In the Philippines, the real estate industry is strictly regulated to protect the interests of home buyers and investors. Buying property is often the most significant financial decision an individual makes; however, the presence of unlicensed developers and unregistered projects poses a grave risk to the public. Under Philippine law, specifically Presidential Decree No. 957 (The Subdivision and Condominium Buyers' Protective Decree) and Republic Act No. 11201, operating without the necessary government oversight is a punishable offense.

The Regulatory Authority: DHSUD

The Department of Human Settlements and Urban Development (DHSUD), which took over the functions of the Housing and Land Use Regulatory Board (HLURB), is the primary government agency responsible for monitoring and regulating real estate developers.

No developer can legally sell any subdivision lot or condominium unit unless they have obtained two critical documents from the DHSUD:

Certificate of Registration: Proof that the developer and the project are officially recognized by the state.
License to Sell (LTS): The specific authorization required before any marketing, advertising, or collection of payments can take place.

Red Flags of Unlicensed Activity

Identifying an illegal project early can prevent significant financial loss. Common indicators of unregistered activity include:

Absence of a License to Sell: If the developer cannot produce an LTS or if the LTS number is not displayed on promotional materials.
"Pre-selling" without permits: Offering units for sale before the ground has been broken or before any government approvals are visible.
Generic or Vague Contracts: Using informal "Reservation Agreements" that do not mention DHSUD standards.
Unusually Low Prices: Prices that are significantly below market value often indicate a lack of compliance with infrastructure and safety standards.

How to Report Violations

If a developer is found to be selling without a License to Sell or if the project is not registered, any concerned citizen or aggrieved buyer can take the following legal steps:

1. Verification of Status

Before filing a formal report, verify the status of the developer and the project through the DHSUD website or by visiting the DHSUD Regional Office having jurisdiction over the area where the project is located.

2. Filing a Formal Complaint

A verified complaint may be filed with the DHSUD. The process generally involves:

Affidavit of Complaint: A sworn statement detailing the transaction, the developer’s name, the project location, and the specific violations (e.g., selling without an LTS).
Evidence: Attach copies of flyers, brochures, official receipts, or any advertisement used by the developer.

3. Administrative Sanctions and Cease and Desist Orders (CDO)

Upon receipt of a report, the DHSUD has the authority to:

Issue a Cease and Desist Order (CDO) to stop further selling and construction.
Impose Administrative Fines (ranging from PHP 10,000 to PHP 50,000 per violation/unit).
Suspend or Revoke the developer's Certificate of Registration.

Criminal Liability and Penalties

Under Section 39 of P.D. 957, any person who violates the decree or its implementing rules and regulations may face criminal prosecution.

Imprisonment: Not more than ten (10) years.
Criminal Fines: Not more than twenty thousand pesos (PHP 20,000).
Liability of Corporate Officers: If the violation is committed by a corporation, the president, manager, or the person in charge of the administration of the business shall be held criminally liable.

Legal Remedies for Buyers

For those who have already entered into a contract with an unlicensed developer, the law provides specific protections:

Non-Forfeiture of Payments: Under Section 23 of P.D. 957, no installment payment made by a buyer shall be forfeited in favor of the developer when the buyer desists from further payment due to the developer's failure to develop the project or for lack of a License to Sell.
Right to Refund: The buyer may demand a full refund of the total amount paid, including amortization interests, with legal interest, and without any deductions.

Note: Real estate brokers and salespersons must also be registered with the Professional Regulation Commission (PRC) and the DHSUD. Reporting "colorum" or unlicensed agents is equally vital in curbing illegal real estate practices in the Philippines.