Rights of Pre-Selling Condominium Buyers Awaiting Bank Loan Approval (Philippines)

Updated for the Philippine legal and regulatory setting. This is a general reference, not a substitute for legal advice on a specific contract.

1) The Typical Pre-Selling Path—and Why “Awaiting Bank Approval” Matters

Most buyers of pre-selling condos follow this route:

Reservation → 2) Contract to Sell (CTS) and installment “equity” payments during construction → 3) Notice of Completion/Turnover → 4) Loan take-out by a bank (or in-house financing, or cash) → 5) Deed of Absolute Sale (DOAS) and condo title (CCT) issuance and mortgage.

Your rights while waiting for bank approval sit at the intersection of:

your CTS and developer’s house rules,
Presidential Decree (PD) 957 (Subdivision and Condominium Buyers’ Protective Decree),
the Condominium Act (RA 4726),
the Realty Installment Buyer Act (RA 6552 or the “Maceda Law”),
the Civil Code on contracts, conditions, rescission, penalties, and interest, and
the reorganization laws that created today’s regulators (DHSUD and HSAC).

2) Core Legal Framework

A. PD 957 (Buyers’ Protective Decree)

Requires project registration and License to Sell before marketing.
Prohibits false or misleading ads; the advertised features become binding.
Protects buyers against non-development or material deviations from approved plans.
Gives buyers administrative remedies against developers with the Department of Human Settlements and Urban Development (DHSUD) and adjudicative recourse with the Human Settlements Adjudication Commission (HSAC).

B. RA 4726 (Condominium Act)

Governs the Master Deed, common areas, and condominium corporation.
On completion and full payment, you’re entitled to conveyance of your unit with an undivided interest in the common areas, subject to the project’s master deed/by-laws.

C. RA 6552 (Maceda Law) — Installment Buyers

Applies to residential real property sold on installments (including condo units under CTS with installment equity).
If you’ve paid at least 2 years of installments:
- Grace period: at least 1 month per year of paid installments to pay unpaid dues without additional interest.
- Cash surrender value upon cancellation: at least 50% of total payments made, plus 5% per additional year after the 2nd, capped at 90%.
If you’ve paid less than 2 years:
- Minimum 60-day grace period; cancellation requires notarial notice and lapses only 30 days after your receipt of that notice.
Prepayment: You may prepay at any time without interest charges beyond what’s due, and demand the corresponding deed/title upon full payment.

Practical effect: If your CTS treats bank take-out as “failure to pay,” Maceda rights on grace periods and surrender value still apply to the installment arrangement you’ve already been performing.

D. Civil Code Protections

Conditions & risk allocation: Bank approval is often framed as your obligation; but if your CTS makes approval a suspensive condition, failure to obtain it can allow contract non-perfection or rescission with restitution (return of what was paid), depending on the stipulation.
Article 1191 (rescission): For substantial breach (e.g., developer’s failure to deliver per plan or on time), you can seek rescission and damages/refund.
Penalty clauses trimming (Art. 1229): Courts/HSAC may reduce unconscionable forfeitures (e.g., keeping a very large portion of your equity upon cancellation).
Interest (Arts. 2209–2212): Legal interest may accrue on amounts unjustly withheld.

3) Rights During the Waiting Period for Bank Approval

1) Right to Full and Accurate Disclosure

You’re entitled to:
- proof of project registration and License to Sell,
- clear timelines for completion and turnover,
- all charges payable at take-out (VAT, transfer taxes, DST, registration, HOA/condo corp fees), and
- final computation for loan take-out (net of equity and promos).
Misrepresentations in brochures/ads are actionable under PD 957 and the Civil Code.

2) Protection Against Premature Cancellation and Unlawful Forfeiture

The developer cannot immediately cancel for non-take-out. They must comply with:
- your Maceda Law grace periods and notarial notice (if the arrangement is installment-based), and
- fair penalty standards (unconscionable forfeiture can be reduced).
Reservation fees are often labeled “non-refundable,” but labels don’t override the law—forfeiture must be reasonable and consistent with the Maceda Law/Civil Code.

3) Right to Cure and Alternatives

During grace periods, you may:
- Cure arrears,
- Switch to another bank (new application),
- Opt for in-house financing (subject to updated terms), or
- Prepay (full cash settlement) without extra interest.

4) Right to Assignment/Substitution

Unless expressly prohibited (and subject to developer consent), you may assign your buyer’s rights to another qualified buyer to avoid cancellation and forfeit. Many CTS forms allow substitution before take-out upon payment of administrative fees.

5) Right to Timely Turnover—and Remedies for Delay

Turnover typically requires (a) building completion and occupancy permits, and (b) full settlement or loan take-out.
If the developer is late relative to the promised completion/turnover schedule, you may pursue:
- Liquidated damages if stipulated,
- Rent-reimbursement/loss-of-use theories,
- Rescission and refund for substantial delays or failure to deliver per approved plans/specs (PD 957 + Civil Code), and
- Administrative complaints with DHSUD or adjudication with HSAC.

6) Right to Fair Processing of Bank Requirements

Developers usually assist with loan take-out (endorsements, documents), but cannot:
- compel you to use a single bank if the CTS allows any accredited bank, or
- charge hidden “processing” fees not disclosed at sale.
You may demand copies of as-built plans, unit floor area confirmation, tax declarations, updated statement of account, and developer undertakings required by lenders.

7) Privacy and Data Rights

Your financial documents submitted for bank approval are personal data; the developer/broker should process them under data-privacy principles (transparency, proportionality, security).

4) If the Bank Declines or Approves at a Lower Amount

A. Declined Loan

You may choose among:

Cure within the Maceda grace/notice windows by re-applying to other lenders.
Shift to in-house (often higher rates; check total cost of credit).
Assign your CTS to a replacement buyer.
Cancel the purchase:
- If you meet Maceda thresholds, claim cash surrender value.
- Challenge excessive forfeiture or fees under the Civil Code.
- If refusal is due to developer fault (e.g., title or project compliance issues), seek full refund with interest/damages.

B. Lower Appraisal / Partial Approval

You may be asked to add down payment or take a smaller loan.
You can:
- Negotiate price re-computation or developer subsidy,
- Mix financing (bank + in-house) if allowed, or
- Rescind if the shortfall makes completion impossible and the CTS/ads created a legitimate expectation of bankability.

5) Turnover, Punch-Listing, Fees, and Title

Turnover before loan take-out is normally not required; possession usually follows full settlement.
On turnover, you have a right to punch-list defects and demand rectification within reasonable time.
Buyer’s typical closing costs: VAT (if applicable), documentary stamp tax (sale and mortgage), transfer fees, registration fees, condo corp share, move-in fees, initial association dues, and insurance.
After bank take-out or full payment, you’re entitled to the DOAS, and eventually your Condominium Certificate of Title (CCT) showing the bank’s mortgage if financed.

6) Notices, Documentation, and Paper Trail—Your Tactical Rights

Demand written timelines from the developer when you receive a Notice to Complete or Turnover Notice.
Acknowledge receipt but reserve rights pending loan approval.
Require notarial notices for any cancellation; insist that Maceda periods be honored.
Keep proof of communications, receipts, and bank correspondence—critical for HSAC/DHSUD or court action.

7) Remedies and Where to Go

DHSUD: Administrative complaints against developers (e.g., false ads, non-development, LS issues).
HSAC: Adjudicates buyer-developer disputes (refunds, damages, rescission, penalties).
Regular courts: Complex claims, injunctions, appeals.
Bank internal appeals: Reconsideration of credit decisions, especially when denial stems from project documentation issues rather than your capacity.

8) Contract Clauses to Watch (and How They Affect Your Rights)

“Bank approval is solely buyer’s responsibility”: Common, but cannot override Maceda grace/notice and reasonableness limits on forfeiture.
“Non-refundable reservation/equity”: Subject to Maceda and penalty reduction for unconscionability.
Completion date “subject to force majeure and permits”: Must still be reasonable; chronic delay enables rescission/damages.
Compulsory use of one bank or paid “loan handling” fees: Must be disclosed and contract-based; otherwise challengeable.
Arbitration clauses: Check if HSAC jurisdiction remains available (often it does, as a matter of buyer protection policy).

9) Practical Playbook (Step-by-Step)

Audit your CTS: note timelines, penalties, cancellation conditions, assignment rules, and turnover prerequisites.
Compute Maceda coverage: months/years paid → grace period and potential cash surrender value.
Prepare bank files early: IDs, ITR/alpha list/COE, payslips, bank statements, collateral docs, developer letters.
Get at least two bank options before your target take-out date.
If declined/short-approved: swiftly decide among top-up cash, second bank, in-house, assignment, or cancellation.
If the developer is delayed: document variance vs. advertised timeline/specs; consider HSAC/DHSUD filing.
For any forfeiture/cancellation notice: check Maceda compliance (grace + notarial notice); if lacking, dispute immediately.
Keep everything in writing; use email and request receipts and acknowledgments.

10) Sample Short Letter Templates

A. Request to Defer Turnover Pending Bank Take-Out

Subject: Request to Defer Turnover / Maintain CTS in Good Standing Dear [Developer], I acknowledge your [Turnover/Completion] notice dated [date]. My bank take-out is in process with [Bank], with target release on [date]. I invoke my rights under the CTS and applicable buyer-protection laws to maintain the contract in good standing. Kindly confirm deferment of turnover and refrain from cancellation or penalties inconsistent with the Maceda Law. Sincerely, [Buyer]

B. Disputing Cancellation/Forfeiture Without Maceda Compliance

Subject: Dispute of Cancellation / Demand for Compliance with RA 6552 Dear [Developer], Your [letter] dated [date] purports to cancel my CTS and forfeit payments. Please note RA 6552 requires a [grace period] and notarial notice with a 30-day lapse before effective cancellation (for <2 data-preserve-html-node="true" years paid) or a cash surrender value (for ≥2 years). Absent compliance, any cancellation/forfeiture is void. Kindly rectify within five (5) days. Sincerely, [Buyer]

11) FAQs

Q: Can the developer keep all my equity if my bank disapproves? A: Not automatically. Maceda Law and the Civil Code can limit forfeiture and grant cash surrender value or grace periods, depending on how long you’ve paid.

Q: I’ve paid 3 years of equity. What if I need to cancel? A: You may claim at least 50% of payments as cash surrender value, plus 5% per additional year after the second, up to 90%.

Q: The developer delayed completion. Can I rescind and get a full refund? A: If the delay is substantial and defeats your purpose or deviates from approved plans, rescission and refund/damages are available under PD 957 and the Civil Code.

Q: Can I insist on using my preferred bank? A: If your CTS does not restrict you, yes. If it does, the restriction must have been clearly disclosed and not unfair.

12) Key Takeaways

Maceda rights attach to installment-style CTS arrangements and do not disappear just because financing is pending.
Cancellations must follow due process (grace periods + notarial notice) and forfeitures must be reasonable.
Developer delays open the door to rescission/refund and regulatory complaints.
Keep a paper trail, act within timelines, and escalate to DHSUD/HSAC when necessary.

Final Note

Because CTS wording varies widely, the exact phrasing on bank take-out, cancellation, and penalties can swing outcomes. Have your contract reviewed before you decide among re-apply / shift financing / assign / rescind—especially where substantial equity is at stake.