In the Philippine real estate landscape, Presidential Decree No. 957 (PD 957), otherwise known as the Subdivision and Condominium Buyers' Protective Decree, serves as the primary shield for individuals investing in residential projects. One of its most critical provisions is the Right to Refund, a remedy designed to prevent developers from holding buyer investments hostage when projects fail to meet legal and contractual standards.
The Legal Basis: Section 23 of PD 957
The core of the right to refund is found in Section 23 of the decree. It dictates that no installment payment made by a buyer for a subdivision lot or condominium unit shall be forfeited in favor of the owner or developer when the buyer desists from further payment due to the failure of the owner or developer to develop the project according to the approved plans and within the time limit for complying with the same.
1. Grounds for a 100% Refund
Unlike the "Maceda Law" (RA 6552), which applies to buyers who default on payments due to personal reasons, PD 957 applies when the developer is at fault. A buyer is entitled to a full refund if:
- The developer fails to complete the project within the timeframe specified in the License to Sell (LTS).
- The developer fails to develop the project according to the approved blueprints, specifications, or amenities promised.
2. What is Included in the Refund?
Under PD 957, the refund is not limited to the principal. The law specifies that the buyer is entitled to:
- The total amount paid, including down payments, reservation fees, and monthly installments.
- Legal interest on the total amount paid, usually computed from the date of the buyer's demand.
Key Procedural Requirements
To successfully invoke the right to refund under PD 957, buyers must navigate specific legal hurdles:
The "Notice of Desistance"
Before stopping payments, it is legally prudent for the buyer to send a formal Notice of Desistance from Payment. This letter informs the developer that the buyer is ceasing installments specifically because of the project's delay or non-compliance. While the law allows the buyer to stop payments, doing so without formal notice can sometimes be misconstrued as a simple default.
Jurisdiction of the DHSUD
The Department of Human Settlements and Urban Development (DHSUD)—formerly the HLURB—is the quasi-judicial body that handles these disputes. If a developer refuses a refund request, the buyer must file a verified complaint with the DHSUD.
PD 957 vs. The Maceda Law (RA 6552)
It is vital to distinguish between these two laws, as they offer different protections:
| Feature | PD 957 (Section 23) | Maceda Law (RA 6552) |
|---|---|---|
| Trigger | Developer's fault (delay/failure) | Buyer's fault (default/can't pay) |
| Refund Amount | 100% of total payments | 50% to 90% (Cash Surrender Value) |
| Interest | Includes legal interest | No interest included |
| Condition | No minimum years of payment required | Usually requires at least 2 years of installments |
Important Jurisprudence and Principles
1. Non-Forfeiture Clause
The law explicitly states that installments cannot be forfeited if the developer is in default. Any contract stipulation that forces the buyer to waive their right to a refund under PD 957 is considered void as against public policy.
2. The "License to Sell" Requirement
A developer cannot legally sell units or lots without a License to Sell. If a developer sells a property without an LTS, or if the LTS has been suspended, the buyer has even stronger grounds to demand a rescission of the contract and a full refund.
3. Delays and Force Majeure
Developers often cite force majeure (acts of God) to excuse delays. However, Philippine courts have generally held that for force majeure to be a valid defense, the event must be unforeseeable and must render the completion of the project truly impossible, not just more expensive or difficult.
Summary of Buyer Rights
If a developer fails to deliver a condominium or subdivision lot on time, the buyer has two primary options under Section 23:
- Wait for Completion: The buyer can choose to wait, but they cannot be charged additional interest or penalties for stopping payments during the period of delay.
- Demand a Refund: The buyer can demand the cancellation of the contract and the return of every centavo paid, plus legal interest.