General information only; not legal advice.

1) What “equity” and “refund” usually mean in pre-selling deals

In Philippine pre-selling condo and subdivision sales, buyers often pay amounts before a bank or Pag-IBIG loan “take-out” happens. Common buckets:

Reservation fee – paid to “hold” a unit/lot; many contracts label this non-refundable.
Equity / down payment (DP) – the buyer-paid portion not covered by the future loan; often paid in monthly installments during construction.
Installments / amortizations (during equity period) – monthly payments credited to the DP/equity.
Fees and charges – documentation, processing, move-in fees, association dues, etc. (varies by developer and project stage).

A “refund” can mean:

Full return of what you paid, or
Partial return (cash surrender value) after deductions allowed by law/contract, or
No refund, but only if the situation legally qualifies and correct cancellation procedures were followed.

The key legal question is why the loan was not approved and what stage you are in, because the governing rules differ depending on whether the buyer is treated as in default or the developer is in breach.

2) Why a loan disapproval happens—and why the cause matters

Loan denial commonly results from:

A. Buyer-side reasons (often treated as buyer default)

Insufficient income, high debt-to-income ratio, weak credit history
Incomplete documents, unstable employment, age limits
Failure to find a co-borrower/guarantor
Failure to meet bank/Pag-IBIG property or borrower requirements (not due to developer)

Typical effect: Developers usually treat this as the buyer’s inability to comply with payment terms after the equity period—i.e., default, which triggers Maceda Law protections (if applicable), not an automatic full refund.

B. Developer/project-side reasons (may be developer breach)

Missing or delayed project/ownership documents needed for loan (e.g., title issues, licensing issues, incomplete permits, failure to deliver required bank documents)
Developer’s inability to “take out” the loan because the unit cannot qualify for financing due to developer non-compliance
Misrepresentation (e.g., “sure bank approval” or “guaranteed take-out”) that turns out untrue

Typical effect: Buyer may claim refund based on developer breach (often closer to full refund, and sometimes with interest/penalties depending on facts), supported by P.D. 957 and general contract principles.

C. Mixed reasons

Sometimes the denial is partly buyer profile and partly project compliance. Outcomes often depend on documentation and timelines.

3) The legal framework that governs refunds and cancellations

3.1 Civil Code + contract law basics

Contracts generally bind the parties, but cannot override mandatory protections in special laws (notably R.A. 6552 / Maceda Law and P.D. 957).
Many contracts say “reservation is non-refundable” or “equity is forfeitable.” These clauses are not automatically enforceable if they conflict with mandatory buyer-protection statutes or are applied without proper legal cancellation steps.

3.2 The Maceda Law (R.A. 6552): the core rule when the buyer defaults

When it usually applies: Residential real estate sold on installment (commonly used for house-and-lot and condos sold on installment). If your situation is treated as buyer default (including inability to secure a loan when the contract places financing responsibility on the buyer), Maceda Law is usually the starting point.

A. If you have paid less than 2 years of installments

You generally have:

A grace period: at least 60 days from the due date to pay missed installments (often described as “one-time” for this stage).
The seller can cancel only after:
1. the grace period lapses, and
2. a 30-day notarial notice of cancellation/demand for rescission is served.

Refund at <2 data-preserve-html-node="true" years: Maceda Law does not grant a guaranteed cash surrender value for buyers who have paid less than 2 years. Any refund here is mainly:

what your contract allows, or
what you can negotiate, or
what may be required if you can prove developer breach, misrepresentation, or unlawful cancellation.

Practical reality: many developers offer partial refunds (sometimes minus admin/marketing fees) as a policy gesture, but it’s not the default legal entitlement under Maceda for <2 data-preserve-html-node="true" years if it’s purely buyer default.

B. If you have paid at least 2 years of installments

You gain stronger rights:

A grace period of one month per year paid, usable to cure default (subject to Maceda’s structure).
If cancellation proceeds, you are entitled to a cash surrender value (refund) of:
- 50% of total payments made, and
- plus 5% per year after the fifth year of payments, capped at 90% of total payments.

Important:

Cancellation still requires a 30-day notarial notice.
Labels like “non-refundable equity” generally cannot defeat the statutory cash surrender value if Maceda applies.

C. What counts as “total payments made”

Maceda is buyer-protective and broadly treats payments toward the property as part of the protected amount. Developers sometimes argue certain fees are excluded. Whether something is refundable can depend on:

how the fee is characterized (purely “reservation” vs applied to price),
whether it was actually used for documented third-party costs,
contract terms versus mandatory protections.

3.3 P.D. 957: key protections for subdivision lots and condominium projects

P.D. 957 is central when the problem is linked to the developer’s compliance and buyer protection in regulated projects.

Situations where P.D. 957 principles commonly strengthen refund claims:

Developer failure to develop or deliver according to approved plans/timeframes
Failure to provide basic facilities or project obligations
Failure to provide/document requirements that prevent loan take-out (when clearly attributable to developer)
Selling without a valid License to Sell (high-risk for developers; buyers commonly pursue stronger refund remedies when this happens)

P.D. 957 also supports the buyer’s right to file complaints with the housing regulator and seek remedies for unfair practices in subdivision/condo sales.

3.4 Regulatory forum: DHSUD / HSAC (housing adjudication)

Disputes involving subdivision lots, condominiums, developers, and sales cancellations/refunds are commonly brought to the housing adjudication system (now under the DHSUD/HSAC structure). This forum typically handles:

refund claims,
contract cancellation disputes,
delivery delays and project compliance,
deceptive or unfair sales practices in housing projects.

4) What developers typically write in contracts—and how those clauses play out

Common clauses you’ll see:

“Subject to bank approval; buyer responsible for financing.” → Makes denial look like buyer risk, pushing toward Maceda default treatment.
“Non-refundable reservation fee.” → Often enforced if it’s truly just a holding fee and not credited to price, but still contestable if tied to misrepresentation or unlawful sales practices.
“If loan is denied, buyer must seek another bank / pay cash / convert to in-house financing.” → Developers use this to argue buyer must find an alternative, not demand refund.
“Equity forfeiture / cancellation fee / admin fee.” → May be limited by Maceda cash surrender value (if ≥2 years) and by required notarial cancellation procedures.
“Automatic cancellation” or cancellation without notarial notice → Vulnerable to challenge; Maceda requires specific cancellation steps.

5) The practical outcomes in real-world loan denial scenarios

Scenario 1: Buyer paid <2 data-preserve-html-node="true" years, loan denied due to buyer profile

Most common result: no guaranteed statutory refund under Maceda; developer may:

offer a partial refund (often minus admin/marketing/processing),
allow unit transfer, assignment, or re-structuring,
offer in-house financing at different terms.

Buyer leverage increases if you can show:

sales agent misrepresented “guaranteed approval,”
developer failed to provide needed documents on time,
cancellation process skipped required notices,
there are unfair/illegal practices in the sale.

Scenario 2: Buyer paid ≥2 years, loan denied due to buyer profile

Most common legal baseline: Maceda applies → you should receive cash surrender value upon valid cancellation, following notice requirements.

Scenario 3: Loan denied mainly because the developer/project cannot comply

Examples: missing compliance documents needed by banks, licensing/title issues preventing take-out, or failure to deliver required documentation within the take-out period. Likely stronger refund position: buyer can argue developer breach (P.D. 957 + contract law), often aiming for:

full or higher refund, and sometimes
interest/penalties depending on proven violations and adjudicator findings.

Scenario 4: Loan denied, but developer offers in-house financing

Developers often treat this as the “alternative performance.” If you refuse, they may classify you as in default. Key question: Was in-house financing part of the original bargain, and are the terms reasonable? If the alternative is materially worse and the buyer was induced by representations of bank financing viability, that can matter in a dispute.

6) How to assess your refund entitlement step-by-step

Step 1: Identify what you paid and how it’s labeled

Break down:

reservation fee
monthly equity installments
lumpsum DP
other charges

Step 2: Count how long you’ve been paying installments

<2 data-preserve-html-node="true" years vs ≥2 years is the Maceda pivot.

Step 3: Pin down the cause of loan denial with documents

Get the bank’s written notice/assessment if possible. Also gather:

email threads with the developer about take-out requirements,
checklists showing what documents the developer needed to provide,
proof of when documents were provided (or not provided).

Step 4: Check whether the developer followed lawful cancellation steps

If the developer is cancelling/forfeiting:

Was there a proper notarial notice?
Was the 30-day period observed?
Were Maceda grace periods honored?

Failure here can strengthen your position.

Step 5: Compute your baseline Maceda benefit (if ≥2 years)

A rough guide:

Total payments made toward the property price × 50% (minimum cash surrender value at ≥2 years),
Adjust upward only if you are beyond 5 years of payments (rare in typical pre-selling equity timelines).

7) Buyer options short of “refund or nothing”

If your goal is to avoid heavy losses, these are common pressure-release valves:

Re-application with another bank (or after improving documentation)
Add a co-borrower
Extend take-out period (sometimes with fees)
Switch to another unit with easier financing profile
Assignment/transfer of rights (subject to developer approval and transfer fees)
Restructure equity (longer DP schedule)

These options matter legally because if reasonable alternatives exist and you decline them, a developer may argue you voluntarily defaulted—though this does not erase Maceda protections if they apply.

8) Where and how disputes are typically pursued

When negotiation fails, buyers commonly proceed through:

Demand letter (document your legal basis: Maceda, improper cancellation, developer breach under P.D. 957, misrepresentation, etc.)
Housing adjudication (DHSUD/HSAC processes) for developer-buyer disputes in subdivision/condo projects
Civil courts in some cases (especially if issues fall outside the specialized housing forum or involve broader damages claims)

Evidence that tends to matter most:

payment history and official receipts
contract (Contract to Sell / Deed of Conditional Sale)
bank denial letter and reasons
developer’s take-out deadlines and provided documents
notices of cancellation (whether notarial, properly served, and timed)
advertisements, brochures, chat messages, and agent representations (if misrepresentation is alleged)

9) Developer policy “red flags” buyers should watch for

Immediate forfeiture without notarial notice
“Automatic cancellation” language used to skip statutory procedures
Blanket claim that all equity is non-refundable even when ≥2 years have been paid
Refusal to acknowledge Maceda cash surrender value
Shifting project-document responsibility to the buyer when the documents are inherently developer-controlled

10) A practical checklist for buyers requesting a refund after loan denial

Secure written proof of loan denial (and reason).
Request a written checklist from the developer: what bank documents they supplied and when.
Extract your payment ledger and total payments made.
Determine if you hit the 2-year threshold (Maceda pivot).
Check cancellation notices: notarial? served? 30-day period observed?
Put everything in writing (email + formal letter).
Frame your claim correctly:
- Buyer-default track → Maceda rights (especially if ≥2 years)
- Developer-breach track → P.D. 957 + contract remedies + misrepresentation/unfair practice theory
Avoid “verbal-only” compromises; insist on written terms for any refund schedule/deductions.

11) Key takeaways

Loan denial does not automatically mean “no refund.” The outcome depends on (a) whether you’re treated as in default or the developer is at fault, and (b) whether you’ve paid at least 2 years of installments.
If the case is buyer default and you’ve paid ≥2 years, Maceda Law generally grants a cash surrender value refund after proper cancellation steps.
If the case is developer breach (documents, licensing, deliverables, misrepresentation), buyers may pursue stronger refund remedies under P.D. 957 and general contract law.
Proper cancellation procedure (notarial notice + timing) is not optional; failures in procedure can materially improve the buyer’s position.