Obtaining a Contract to Sell in Philippine Real-Estate Deals
1. What exactly is a “Contract to Sell”?
A Contract to Sell (CTS) is a bilateral promise in which the seller undertakes to convey ownership of specified real property to the buyer once a future condition—usually full payment—is met. Until that moment, no real right of ownership passes; the buyer only acquires a personal right to demand execution of a final Deed of Absolute Sale (DOAS). The Supreme Court repeatedly characterises it as a preparatory, executory agreement distinct from a perfected sale (e.g., Heirs of Lazo v. Lazo, Coronel v. CA) (RESPICIO & CO.).
Key attributes
| Feature |
Contract to Sell |
Contract of Sale |
| Transfer of ownership |
Deferred—only upon condition’s fulfilment |
Immediate upon delivery |
| Seller’s remedies on buyer’s default |
May cancel CTS (subject to Maceda/PD 957) without court action |
Must sue to rescind or foreclose |
| Instrument subject to DST/CGT |
No—taxes arise at DOAS stage |
Yes, upon signing/delivery |
2. Statutory & Jurisprudential Backbone
| Source |
Relevance |
| Civil Code arts. 1458–1500 |
General rules on sales; CTS evolved jurisprudentially from these provisions (Legal Resource Library) |
| Maceda Law (RA 6552) |
Mandatory notice, grace periods & refund formulas before a seller may cancel a CTS covering residential realty sold on instalment (Human Settlements and Urban Dev.) |
| PD 957 & RA 4726 |
Extra buyer-protections for subdivision & condominium projects (e.g., CTS form, HLURB/DHSUD registration) |
| PD 1529, §70 |
Allows the buyer to annotate an adverse claim on the certificate of title to publicise the CTS and protect against double sale (RESPICIO & CO.) |
| Recent SC ruling (2023) |
Cancellation under Maceda Law is invalid without a notarised notice of cancellation/refund served on the buyer (Supreme Court of the Philippines) |
3. Why use a CTS?
- Installment schemes & pre-selling – developers retain title while buyers pay over 2-10 years.
- Financing bridge – banks often require a CTS as collateral before release of housing loan proceeds.
- Tax deferral – Documentary-Stamp Tax (DST) and Capital-Gains/Withholding occur only when the DOAS is signed, easing cash flow.
- Risk management – seller keeps the Torrens title, allowing quicker recovery if buyer defaults, subject to statutory safeguards.
4. Essential Clauses (minimum checklist)
| Clause |
Practical tips |
| Accurate property description |
Quote TCT/OCT number, lot & block, floor or unit data. |
| Purchase price & schedule |
Spell out down-payment, instalment tenor, interest (if any), deadlines, mode (PDCs, auto-debit). |
| Condition precedent |
Most common: full payment; others: loan take-out, completion of condominium unit. |
| Default & grace-period language |
Align with Maceda Law (60-day grace if < 2 yrs paid; 1 mo per yr paid if ≥ 2 yrs). |
| Taxes & closing costs |
State that CGT/DST/transfer tax will be borne by _____ after DOAS; VAT allocations, if applicable. |
| Notarisation & registration |
Contract need not be notarised for validity, but notarisation converts it to a public instrument—prerequisite for RD annotation & evidentiary weight. |
| Dispute-resolution & venue |
Arbitration or exclusive courts; venue often where property is situated. |
5. Step-by-Step: Obtaining & Perfecting a CTS
| Stage |
Action |
Who leads? |
| 1 Due diligence |
a. Verify TCT/OCT via Registry of Deeds; b. check liens, adverse claims, Sec. 4.11 DHSUD license for developers; c. inspect property & zoning. |
Buyer (often via lawyer/broker) |
| 2 Reservation/Earnest-money |
Pay small fee (₱10-50k) to lock the unit; not earnest money yet because no sale perfected. |
|
| 3 Drafting & negotiation |
Use developer’s template or lawyer-drafted form; negotiate payment schedule, interest, penalty rates. |
Seller/developer |
| 4 Signing & notarisation |
Execute multiple originals; pay notarial fees (~₱500–₱1,500). |
Both parties |
| 5 Annotation (optional but wise) |
Buyer files sworn Adverse Claim under PD 1529 §70 (effective 30 days unless suit filed) or asks seller to annotate CTS itself. |
Buyer |
| 6 Compliance period |
Buyer pays instalments; seller issues official receipts (BIR-registered). |
Buyer / Seller |
| 7 Final conveyance |
Upon full payment/ loan take-out, parties execute DOAS; pay CGT 6 %, DST 1.5 %, transfer tax & registration fees. |
Both parties |
6. Taxes & Fees Snapshot
| Trigger |
Tax/Fee |
Rate / Basis |
When Due |
| CTS signing |
Notarial fee; no DST/CGT (BIR Rulings OT-061-2024 & earlier) (Bir.gov.ph) |
Nominal |
Signing |
| DOAS execution |
DST |
₱15/₱1,000 (≈1.5 %) of higher FMV or price |
Within 5 days from notarisation |
| - - |
CGT / Withholding |
6 % on gross selling price or zonal value |
30 days from signing |
| - - |
Local transfer tax |
0.5 %-0.75 % (LGU dependent) |
Registration |
| Annotation of CTS |
RD entry fee |
≈ ₱50–₱250 per page |
Filing |
Tip: Sellers of capital property may instead be liable to Creditable Withholding Tax if corporate. Always confirm the current BIR issuance.
7. Statutory Protections for Buyers
| Law |
Core rights |
| Maceda Law |
Grace period, cash-surrender refund (50 % of payments, +5 %/yr beyond 5 yrs), notarised 30-day cancellation notice (Human Settlements and Urban Dev., Supreme Court of the Philippines) |
| PD 957 (Subdivision/Condo buyers) |
Right to a license to sell, project registration, refund if project incomplete, mortgage clearance before CTS signing; CTS forms are subject to DHSUD review. |
| Consumer Act & DTI rules |
Prohibit false representations in preselling brochures. |
8. Remedies & Risks
If the buyer defaults
If the seller reneges or double-sells
- Buyer may file an action for specific performance (to compel execution of the DOAS) only after the suspensive condition is fulfilled; before that, remedy is damages under Art. 1170 Civil Code.
- Annotation of an adverse claim blocks innocent third-party purchasers for 30 days; beyond that period, buyer should file a suit to maintain protection (RESPICIO & CO.).
9. Practical Pointers
- Always match the CTS schedule with bank-loan timelines to avoid technical default.
- Keep every Official Receipt—they prove payments for Maceda Law refunds.
- Audit the developer’s DHSUD license and project completion bond.
- Insert a clause requiring the seller to deliver a certified true copy of the TCT/OCT free of liens before DOAS.
- For OFW buyers, execute a Consular-acknowledged Special Power of Attorney naming a local attorney-in-fact to sign the CTS and receive notices.
10. Template sources & drafting etiquette
Developers usually supply pre-approved CTS forms; independent sellers may adapt publicly available templates (e.g., samples on legal portals) but always have a lawyer vet the draft to align with current BIR, DHSUD and LGU rules (Scribd).
11. Common Pitfalls
| Pitfall |
Consequence |
Fix |
| Paying huge “reservation fees” without a signed CTS |
No enforceable obligation; risk of forfeiture |
Insist on simultaneous CTS signing |
| Failing to notarise |
CTS remains valid but cannot be annotated; weaker evidence |
Notarise immediately after signing |
| Ignoring Maceda timelines |
Invalid cancellation; exposes seller to suits |
Calendar grace periods & refund dates |
| Not monitoring developer mortgages |
Bank may foreclose despite buyer payments |
Demand mortgage release & annotation clearance |
12. Quick Compliance Checklist (one-pager)
- ☐ Verified clean title (RD CTC)
- ☐ Authority to Sell / SPA (if broker/agent involved) (PropertyMart)
- ☐ Reservation agreement & official receipt
- ☐ CTS signed, notarised, buyer given original
- ☐ Payment schedule aligns with loan or cash flow
- ☐ CTS or adverse claim annotated (if feasible)
- ☐ Receipts/BIR-registered invoices for every payment
- ☐ Maceda Law notice calendarised
- ☐ DOAS & tax computation template ready
Conclusion
A Contract to Sell is more than a stepping-stone; it is the legal scaffold that balances the seller’s interest in holding title with the buyer’s expectation of eventual ownership. Mastery of its statutory ground rules (Civil Code, Maceda Law, PD 957, PD 1529) and practical execution—from due diligence to annotation and tax timing—prevents costly missteps and positions both parties for a seamless transfer when the suspensive conditions are finally met.