I. Overview: The Problem of Undelivered Housing Units

Buying a house or condominium unit “on preselling” or through installment is common in the Philippines. The risk is also common: projects get delayed, suspended, or never delivered at all. Philippine law provides multiple refund pathways depending on (a) the type of developer, (b) the buyer’s status, and (c) the reason for non-delivery.

This article explains the legal bases, refund rights, procedures, documentary needs, and practical strategies to recover money from real estate developers for undelivered units.

II. Key Laws Governing Refunds for Undelivered Units

A. Presidential Decree No. 957 (Subdivision and Condominium Buyers’ Protective Decree)

PD 957 is the primary buyer-protection law for subdivision lots, house-and-lot packages, and condominium units sold to the public. It regulates developers, requires licenses, and mandates delivery standards.

Core rights relevant to refunds:

Right to project completion and delivery as represented in the approved plans and timeframes.
Right to suspend payments if the developer fails to develop or deliver.
Right to refund when non-delivery or substantial delay is attributable to the developer.

PD 957 is enforced by the Department of Human Settlements and Urban Development (DHSUD), formerly HLURB.

B. Republic Act No. 6552 (Maceda Law)

Maceda Law applies when a buyer purchases real property on installment and later seeks cancellation/refund. It is often used when:

the buyer defaults, or
the buyer cancels after paying significant installments.

Important limit: It helps buyers who have paid for at least two years of installments. If you paid less than two years, the refund rights are smaller.

While Maceda Law focuses on buyer cancellation/default, it is frequently invoked in disputes involving delayed or undelivered units, especially when buyers choose to terminate the contract because of developer breach.

C. Civil Code of the Philippines (Obligations and Contracts)

Even without special laws, basic contract rules apply:

If a developer breaches (fails to deliver on time, abandons project, misrepresents), the buyer may rescind the contract and demand restitution/refund plus damages.
Rescission means treating the contract as cancelled due to the other party’s fault.

D. Consumer Act & Related Rules (Supplementary)

Real estate sales are treated as consumer transactions in many contexts. Unfair, deceptive, or oppressive acts can support refund claims and damages.

E. Condominium Act (RA 4726) & Associated Regulations

For condos, the Condominium Act defines unit delivery, common areas, and developer responsibilities. PD 957 still mainly governs preselling protections and refund rights.

III. When Are You Entitled to a Refund?

Refund entitlement depends on fault and circumstances.

A. Developer-Fault Situations (Strongest Refund Claims)

You generally have a right to full or substantial refund if:

Failure to deliver by the promised date, including unreasonable or excessive delay.
Project abandonment or stoppage, even if not formally declared.
No License to Sell (LTS) at the time of marketing/sale.
Material deviation from approved plans (smaller unit, different location, missing amenities).
Misrepresentation or fraud (false completion dates, ownership, permits, or project status).
Developer insolvency resulting in non-delivery.

In these cases, the buyer is not “defaulting”; the developer is.

B. Buyer-Initiated Cancellation (Maceda Law Scenario)

If you cancel for personal reasons (financial difficulty, change of plans) without proving developer breach, refunds depend on how long you’ve paid:

Paid < 2 years installment
- Entitled to 50% refund of total payments, only after developer cancels contract and after a 60-day grace period.
Paid ≥ 2 years installment
- Entitled to cash surrender value:
  - 50% of total payments, plus
  - +5% per year after the 2nd year, capped at 90% total.
- Plus mandatory grace periods before cancellation.

C. Mixed Situations

Sometimes both parties contribute to delay or cancellation. If the buyer can show developer’s primary fault, PD 957/Civil Code remedies dominate and may override or expand Maceda refunds.

IV. How to Prove “Undelivered” and “Delay”

A. Contractual Delivery Date

Start with your:

Contract to Sell / Purchase Agreement
Reservation Agreement
Payment Schedule
Official brochures, timelines, and ads

If a delivery date is stated, missing it is direct breach.

B. If Delivery Date Is Vague

Many contracts say “estimated completion” or “subject to force majeure.” Even then:

Unreasonable delay is still actionable.
Developers must prove legitimate cause and diligence.

C. Force Majeure Defense

Developers often invoke force majeure (natural disasters, war, government actions). To defeat it, show:

Delay existed before the alleged force majeure, or
The event did not actually prevent construction, or
Developer failed to take reasonable steps to mitigate.

V. Refund Options and Remedies

A. Full Refund + Interest + Damages (PD 957 / Civil Code)

Best case for developer breach. You may seek:

Return of all payments (reservation, downpayment, monthly amortizations).
Legal interest from time of demand.
Damages, such as:
- actual damages (rent you paid due to non-delivery),
- moral damages (stress with strong proof),
- exemplary damages (if fraud/abuse),
- attorney’s fees.

B. Suspension of Payments (While Claim Is Pending)

Under PD 957, buyers may stop paying installments when:

the developer fails to develop or deliver, and
you properly notify the developer.

This prevents developers from claiming you defaulted.

C. Contract Rescission (Termination for Breach)

Rescission cancels the contract due to developer’s fault and restores both parties to pre-contract status. This usually pairs with a refund demand.

VI. Step-by-Step Procedure to Get a Refund

Step 1: Gather and Organize Evidence

Make a file with:

Contracts and annexes
Official receipts / proof of payment
Demand letters you sent
Ads, brochures, screenshots of promises
Progress reports, photos of site
Any developer notices about delay
Communications (email, Viber, SMS)

Step 2: Send a Formal Written Demand

Your demand should include:

Contract details and unit identification.
Total payments and dates.
Delivery promise vs. actual non-delivery.
Legal basis (PD 957, Civil Code, Maceda if relevant).
Clear request: refund within a fixed period.
Notice that you will file a case if ignored.

Send via:

registered mail / courier with proof,
email (keep read receipts),
personal service with acknowledgment.

Step 3: Attempt Settlement / Mediation

Developers often propose:

unit substitution,
rescheduled delivery,
partial refunds,
assignment to another project.

Evaluate carefully:

take settlement only if it is written, specific, and enforceable.

Step 4: File a Complaint with DHSUD (Primary Forum)

If unresolved, file at DHSUD Regional Office where the project is located.

You may file for:

refund,
rescission,
damages,
interest,
suspension of payments.

Filing essentials:

complaint affidavit,
supporting documents,
computation of claim.

DHSUD has jurisdiction over PD 957-covered projects.

Step 5: Litigation in Regular Courts (If Needed)

Go to court when:

the dispute is beyond DHSUD scope,
large damages are involved,
developer refuses to comply with DHSUD orders,
fraud/criminal angles exist.

You may file:

Civil case for rescission and refund, plus damages.
Collection of sum of money if contract already rescinded.

Step 6: Enforce the Decision

If you win:

DHSUD decision can be executed (writ of execution).
Court judgment can be executed via sheriff.
You may garnish accounts or levy property if necessary.

VII. Special Situations

A. Developer Has No License to Sell (LTS)

Selling without LTS is a major violation. Strong consequences:

Buyer can demand full refund.
Developer may face administrative penalties and criminal liability.
Contracts without LTS are often treated as voidable or illegal.

This is one of the strongest refund grounds.

B. Developer Is in Bankruptcy / Insolvency

If the developer is under rehabilitation or liquidation:

File your claim in the rehabilitation/liquidation proceedings.
Attach the DHSUD complaint or judgment if already filed.
You become a creditor; recovery may be partial depending on assets.

C. Bank Financing Has Started (You Are Paying a Bank Loan)

If the bank has released loan proceeds but unit isn’t delivered:

You may still charge the developer with breach.
If rescission is granted, developer may be ordered to:
- reimburse you, and/or
- return loan proceeds to the bank.
Notify the bank early to avoid credit penalties.

D. “Contract to Sell” vs. “Deed of Sale”

Most preselling uses Contract to Sell (title stays with developer until full payment). Refund rights still apply if developer breaches.

E. Buyer Is Overseas (OFW/Foreign-based)

You can file through:

an authorized representative via SPA,
embassy/consulate notarization for SPA,
electronic filing/attendance if allowed by current DHSUD rules.

VIII. Common Developer Tactics and How to Respond

Blaming the buyer for stopping payments → Show you invoked PD 957 suspension due to delay.
Forcing “take it or leave it” substitutions → Substitution needs buyer consent unless contract allows and substitution is equivalent.
Offering refunds in installments without interest → Negotiate written terms; ask for interest or damages for long delays.
Invoking vague force majeure → Demand proof and timeline; challenge if delay is excessive or pre-existing.
Saying “estimated” completion is not binding → Courts and DHSUD still treat unreasonable delay as breach.

IX. Practical Tips to Maximize Recovery

Do not sign a “quitclaim” casually. Quitclaims can waive future claims unless carefully drafted.
Compute your claim clearly. List every payment, date, and receipt number.
Use suspension of payments strategically. Don’t keep paying forever while delivery is uncertain.
Act early. Delay in filing sometimes weakens urgency and leverage.
Coordinate with other buyers. Group complaints increase pressure and reduce costs.

X. Template Outline for a Demand Letter (What It Should Contain)

Date
Developer name and address
Unit details (project, block/lot/unit no.)
Contract reference and date
Payments made (attach schedule)
Promised delivery date
Actual status and evidence of non-delivery
Legal grounds
Demand for:
- rescission,
- full refund,
- interest/damages
Deadline to comply
Signature, contact details

XI. Frequently Asked Questions

1. Can I stop paying right away once delay happens?

You may suspend after giving notice and grounding it on developer delay or failure to develop/deliver. Keep proof.

2. Is reservation fee refundable?

Yes, generally refundable if:

developer breaches,
developer lacks LTS,
non-delivery occurs. If buyer cancels without breach, reservation refunds depend on contract terms, but abusive non-refund clauses can be challenged.

3. How long is “too long” a delay?

No single number fits all. Factors include:

promised date,
type of project,
reasonable construction time,
developer explanations. Delays of many months beyond promised turnover, without valid cause, are usually treated as substantial.

4. Do I need a lawyer?

Not strictly for DHSUD filing, but highly recommended for:

large claims,
complex contracts,
force majeure disputes,
court actions.

5. If I already agreed to a new turnover date, can I still claim a refund?

Maybe. If the new date was induced by pressure or repeated failures, you can argue continuing breach. Your written agreement matters—review carefully.

XII. Bottom Line

Philippine law strongly protects buyers against undelivered housing units. PD 957 and the Civil Code provide robust grounds for rescission and full refund when the developer is at fault. The Maceda Law gives fallback refund protection even when cancellation is buyer-initiated, especially after two years of payments.

Your success depends on:

documenting non-delivery and promises,
making a clear formal demand,
invoking the right legal basis, and
filing promptly with DHSUD or courts when settlement fails.

If a developer took your money without delivering the unit, the law gives you tools to get it back—often with interest and damages.