Refund Claims for Purchases of Subdivision Lots Without a License to Sell
Philippine legal framework, remedies, procedure, and recent practice
Key takeaway – If a developer sells a subdivision lot before securing a License to Sell (LTS) from the Department of Human Settlements and Urban Development (DHSUD, formerly HLURB), the buyer may rescind the contract and demand a full refund of all payments with interest, plus damages, through an action before the Human Settlements Adjudication Commission (HSAC) or the regular courts.
1. Regulatory background
| Instrument | Core rule | Notes |
|---|---|---|
| Presidential Decree No. 957 (Subdivision and Condominium Buyers’ Protective Decree, 1976) | § 5 – No owner or developer may sell lots/units “without a License to Sell issued by the [HLURB].” § 23 – Buyer may stop payment or demand refund if developer violates the decree. |
PD 957 is special legislation; its provisions supersede the Civil Code on matters of subdivision/condominium sales. |
| RA 11201 (2019) | Created DHSUD and the HSAC (quasi-judicial body that inherited HLURB adjudicatory powers). | HSAC decisions may be appealed to the Court of Appeals under Rule 43. |
| RA 6552 (Maceda Law, 1972) | General protection for buyers of real estate on installment. Lets qualified buyers retain the right to a cash surrender value equivalent to 50 % – 90 % of payments made. | Applies to all real-estate installment sales, but PD 957 supplies stricter remedies where a subdivision lot or condo unit is involved. |
| Civil Code of the Philippines | Arts. 1390–1391 (voidable contracts), 1191 (rescission), 1398 (effects of voidable contracts). | Invoked subsidiarily when PD 957 is silent. |
2. Why a License to Sell matters
Consumer protection The LTS is issued only after DHSUD verifies:
- Developer’s ownership/rights over the land;
- Approved subdivision plan and compliance with minimum development standards;
- Adequate financial capacity to finish the project.
Public policy Selling without an LTS is a public offense. Section 38 of PD 957 prescribes a fine of up to ₱ 20,000 and/or imprisonment of up to 10 years for each transaction, plus administrative sanctions (project suspension, blacklisting).
3. Buyer’s substantive remedies
| Remedy | Statutory basis | Effect |
|---|---|---|
| Rescission + full refund | PD 957 § 23; Art. 1191 Civil Code | Buyer recovers 100 % of all payments plus legal interest (currently 6 % p.a. from date of extrajudicial demand). Contract is extinguished; developer regains the lot. |
| Stop-payment until compliance | PD 957 § 23 | Buyer keeps the contract alive but need not pay until an LTS (and often a development permit) is produced. |
| Damages & fees | Art. 1170, Art. 2208 Civil Code; PD 957 § 38 | Moral/exemplary damages for bad faith, attorney’s fees, litigation expenses. |
| Criminal prosecution | PD 957 § 38 | Independent of civil action; instituted by the prosecutor’s office. |
Is the sale void or voidable? Jurisprudence (e.g., Dionisio v. CA, G.R. No. 116138, 28 Jan 1998) treats the sale as voidable—valid until annulled—because the defect affects public regulation rather than the object or cause of the contract itself.
4. Where and how to file a refund claim
| Forum | Why choose it | Typical timeline* |
|---|---|---|
| HSAC Regional Adjudication Branch (formerly HLURB Field Office) | Primary jurisdiction over PD 957 disputes: refund, specific performance, permits, subdivision/condo issues. | 30 days: pleadings & mediation → 60–90 days: trial & decision → immediate writ of execution once decision becomes final. |
| Regular Trial Court | When land is agricultural or the case involves non-PD 957 issues (e.g., reformation, title disputes). | Longer; ordinary civil procedure applies. |
| Small Claims Court | If total claim ≤ ₱ 600,000 and buyer opts for small-claims procedure (A.M. 08-8-7-SC). | Summary disposition (30 days). |
* Timelines are aspirational under the 2021 HSAC Rules of Procedure; congestion or appeals can extend them.
Procedural checklist (HSAC)
- Demand letter – State violation (sale w/o LTS), demand refund w/ interest, give developer 15 days to comply.
- Verified Complaint (w/ Certificate of Non-Forum Shopping) – Attach: contract to sell/Deed of Sale, official receipts, demand letter, proof of no LTS (DHSUD certification or print-out).
- Filing fees – ₱ 1,000 + 2 % of monetary claim in excess of ₱ 100,000 (per 2024 HSAC Schedule).
- Mediation (mandatory) – 10-day period; if settlement fails, case proceeds to adjudication.
- Decision & execution – HSAC may order refund within 30 days and issue a writ of execution motu proprio.
- Appeal – Aggrieved party may file a Petition for Review with the CA (Rule 43) within 15 days.
5. Interest, penalties, and damages
| Item | How computed | Authority |
|---|---|---|
| Legal interest | 6 % per annum from date of extrajudicial demand until full payment (per Nacar v. Gallery Frames, G.R. No. 189871, 13 Aug 2013). | Supreme Court circulars & Art. 2209 Civil Code. |
| Moral damages | Discretionary; usually ₱ 20,000 – ₱ 100,000 where buyer shows anxiety, inconvenience, or deceptive marketing. | Art. 2219(10) Civil Code. |
| Exemplary damages | Granted when developer’s conduct is wantonly reckless or deliberately evasive. | Art. 2229 Civil Code. |
| Attorney’s fees | Often 10 % of the award or proven actual outlay. | Art. 2208(1)(11) Civil Code. |
6. Selected jurisprudence
| Case | G.R. No. / Decision Date | Ratio / Take-away |
|---|---|---|
| Dionisio v. Court of Appeals | 116138 / 28 Jan 1998 | HLURB (now HSAC) has exclusive jurisdiction over disputes arising from PD 957 even if the relief prayed for is recovery of possession or annulment. |
| Fil-Estate Properties, Inc. v. Go | 131283 / 21 Feb 2005 | Buyer entitled to 100 % refund + interest when developer failed to secure an LTS and a development permit. |
| Pascual v. Woodridge Estates, Inc. | 178889 / 27 Aug 2009 | HLURB may award damages and attorney’s fees; its quasi-judicial power is co-extensive with regular courts regarding subdivision-sales disputes. |
| Spouses Almira vs. Apec Homes, Inc. | HSAC RB-IV-23-001 (25 Mar 2024) | First HSAC regional decision applying PD 957 after RA 11201: refund ordered; HSAC clarified that its writs of execution can be enforced by sheriffs nationwide. |
7. Practical guidance for buyers
- Verify the LTS – Visit e-LTS Verification on the DHSUD website or request a certification from the Records Division.
- Keep every receipt – Installment payments, reservation fees, correspondence.
- Send a formal demand early – Interest runs only from demand; silence may be construed as waiver.
- Prepare for mediation – HSAC’s 2023 Mediation Rules require parties to bring settlement authority; many disputes are resolved here.
- Watch the statute of limitations – Action for rescission is subject to the 4-year prescriptive period for voidable contracts (Art. 1391 Civil Code), counted from discovery of the fraud or defect (i.e., when buyer learns there is no LTS).
- Separate criminal action – If you want the developer jailed, file a case with the city/provincial prosecutor; conviction strengthens the civil claim but is not essential to the refund suit.
8. Developer defenses and how to counter them
| Defense raised | Typical buyer response |
|---|---|
| “We already applied for an LTS.” | PD 957 demands an issued license; application is insufficient. Present DHSUD certification that no LTS exists. |
| “Buyer waived the right to rescind.” | Waivers of PD 957 rights are void as they contravene public policy (see Fil-Estate). |
| “We offered a replacement lot.” | Buyer may accept or reject; rejection still entitles buyer to refund under § 23. |
| “Action is barred by prescription.” | Four-year period runs only upon discovery of the absence of LTS, not from contract date. Produce evidence of recent discovery (DHSUD certification date, inquiry emails). |
9. Comparison with Maceda Law refunds
| Aspect | PD 957 (no LTS) | RA 6552 (Maceda Law) |
|---|---|---|
| Coverage | Subdivision or condo sale, any length of payment, focus on regulatory violation. | All realty sales on installments ≥ 2 years. |
| Amount refundable | 100 % of payments + interest. | 50 % – 90 % of payments, no interest. |
| Trigger | Developer’s fault (no LTS, other PD 957 breaches). | Buyer’s default in payments. |
| Forum | HSAC primary jurisdiction. | Regular courts / HSAC (if subdivision). |
10. Current enforcement landscape (2024–2025)
- Active compliance drive – DHSUD Memorandum Circular 2024-002 requires regional offices to conduct semi-annual project audits; 147 projects issued show-cause orders in 2024 for selling without LTS.
- Faster adjudication – HSAC’s 2023 Rules cap total hearing time at 60 days and allow electronic filing outside NCR.
- Digital verification – Since April 2024, buyers can scan a QR code on ads to pull LTS data in real time. Absence of a QR code is now prima facie evidence of non-compliance.
- Higher penalties – Proposed Senate Bill No. 2604 (passed on third reading, May 2025) raises fines to ₱ 2 million per violation and authorizes HSAC to order escrow deposits for ongoing projects.
Conclusion
In Philippine real-estate law, selling a subdivision lot without a License to Sell is a serious regulatory breach that empowers the buyer to walk away and recover every centavo paid, with interest, damages, and even criminal sanctions against the developer. The mechanism is straightforward—issue a demand, file with HSAC, mediate, and obtain a decision—but documentation and timing are crucial. Buyers who act promptly, preserve evidence, and leverage the specialized HSAC forum typically secure a refund in under a year, plus ancillary awards. Developers, on the other hand, face escalating penalties and should prioritize LTS compliance before any marketing effort.
This article provides general information and is not a substitute for specific legal advice. For personalized guidance, consult a Philippine real-estate lawyer or accredited DHSUD practitioner.