I. The Issue in Plain Terms

In the Philippines, many residential lots, condominium units, and house-and-lot packages are marketed while still under development. The law allows pre-selling—but only under strict conditions. One of the most important is that the developer must have a License to Sell (LTS) for the specific project (and, as applicable, for each phase/section) before offering units to the public.

When a project is being sold without an LTS, buyers commonly ask:

Is the sale legal?
Can the buyer stop paying?
Is the buyer entitled to a full refund of the downpayment and other amounts paid?
What forum handles the claim, and what evidence is needed?

This article explains the governing rules and the practical pathway to refunds.

II. What a “License to Sell” Is, and Why It Matters

A. What the LTS is

An LTS is the government authorization issued to a developer/owner to offer and sell subdivision lots or condominium units to the public. It is project-specific and typically follows the issuance of other approvals such as the registration of the project with the regulator.

B. Why it is legally crucial

The LTS requirement is a buyer-protection mechanism. The policy is to prevent “fly-by-night” projects and to ensure the project has met minimum compliance standards before money is collected from the public.

In practice, selling without an LTS is not a harmless technicality. It is treated as a serious regulatory violation and is commonly framed as an unlawful act that can support rescission/cancellation and refund remedies.

III. The Primary Laws and Agencies Involved

A. PD 957 (Subdivision and Condominium Buyers’ Protective Decree)

This is the foundational buyer-protection law for subdivisions and condominiums. Among its core buyer safeguards is the rule that developers must secure an LTS before selling.

B. Condominium Act (RA 4726)

This law provides the general framework for condominiums, but buyer protection in pre-selling and licensing is largely enforced through the regulatory system and PD 957 protections for buyers.

C. Maceda Law (RA 6552) – when it matters and when it doesn’t

The Maceda Law applies to installment purchases of real estate (commonly lots and sometimes house-and-lot under certain structures), and it grants:

Grace periods, and
Cash surrender value (partial refund) after a certain number of years of installment payments.

However, when the core problem is sale without an LTS, the buyer’s strongest theory is often not the Maceda Law’s partial-refund formula, but rather refund due to unlawful selling / regulatory violation and related equitable remedies. Still, Maceda concepts may come up if the developer tries to characterize the case as a mere “default” by the buyer. The key is: lack of LTS shifts the narrative from buyer default to developer illegality/noncompliance.

D. Regulators and forum

Historically and currently in modern practice, complaints by subdivision/condominium buyers relating to these protections are handled by the government housing regulator (now generally under the housing regulatory framework). The specialized forum typically has authority to order:

Refunds,
Interest/penalties (depending on circumstances),
Damages and attorney’s fees (when justified),
Administrative sanctions against developers.

IV. What “Lacks a License to Sell” Can Mean (Important Distinctions)

Buyers should be clear about the specific deficiency because developers often argue “we have a license” when the reality is narrower.

Common scenarios:

No LTS at all for the project at the time of offer/sale.
LTS exists but was issued only later (after reservations/downpayments were collected).
LTS exists for a different phase or different project name, but not for the unit/lot being sold.
LTS expired, suspended, or revoked, yet sales continued.
Marketing by an agent/broker for a project that has no LTS.

For refund claims, any of these can be material, but (1), (2), (3), and (4) are especially strong.

V. Legal Consequences of Selling Without an LTS

A. Regulatory violation with administrative and civil consequences

Selling without an LTS can trigger:

Administrative sanctions (fines, suspension, cease-and-desist orders),
Project enforcement actions,
Buyer remedies such as cancellation/rescission and refund.

B. Effect on the buyer’s obligation to continue paying

A buyer who discovers that the project had no LTS at the time of sale commonly invokes that the developer had no legal authority to sell, supporting the buyer’s right to stop paying and demand the return of payments.

In disputes, the buyer’s position is strongest when framed as:

The buyer is not defaulting;
The buyer is electing to rescind/cancel due to the seller’s unlawful act and noncompliance.

C. Refund of downpayment and other payments

The usual remedy sought is a refund of all amounts paid (reservation fee, downpayment, amortizations), often with:

Legal interest from demand or from filing (depending on the forum’s approach),
Possible damages and attorney’s fees if bad faith or oppressive conduct is shown.

Whether the refund is full or partial may depend on:

Proof of lack of LTS at the relevant time,
The nature of the contract and the payments,
The buyer’s actions and timing,
Whether the buyer received any benefit (e.g., possession) and whether restitution issues arise,
Whether the developer later obtained an LTS and what the forum considers equitable (though later compliance often does not erase earlier unlawful selling).

VI. Full Refund vs. Maceda-Style Partial Refund: How to Think About It

Developers often try to reframe the dispute as:

“Buyer stopped paying—therefore buyer is in default—therefore only Maceda cash surrender value applies (or forfeiture under the contract).”

A buyer asserting lack of LTS typically responds:

This is not a default case; it is a regulatory noncompliance / illegal sale case.
A seller should not benefit from forfeiture clauses when the seller had no authority to sell.
Buyer payments were induced through an unlawful offer/sale; equity supports return of what was paid.

In many real disputes, the outcome turns on whether the forum treats the lack of LTS as:

A defect serious enough to justify rescission and restitution (full refund), versus
A compliance issue that can be “cured” later, leaving the buyer to Maceda mechanics.

Practically, buyers strengthen full-refund claims by showing:

The absence of LTS at the time money was collected, and
That the buyer demanded compliance and/or refund, and
That the project’s regulatory deficiency was not trivial (e.g., no registration/LTS, suspended/revoked license, or misrepresentation).

VII. Reservation Fees, “Non-Refundable” Clauses, and Forfeiture Provisions

A. Reservation fee is usually treated as part of payments

Even when labeled “reservation,” if it functions as part of the price and was collected in connection with an offer/sale lacking LTS, it can be included in the refund demand.

B. “Non-refundable” stipulations are not absolute

Contracts frequently state:

“Reservation is non-refundable,” or
“Downpayment is forfeited upon cancellation.”

In buyer-protection disputes, especially involving unlawful selling, such clauses may be attacked as:

Contrary to law and public policy, and/or
Unconscionable, and/or
Ineffective because the seller’s noncompliance is the proximate cause of cancellation.

C. Liquidated damages clauses

Developers sometimes impose large “processing fees,” “administrative fees,” or “liquidated damages” to reduce refunds. A buyer can contest these as improper where:

The seller’s lack of LTS is the root problem, and
The fees are punitive or not tied to actual loss.

VIII. Evidence: What Buyers Should Gather

A refund claim becomes much easier when supported by clean documentation. Typical key evidence:

Contract documents
- Reservation agreement, contract to sell, deed of sale, disclosure statements, brochures with project name/phase.
Proof of payments
- Official receipts, acknowledgment receipts, bank deposit slips, remittance records.
Marketing materials and representations
- Ads, social media posts, emails, messages showing the offer and dates.
Proof of lack of LTS
- Written confirmation/record from the regulator regarding LTS status (no license, late issuance, wrong phase, etc.).
Demand letter
- Written demand for refund citing lack of LTS, with proof of receipt.
Project identification
- Exact project name, location, phase, block/lot or unit number; mismatches are common defenses.

IX. Procedure and Strategy (Typical Path)

Step 1: Verify LTS status

Buyers should confirm whether the project and the specific phase/unit was covered by an LTS at the time of offer/sale and payment collection.

Step 2: Send a written demand

A demand letter should:

Identify the project/unit and contract,
State the factual basis: sale/offering without LTS (or wrong phase/late issuance/suspension),
Demand refund of all payments within a fixed period,
Request a written response and computation.

Step 3: File a complaint in the proper housing forum

If the developer refuses or ignores demand, the buyer typically files a complaint seeking:

Rescission/cancellation,
Full refund of payments,
Interest,
Damages/attorney’s fees (when warranted),
Administrative sanctions (where applicable).

Step 4: Anticipate common defenses

Developers commonly argue:

“We have an LTS now” (buyer responds: unlawful at time of sale; later issuance doesn’t erase earlier violation),
“Buyer is in default” (buyer responds: cancellation due to seller noncompliance),
“Reservation is non-refundable” (buyer responds: contrary to law/public policy given illegal sale),
“Agent acted alone” (buyer responds: developer benefited; agency/ratification; project marketing is attributable).

X. Special Situations

A. The developer later obtains an LTS

This is one of the most litigated practical scenarios. Buyers generally argue:

The critical moment is when the property was offered/sold and payments were collected.
A license obtained later does not legitimize earlier collections.

Developers argue:

The defect was cured; buyer should proceed.

The resolution can depend on:

Whether there were misrepresentations,
The length of time without an LTS,
Whether the buyer would have purchased had the truth been known,
The forum’s view of public policy and equity.

B. Project is “for assignment” or buyer is not the first buyer

Assignments complicate, but do not automatically defeat, a refund theory. The crucial inquiry remains:

Was there an unlawful sale/offering without LTS in the chain of transactions relevant to the buyer’s payments and rights?
What did the assignee actually pay, to whom, and under what documents?

C. Buyer already took possession

If the buyer has enjoyed use/possession, the developer may argue set-off for reasonable value of use. Outcomes vary depending on:

Whether possession was legally transferred,
The period and value of use,
Whether the buyer paid association dues/taxes,
The equities and the forum’s restitution approach.

D. Bank financing stage vs. pre-selling stage

Many disputes occur before bank takeout. If the sale was unlawful at pre-selling, that issue does not disappear just because financing was contemplated. But the paper trail becomes more complex.

XI. Remedies Beyond Refund

Depending on facts, buyers may seek:

Interest Often claimed from the time of demand or filing.
Moral and exemplary damages Typically require proof of bad faith, fraud, or oppressive conduct.
Attorney’s fees and litigation expenses Often tied to bad faith or when the buyer is compelled to litigate.
Administrative sanctions against the developer Including fines and directives to comply, which can pressure settlement and protect other buyers.

XII. Practical Red Flags and Buyer Self-Protection

Before paying significant sums, buyers should be wary of:

“We’re still processing the LTS” but collecting full downpayments,
“The LTS is for another phase; yours will follow” (high risk),
Refusal to provide LTS number or project registration details,
Receipts not issued or issued under a different entity/project name,
Contracts with heavy forfeiture clauses paired with vague project approvals.

Buyers can protect themselves by insisting on:

LTS number and coverage (project/phase),
Written disclosures and complete contract documents,
Official receipts and traceable payment methods,
A clear description of the exact unit/lot and project phase.

XIII. Key Takeaways

A License to Sell is a gatekeeping legal requirement for offering and selling subdivision lots and condominium units to the public.
Selling without an LTS is a serious violation that can support cancellation/rescission and refund claims.
Developers often try to reframe the dispute as buyer default (Maceda Law / forfeiture), but lack of LTS shifts the case toward seller noncompliance and buyer restitution.
Documentation and timing matter: the strongest cases show the project lacked the required license when the buyer was induced to pay.
The usual remedy pursued is refund of all payments, often with interest, and possibly damages and attorney’s fees where bad faith is proven.