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PROTECTION AGAINST FAILED CONSTRUCTION OF A CONDO

PROTECTION AGAINST FAILED CONSTRUCTION OF A CONDO

Yesterday, 15th of July 2017, I was given the opportunity to speak in Lamudi’s Housing Fair conducted at the Glorrieta Activity Center.

Lamudi Philippines Event

I shared my thoughts and knowledge about the pre-selling market and how potential investors can take advantage of condo developments at this particular phase. It was fun discussing how and why a pre-selling condo  is considered as “concrete gold” and how it is better than gold itself, but what made the event memorable was the question and answer portion.

Lamudi Philippines Housing Fair 2017 Expo

A person named Andrew from Philippine Investment (I assume it’s Philippine Investment Management Consultants, Inc or PHINMA), asked:

What’s the law that protects buyers, when a developer is unable to finish a condo development/construction? or something to that effect

I failed to provide the name of a specific law and it was obvious that he was disappointed. I, too, was disappointed at myself. I seemed to have forgotten all those “Presidential Decrees” and “Republic Acts” that I tried to memorize back in my brokerage class. That question has bothered me for the past 24-hours, so today, I decided to write an answer, belated as it may, to put closure to it.

P.D. 957

In my review, I found that the answer to the question was PRESIDENTIAL DECREE NO. 957 or also know as, Subdivision and Condominium buyer’s Protective Decree (as amended by P.D. 1216), Regulating The Sale Of Subdivision Lots And Condominiums, Providing Penalties For Violations Thereof.

MORE SPECIFICALLY, SECTION 9

If a developer fails to finish a condominium project, the National Housing Authority may revoke or cancel the developer’s registration certificate and license to sell.

Here’s the transcript of that specific section: 

SECTION 9. Revocation of Registration Certificate and License to Sell. –

The Authority may, motu proprio or upon verified complaint filed by a buyer of a subdivision lot or condominium unit, revoke the registration of any subdivision project or condominium project and the license to sell any subdivision lot or condominium unit in said project by issuing an order to this effect, with his findings in respect thereto, if upon examination into the affairs of the owner or dealer during a hearing as provided for in Section 14 hereof, if shall appear there is satisfactory evidence that the said owner or dealer: 

a) Is insolvent; or
b) has violated any of the provisions of this Decree or any applicable rule or regulation of the Authority, or any undertaking of his/its performance bond; or
d) Has been or is engaged or is about to engage in fraudulent transactions; or
e) Has made any misrepresentation in any prospectus, brochure, circular or other literature about the subdivision project or condominium project that has been distributed to prospective buyers; or
f) Is of bad business repute; or
g) Does not conduct his business in accordance with law or sound business principles.

Where the owner or dealer is a partnership or corporation or an unincorporated association, it shall be sufficient cause for cancellation of its registration certificate and its license to sell, if any member of such partnership or any officer or director of such corporation or association has been guilty of any act or omission which would be cause for refusing or revoking the registration of an individual dealer, broker or salesman as provided in Section 11 hereof.

DEALERS, BROKERS AND AGENTS ARE ALSO LIABLE

It’s not only the developers who are in trouble, the buyer can also sue the person that sold the condominium, if s/he has knowingly misrepresented the sale. Under Section 12, the registration of the dealer, broker or agent can be revoked if proven guilty. 

SECTION 12. Revocation of Registration as Dealers, Brokers or Salesmen.

Registration under the preceding section may be refused or any registration granted thereunder, revoked by the Authority if, after reasonable notice and hearing, it shall determine that such applicant or registrant:

  1. Has violated any provision of this Decree or any rule or regulation made hereunder; or
  2. Has made a material false statement in his application for registration; or
  3. Has been guilty of a fraudulent act in connection with any sale of a subdivision lot or condominium unit; or
  4. Has demonstrated his unworthiness to transact the business of dealer, broker, or salesman, as the case may be.
  5. In case of charges against a salesman, notice thereof shall also be given the broker or dealer employing such salesman.

Pending hearing of the case, the Authority shall have the power to order the suspension of the dealer’s, broker’s, of salesman’s registration; provided, that such order shall state the cause for the suspension.

The suspension or revocation of the registration of a dealer or broker shall carry with it all the suspension or revocation of the registrations of all his salesmen.

END GAME IS SECTION 15

Aside from the revocation of the registration and license to sell of the developer if it is found guilty beyond reasonable doubt, the National Housing Authority may also order the forfeiture of the Performance Bond paid by the developer and direct the provincial or city engineer to use the bond to finish the construction of the condominium.

SECTION 15. Decision.

The case shall be decided within thirty (30) days from the time the same is submitted for decision. The Decision may order the revocation of the registration of the subdivision or condominium project, the suspension, cancellation, or revocation of the license to sell and/or forfeiture, in whole or in part, of the performance bond mentioned in Section 6 hereof. In case forfeiture of the bond is ordered, the Decision may direct the provincial or city engineer to undertake or cause the construction of roads and of other requirements for the subdivision or condominium as stipulated in the bond, chargeable to the amount forfeited. Such decision shall be immediately executor and shall become final after the lapse of 15 days from the date of receipt of the Decision. 

You may read the full Presidential Decree 957 here.

Ps. Congratulations to Erika and the rest of the Lamudi Philippines crew for organizing a very successful housing fair!

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Jake Nasol Loria

Non-tech Martian trying to change the real estate industry for the best through technology.

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