Pre-Selling House-and-Lot Delayed: Buyer’s Right to Cancel and Get a Refund (Philippines)

Updated for the current Philippine legal framework. This guide is practical, not a substitute for tailored legal advice.

1) Why delays happen—and why the law protects you

“Pre-selling” means a developer markets lots or units before completion. Because buyers fund construction through installment payments, Philippine law gives strong protections when developers miss timelines or violate obligations. Depending on the facts, a buyer may (a) cancel (rescind) the sale and recover money paid, and/or (b) enforce completion plus damages.

2) Core legal bases

Republic Act No. 6552 (“Maceda Law”) – rights of buyers in real estate sold on installment (house-and-lot, lot only, condominium, etc.).
Presidential Decree No. 957 (Subdivision and Condominium Buyers’ Protective Decree) – duties of developers and additional buyer remedies, especially for failure to develop as promised.
Civil Code (Art. 1191 and related provisions) – rescission of reciprocal obligations for substantial breach (e.g., undue delay in turnover), with damages.
RA 11201 and related rules – creation of DHSUD (regulator) and HSAC (Human Settlements Adjudication Commission), the forum for refund/cancellation cases against developers.
Special laws and rules – e.g., the Condominium Act (RA 4726), consumer/advertising regulations, and DHSUD/HSAC circulars.

3) When can you cancel and claim a refund?

A. Delay or failure to complete/develop (PD 957 + Civil Code)

If the developer fails to develop the project or unduly delays completion/turnover versus the approved timetable or contract, you may:

Cancel the sale and seek a refund (often with legal interest) under PD 957 and/or rescind under Civil Code Art. 1191 for substantial breach.
Alternatively, compel performance and claim damages/penalties.

Practical test: Is the delay substantial (not a trivial slippage), and attributable to the developer, not force majeure? Is the promised date (or regulatory deadline) clearly missed without valid extension?

B. Misrepresentation or material deviations

False or misleading ads/brochures, or material changes in plans (e.g., smaller floor area, downgraded finishes, missing amenities) without proper approval and disclosure can justify cancellation with refund and damages.

C. Violations of licensing requirements

Selling without a License to Sell (LTS), or other regulatory breaches, strengthens a claim for rescission and refund and exposes the developer to administrative sanctions.

4) The Maceda Law: your default safety net for installment buyers

Applies to real estate sold on installment (residential is the core use case). It grants:

4.1 Grace period for default

If you’ve paid < 2 years of installments: at least 60 days grace to pay due installments.
If you’ve paid ≥ 2 years: 1 month of grace per year of paid installments (e.g., 36 months paid = 3 months grace).
No extra interest during grace on unpaid installments.
Cancellation is not automatic. It becomes effective only 30 days after your receipt of a notarized notice of cancellation or demand and after the grace period lapses unmet.

4.2 Cash Surrender Value (CSV) refund after cancellation

If you cancel (or the developer cancels properly), you are entitled to a cash surrender value equal to:

At least 50% of total payments made (including down payments, amortizations, but typically excluding interest and penalties); plus 5% per year after the 5th year, capped at 90%.

Illustration (CSV computation):

Total paid (principal portions) = ₱1,200,000
Years paid = 7 years
Base 50% = ₱600,000
Additional 5% × (7 − 5) = 10% of ₱1,200,000 = ₱120,000
CSV = ₱720,000 (provided the 90% cap isn’t exceeded)

4.3 Reinstatement & assignment options

Before effective cancellation, you generally may reinstate by paying due amounts within your grace. You may also assign/sell your rights to another buyer or apply payments to another unit, subject to the developer’s reasonable rules.

Tip: The CSV is a floor, not a ceiling. If PD 957/Civil Code remedies justify a fuller refund plus interest/damages, you can pursue the greater recovery.

5) PD 957 remedies: when development fails

PD 957 is buyer-protective. Key points:

Failure to develop per approved plans/within required periods can justify cancellation and refund with legal interest.
Material deviations (e.g., missing roads, drainage, amenities promised in ads/plans) are actionable.
Advertising forms part of the offer; misrepresentations can ground rescission/damages.
DHSUD (regulatory) may sanction developers; HSAC (quasi-judicial) hears buyer claims for rescission, refund, interest, and damages.

6) Civil Code rescission (Art. 1191): powerful in delay cases

Even if the Maceda Law CSV seems small, a substantial breach (e.g., long delays in turnover) lets you rescind and demand:

Return of what you paid (commonly full principal paid, sometimes with interest), and
Damages (e.g., lost rental value, expenses). Courts/HSAC weigh extent of delay, causes, contract clauses, and buyer conduct (e.g., repeated demands).

7) How much refund can you realistically claim?

Scenario	Typical baseline
Minor buyer default, no developer breach	Maceda CSV after valid cancellation by notarial notice
Significant developer delay or failure to develop	Rescission with fuller refund (principal, often with legal interest), plus possible damages
Misrepresentation/material deviations	Rescission with refund + interest, possible damages/penalties
Sale without License to Sell	Strong case for rescission & refund, admin sanctions vs. developer

Interest: Legal or compensatory interest may be awarded from date of demand or from filing, depending on forum/decision.

8) Notice and cancellation mechanics (common pitfalls)

Notarial cancellation notice is mandatory for developer-initiated cancellation under the Maceda Law. Email/SMS isn’t enough.
Timing matters: Grace period first; then 30-day clock runs after notarial notice is received.
Buyer-initiated cancellation: You should issue a written demand (ideally notarized) invoking breach/delay and rescission; set a clear deadline.
Document everything: Receipts, contract, ads/brochures, promised timelines, emails, site photos, government approvals.

9) Bank-financed or “take-out” loans

If your installment was assumed by a bank (unit “taken out”), your monthly dues shift to the bank.
Your remedies vs. the developer (rescission/refund for breach, delays, defects) remain; but you must coordinate with the bank to avoid credit issues.
If rescission is granted, orders often include cancellation of the loan/mortgage and restoration to status quo between bank, buyer, and developer.

10) Fees, penalties, and deductions in refunds

Developers may attempt deductions (processing/admin fees, broker’s commissions, move-in charges). Challenge any deduction not grounded in law or contract.
Interest and penalties you paid typically don’t count toward the Maceda CSV base.
Taxes/withholding: Capital gains and VAT are developer obligations; they should not reduce your lawful refund for a rescinded pre-selling purchase.

11) Where and how to enforce your rights

Forums

HSAC (Human Settlements Adjudication Commission) – primary venue for buyer claims (rescission, refunds, interest, damages).
DHSUD – administrative complaints re licensing, advertising, project compliance (sanctions vs. developers).
Regular courts – if strategy requires judicial action, e.g., broader damages or appeals.

Evidence package (build this before filing)

Contract to Sell / Reservation Agreement / Payment schedule
Official Receipts/Statements (separate principal vs. interest/penalties)
Ads/brochures/website screenshots; LTS number and permit copies
Promised turnover date and actual progress (photos, inspection reports)
Demand letters (with proof of delivery) and developer replies
Any bank loan documents if taken out

Basic case flow (HSAC)

Demand (final demand to complete/turn over or refund).
Filing (Verified complaint with attachments; pay fees).
Mediation (often required).
Position papers/evidence; possible hearings.
Decision (rescission/refund/interest/damages as warranted).
Execution if developer does not comply.

12) Timelines and prescription

Written contracts: Actions generally within 10 years from breach (Civil Code).
Quasi-delict/misrepresentation: Usually 4 years from discovery.
Administrative rules may fix specific periods—file sooner rather than later, especially when delays compound losses.

13) Practical strategies (what works)

Start on paper: Send a clear, notarized demand invoking specific laws (PD 957, Art. 1191, Maceda) and specific breaches (missed turnover date, missing amenities).
Choose your remedy early: If delay is severe, seek rescission and full refund with interest; keep Maceda CSV as fallback.
Compute two ways: (1) Full rescission (principal + interest + damages), and (2) Maceda CSV—so you can negotiate from strength.
Don’t waive rights lightly: Beware of “restructuring” offers that require you to waive claims without real consideration.
Coordinate with your bank (if any) before you stop payments.
Act collectively when possible—groups of buyers increase leverage.

14) Worked examples

Example 1 – Severe delay; buyer seeks rescission

Contract promised turnover: 30 June 2023. As of 01 October 2025, site is incomplete; key amenities missing.
Buyer paid ₱1.8M principal over 5.5 years; interest/penalties excluded from base.
Remedy: File with HSAC for rescission under Art. 1191/PD 957, demand ₱1.8M + legal interest (e.g., from date of demand) + damages (rent, transport, etc.).
Fallback: Maceda CSV = 50% base (≥2 years) + 5% per year after year 5, capped at 90%.

Example 2 – Buyer defaults but developer also delayed

Buyer missed 2 months; developer threatened cancellation without notarial notice while project is months late.
Points: (i) Cancellation ineffective without notarial notice + grace rules; (ii) Developer’s substantial delay gives buyer rescission leverage and refund claim.
Action: Demand completion or rescission/refund; if developer insists on canceling, insist on proper notice and CSV at minimum.

15) Special situations

Force majeure (e.g., disasters): Temporary relief may apply, but developers must prove the event and mitigate delays; long, unexplained holdups still justify rescission.
Change of unit or specs: You can refuse material downgrades; insist on contract specs or rescind.
Defects after turnover: You may pursue warranty claims (Civil Code; building code/structural warranties) or rescind for grave breach.
OFW buyers: Keep an attorney-in-fact with SPA for filing/signing; insist on official e-copies and notarizations suited for use abroad (apostille as needed).

16) Template: Buyer demand for rescission and refund

Subject: Final Demand – Rescission and Refund (House-and-Lot, [Project/Phase/Block-Lot]) To: [Developer Name & Address] Date: [__________]

I purchased [Project/Unit details, CTS No.] on [date], paying ₱[total principal paid]. The contract and your advertisements committed to [turnover date/specs/amenities]. As of today, you have failed to [complete/turn over/comply with specs], constituting substantial breach under Art. 1191, Civil Code and violations of PD 957.

Pursuant to Art. 1191 and PD 957, I hereby rescind the sale and demand refund of all amounts paid (principal) with legal interest, plus damages for losses incurred. This is without prejudice to administrative and adjudicatory remedies before DHSUD/HSAC.

Kindly remit ₱[amount] within [10] calendar days from receipt of this notarized letter. Failing which, I will file the appropriate HSAC complaint and seek full reliefs, including costs and attorney’s fees.

Sincerely, [Name, Address, Contact] (with proof of identity and attachments)

(If you elect cancellation under the Maceda Law instead, adapt the letter to demand the cash surrender value and cite the grace-period/notice rules.)

17) Quick FAQ

Q: Does the Maceda Law apply to cash sales? A: No. It protects installment buyers. Cash buyers rely on PD 957 and Civil Code remedies.

Q: Can a developer keep my payments if I defaulted? A: Not automatically. Proper notarial notice and grace rules apply. You’re typically entitled to CSV at least, and possibly more if the developer breached.

Q: I used bank financing. Can I still cancel? A: Yes, if there’s substantial breach. The adjudicator can order rescission, refund, and loan/mortgage cancellation in coordination with the bank.

Q: Can I get interest on my refund? A: Often yes—legal interest from demand or filing, subject to the decision.

18) Action checklist (start here)

Gather your contract, receipts, ads, promised timeline.
Take dated photos of the site; secure LTS and approved plans if available.
Send a notarized demand (rescission/refund or completion with deadline).
Prepare a dual computation: (a) full rescission recovery; (b) Maceda CSV fallback.
File with HSAC if the developer does not cure promptly; consider also a DHSUD complaint for sanctions.

If you want, I can tailor a refund computation to your exact payments and draft a demand letter with your project details—just share the figures and key dates.