Rights to Cancel a Pre-Sale Condominium Contract and Recover Payments in the Philippines

(A comprehensive practitioner-level guide as of 2 August 2025)

1. Context: What “Pre-Sale” Means in Philippine Real-Estate Practice

A pre-sale (or “pre-selling”) transaction occurs when a developer markets condominium units before the building is completed or, often, before construction has begun. Buyers typically pay in installments during the construction phase and receive the unit only upon project completion and issuance of a Certificate of Occupancy. Because buyers are financing a promise rather than a finished asset, Philippine law layers multiple protective statutes on top of general Civil Code remedies.

2. Core Statutes and Regulations

Law / Regulation	Key Sections	Core Buyer Protections Relevant to Cancellation & Refund
Presidential Decree 957 (Subdivision and Condominium Buyers' Protective Decree, 1976)	§§ 20–24	Full refund plus legal interest if the developer fails to develop or deliver; prior DHSUD/HSAC approval before valid cancellation by either party; criminal penalties for violations.
Republic Act 6552 (Maceda Law, 1972)	§§ 3–5	For any residential real-estate sold on installment (including condos): grace periods, formal notice requirements, and cash refund of 50 %–90 % of total payments when the seller cancels for buyer default.
Republic Act 4726 (Condominium Act, 1966)	§§ 6, 15	Recognition of the buyer’s “conveyance in fee simple of an undivided interest in the land” and right to rescind/invoke Article 1191 of the Civil Code for substantial breach.
Civil Code of the Philippines	Arts. 1191, 1380 ff., 1305 ff.	General contract rescission or annulment; restitution with interest; damages.
Republic Act 7394 (Consumer Act, 1992)	Arts. 48–52	Misrepresentation and unfair sales practices can ground rescission & damages.
DHSUD Charter (R.A. 11201) & HSAC Rules (2021-present)	—	Vests exclusive original jurisdiction in the Human Settlements Adjudication Commission (HSAC) over disputes arising from PD 957, including rescission and refund actions.

Key takeaway: PD 957 governs developer default, Maceda Law governs buyer default. Both overlay the Civil Code.

3. Grounds and Mechanisms to Cancel

3.1 Developer-Related Grounds

Failure to Develop / Delay in Completion PD 957, §23 allows the buyer to demand full reimbursement of all payments plus 6 % legal interest if development or delivery is not completed within the promised time.
Material Misrepresentation or Change of Plans Under PD 957 and the Consumer Act, substantial deviation (e.g., cutting floor area or amenities) justifies rescission.
Absence or Revocation of DHSUD License to Sell Any sale made without a valid License to Sell is voidable at the buyer’s option; refund is required.

Where to file: Complaint for rescission and refund is filed with HSAC (formerly HLURB); its decisions are enforceable as quasi-judicial orders.

3.2 Buyer-Related Defaults

When the buyer wishes to walk away for personal reasons or is in payment default, rights depend on how much has already been paid.

Cumulative Payments Made	Grace Period Before Seller Can Cancel	Mandatory Cash Refund on Cancellation
< 24 monthly installments	At least 60 days to settle arrears (Maceda §5)	None (payments may be forfeited unless contract says otherwise)
≥ 24 monthly installments	1 month for every full year of payments (minimum 2 months; maximum 2 years), no interest (Maceda §3)	50 % of total payments + 5 % per full year beyond 5 years, capped at 90 % (Maceda §4)

Cancellation Procedure (Maceda §3–5)

Seller issues Notarial Notice of Cancellation or Demand for Rescission after grace period expires.
Buyer has 30 days from receipt to refund demand before contract is deemed canceled.
Refund must be paid within 30 days of cancellation; otherwise, interest accrues.

4. Interaction Between PD 957 and Maceda

If developer is at fault (non-delivery, no license, misrepresentation), the buyer’s remedy is PD 957 full refund, regardless of payment history.
If buyer simply defaults in installments, Maceda governs (graduated refund).
Latest jurisprudence (e.g., Spouses Abay-Abay v. Fil-Estate, G.R. 195528, 10 March 2021): The Supreme Court held that PD 957 refunds are distinct from Maceda; a buyer cannot obtain both but may elect the more favorable law.

5. Computing the Refund: Practical Examples

Scenario	Facts	Statutory Basis	Computation
Developer Delay	₱1 500 000 paid over 3 years; building 18 months late.	PD 957 §23	₱1 500 000 × (1 + legal interest) → ~₱1 590 000 if interest at 6 % p.a. for one year of delay.
Buyer Paid 30 Months, Defaults	₱60 000 monthly × 30 = ₱1 800 000	Maceda §§ 3–4	Refund = 50 % → ₱900 000.
Buyer Paid 9 Years, Defaults	₱20 000 × 108 = ₱2 160 000	Maceda §4	50 % + (4 × 5 %) = 70 % → ₱1 512 000 (capped below 90 %).

6. Procedural Roadmap

Document the Breach or Installment History (receipts, contract to sell, marketing materials).
Send a Written Demand or Notice (grace period runs from receipt).
File a Case with HSAC
- Relief sought: rescission and refund, damages, interest.
- Venue: Region where property is located or where buyer resides.
Attend Mediation (mandatory under HSAC rules).
Decision and Writ of Execution
- Non-payment of refund can lead to levy on developer assets or garnishment.
Optional Civil Action for additional damages (emotional distress, exemplary) before the regular courts after HSAC judgment attains finality.

7. Ancillary Rights and Issues

Retention of Occupancy Fees – If buyer has taken early possession, developer may offset reasonable occupancy charges against the refund.
VAT & Documentary Stamp Taxes – Taxes paid form part of “total payments” and are refundable.
Bank-Financed Buyers – If the installment payments were through a take-out loan, the buyer must coordinate with the bank for release of the mortgage; Maceda protections still apply vis-à-vis the developer.
Assignment or Resale – Prior assignment of the reservation or CTS to a third party may waive Maceda rights unless expressly reserved.
Criminal Liability – PD 957 classifies wilful refusal to refund or to develop as a criminal offense; officers of the corporation can be imprisoned (up to 10 years) and fined.

8. Recent Regulatory Developments (2020–2025)

Issuance	Effect
HSAC Revised Rules of Procedure (2021)	Streamlined e-filing, mandatory pre-trial in 30 days; introduction of e-refund escrow for developers under investigation.
DHSUD Circular 21-02 (2022)	Requires 10 % of total contract price to be placed in escrow for each pre-selling project, accessible to pay verified refund claims.
BSP Memo M-2023-046	Banks must include Maceda opt-out disclaimer in pre-take-out disclosures.
Supreme Court A.M. 22-10-22-SC (2024)	HSAC decisions now directly appealable to the Court of Appeals, not the OP, shortening litigation by ~1 year.

9. Practical Tips for Buyers

Verify the License to Sell on the DHSUD portal before paying any reservation fee.
Keep Originals of every Official Receipt; photocopies are not enough in HSAC.
Mark Payment Anniversaries—Maceda grace periods are per year of payments.
Act Quickly on Delays—File as soon as the promised completion date lapses; courts view delay tolerance more favorably to buyers who protest early.
Negotiate in Writing—Developers often offer “buy-back” or “unit swap” packages; accept only through written compromise approved by HSAC to preserve rights.

10. Conclusion

Philippine law gives pre-sale condominium buyers powerful statutory weapons to cancel contracts and recover hard-earned payments. The correct remedy hinges on who is in breach:

Developer’s fault → PD 957 → full refund + interest + possible criminal sanctions.
Buyer’s default → Maceda Law → staged grace periods and a 50 %–90 % cash refund.

All disputes funnel through the HSAC, whose streamlined procedures since 2021 have made enforcement faster. By understanding these layered protections and acting within statutory timelines, buyers can exit unfavorable pre-sale deals without forfeiting their investments.