your specific documents and timelines.