PD 957 Report

THE SUBDIVISION AND CONDOMINIUMTHE SUBDIVISION AND CONDOMINIUMBUYERSBUYERS‘‘ PROTECTIVE DECREE PROTECTIVE DECREE

INTRODUCTION

REGULATING AGENCY

REGISTRATION AND LICENSE TO SELL

COMPLETION OF PROJECTS AND ALTERATIONS

PAYMENTS, REALTY TAXES & OTHER

EXPENSES

PUBLIC CONCERNS

VIOLATIONS OF PD NO. 957

PROCEDURES FOR REVOCATION

SALE OR SELL

• Disposition or attempt to dispose of a subdivision lot for a valuable consideration

• contract to sell

• contract of purchase and sale

• exchange

• attempt to sell

• option of sale or purchase

• solicitation of a sale

• offer to sell (directly, thru agent, circular, letter or ads)

• Privilege given to members of cooperative, corporation, partnership, or any association

• issuance of a certificate/receipt giving the right of participation in any land

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PAYMENTS, REALTY TAXES AND OTHER

EXPENSES

PUBLIC CONCERNS

Subdivision projecta tract or a parcel of land: •registered under Act No. 496•partitioned into individual lots (residential purposes)•offered to the public for sale (cash or in installment)

Condominium project

real property divided or to be divided for residential purposes into condominium purposes

SUBDIVISION AND CONDOMINIUM PROJECT

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HOUSING AND LAND USE

REGULATORY BOARD

REGULATEreal estate trade and business (Sec 3)

EXCLUSIVE JURISDICTION

(a) Unsound real estate business practices;

(b) Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and

(c) Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman.

What is covered by EXCLUSIVE JURISDICTION?

In addition to powers provided for in PD No. 957, HLURB shall have exclusive jurisdiction to hear and decide cases of the ff. nature: (Section 1 of PD 1344)

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NULLITY OF WAIVERS

Any stipulation waiving the compliance with this Decree is void

REPEALING CLAUSEAll laws, executive orders, rules and regulations or part thereof inconsistent with the provisions of this Decree are repealed or modified accordingly.

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Delivery

Outstanding Mortgage

Fee

ISSUANCE OF TITLE

Upon full payment of the lot/unit, owner/developer shall deliver the title of the lot/unit to they buyer

Owner/developer shall redeem the mortgage within 6 months from issuance of title to the buyer

No fee except fees required for the registration of the deed of sale in the Registry of Deeds

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ISSUANCE OF TITLE

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• NHA extended to GOAL a loan for the construction of Gemini I Condominium

• A "Contract Agreement" was entered into between GOAL and Matson International Corporation for the construction of the condominium within one (1) year

• The Contractor abandoned the project with only 60% of it finished

• GOAL offered the condominium units for sale with private respondents among its buyers

• To remedy the situation brought about by the abandonment of the project, GOAL subsequently pursued the construction of the fifth floor with NHA granting additional funding on the condition that it would hold on to the condominium certificates of title of private respondents as collateral

Case Facts

ISSUANCE OF TITLE

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Upon full payment of a unit, seller loses all its right and interests to the unit in favor of the buyer. Consequently, it has no right to use the certificate of title of buyer as collateral for a new loan. The title of buyer must be released to him as provided by law.

Decision

MORTGAGES

If such lot or unit has a buyer

•He will be notified before the release of the loan•He may pay installments directly to the mortgagee and the mortgagee will apply the payments to the indebtedness connected with the lot or unit

Must first be approved by the HLURB in writing

To be approved: proceeds of the loan must be used for development of

condominium/subdivision project

Loan value of each lot or unit covered by the mortgage shall be determined

Rationale

for the buyer to obtain title promptly after full payment of the lot or unit.

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MORTGAGES

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Relevant Facts

Delta Development and Management Services, Inc. (Delta) obtained a loan from the Luzon Development Bank (LDB) for the express purpose of developing a subdivision, executing in favor of the bank a real estate mortgage (REM) on several of their properties.

Delta obtained a Certificate of Registration and a License to Sell from the HLURB after the loan transaction. In court, Delta argued that clearance was not required for mortgages that were constituted on a subdivision project prior to registration. According to DELTA, it did not violate the terms of its license because it did not obtain a new mortgage over the subdivision project.

MORTGAGES

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IssueWas the mortgage over the property valid?

AnswerThere was no HLURB approval, thus rendering the mortgage void. It was held that all developers should

obtain a clearance for mortgage from the HLURB, regardless of the date when the mortgage was secured,

because the law does not distinguish. Having violated this legal requirement, Delta was held liable to pay the administrative fine. Also, due to the nullity of the

mortgage, the bank’s loan of P8 million to Delta has effectively become unsecured.

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REGISTRATION OF PROJECTS

For owners of a parcel of land who wishes to convert the same into a subdivision project

Submit subdivision plan or condominium plan

After approval, submit subdivision plan to Director of Lands and Condominium Plan to Register of Deeds

11

22

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LICENSE TO SELL

Sellers must obtain a license to sell within 2 weeks after registering the condo/subd unit

• Must be of good repute• financially stable

• registration must not be fraudulent

PERFORMANCE BONDadequate performance bond

guaranteeing development, construction and maintenance of project

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EXEMPT TRANSACTIONS

EXEMPTIONSfrom requirement of a license to sell

a) Sale resulting from the partition of land among co-owners and co-heirs.

c) Sale by or for a mortgagee in the ordinary course of business when necessary to liquidate debt.

b) Sale or transfer by the original purchaser and any subsequent sale.

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REGISTRATION OF DEALERS, BROKERS & SALESMEN

Requirements for registration

a.) Good reputationb.) Complied with all the applicable rules including any prescribed feesc.) File a bond or security

Expiration and Renewal of Registration

a.) Expiration is on December 31 of each yearb.) Renewal shall be given upon written application (must be made within 30-60 before the first day of the subsequent year and any prescribed fees must be paid)c.) If filed beyond the prescribed period - treated as original applications.

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PHASES OF SUBDIVISION

Owner/developer may divide the development and sale of subdivision into

phases not less than 10 hectares

Requirements in this Decreeshall be imposed to

on each phase

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ADVERTISEMENTS

Owner/Developer answerable to developments represented or promised

• May be in any form• Must reflect real facts• Must not be presented so as to mislead or deceive

the public

Advertisements

warranty enforceable solidarily

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TIME OF COMPLETION

For developments indicated in subdivisionor condominium plans and advertised,

time of completion is:

• 1 year from date of issuance of license for the project

• a period of time fixed by the HLURB

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ALTERATION OF PLANS

• Permitted by the HLURB and• Consented in writing by the homeowners’

association or in the absence thereof, the majority of the lot buyers in the subdivision

Change or alterations

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TAKE-OVER DEVELOPMENT

If the owner/developer has refused/failed to develop or complete the development of the project

Authority may take over or cause such development and completion

The Authority may

demand, collect and receive from the buyers the installment payments due,

which shall be used for the development

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NON-FORFEITURE OF PAYMENTS

WHENFailure of owner to develop subdivision or condominium

project according to plan or within time limit.

REMEDYBuyer may be reimbursed with total amount paid

(including amortization interest) excluding delinquency interests, plus legal interest

FAILURE TO PAY INSTALLMENTSFor any other case of buyer’s failure to pay

•rights covered by RA 6552 (Maceda Law)

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RA 6552 (MACEDA LAW)

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RIGHTS OF THE BUYER

1. Grace period (payment of unpaid installments without additional interest)

– Less than two years of installments: 60 days grace period

– At least two years: one month grace period per year of installment payments

*grace period may only be exercised once every 5 years


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RIGHTS OF THE BUYER

2. Refund of the Cash Surrender Value (CSV) of payments

– Less than five years of installments: CSV = 50% of payments

– Every year of installment payments in excess of 5 years: 5% additional CSV

*CSV not to exceed 90% of total payments.


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•If buyer fails to pay within grace period seller may cancel the contract (contract to sell) or rescind the contract (contract of sale)•Actual cancellation is after 30 days from the buyer’s time of receipt of notice of cancellation or demand for rescission plus payment of CSV•Without return of CSV, rescission is incomplete and buyer may still pay unpaid installments

REALTY TAX

Real estate tax and assessment on a lot/unit

Title has not passed to the buyer

Buyer has taken possession of and occupied the lot/unit

Paid by owner/developer with-out recourse tothe buyer

Buyer is liable to the owner/developer for such tax and assessment effective the year following such taking of possession and occupancy

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PROHIBITED•Fee for an alleged community benefit charged by the owner/developer

AUTHORIZED COLLECTOR•Properly organized homeowners association

REQUIREMENTS•Fees to finance services for common comfort, security and sanitation•consent of a majority of the lot/unit buyers residing in the subdivision/condo

OTHER CHARGES

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ACCESS TO PUBLICOFFICES IN SUBDIVISIONS

No owner/developer shall deny any person free access to any government office

or public establishment located within the subdivision or which may be

reached only by passing through the subdivision

RIGHT OF WAY TO PUBLIC ROADThe owner/developer must secure

a right of way to a public road or street

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If there is a street, passageway or required open space delineated on a complex subdivision plan, the Register of Deeds shall annotate on the new certificate of title covering the street, passageway

or open space a memorandum that:

PUBLIC AND OPEN SPACES

General Rule

No portion of such shall be closed or otherwise disposed of by the registered owner

Exception

•Obtaining the requisite approval as provided under Section 22, or•Donation in favor of a city or municipality

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DONATIONS OF ROADS &OPEN SPACES TO LOCAL GOV’T

Owner/developer of the subdivision or condominium may donate roads and open spaces to the city or

municipality where the project is located

After the donation

The area donated shall not be converted to other purposes unless the Authority approves so after a

hearing

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Sec. 2. Amendment of Section 31 of this Decree

Owner/developer is required to donate adequate roads, alleys and sidewalks to the city/municipality and the local gov’t must accept it.

Owner/developer may also donate it to Homeowners Association of the project if approved by the city/municipality.

If 1ha or more, 30% of gross area shall be reserved for open space.

AMENDMENTS BY PD 1216

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REGISTERS OF SUBDIVISION LOTS & CONDOMINIUM UNITS

• Maintained by the Authority

• Open to public inspection subject to such reasonable rules by the Authority

Record of subdivision lots and condominium units INTRODUCTION

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VIOLATIONS OF PD957Sanctions for Violating PD 957

Either:

Jurisdiction

Either:1.) HLURB – for Administrative aspect2.) Fiscal’s office – for Criminal aspect3.) Civil Courts – if there is a finding of probable cause for criminal action

Where the violator is a partnership or corporation?

The liability extends to controlling persons. To carry administrative and criminal penalties

11 Administrative Sanction - not exceeding Ten Thousand Pesos

Penal Sanction - not exceeding Twenty Thousand Pesos and/or imprisonment of not more than 10 years22

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OTHER REMEDIES

Rights and remedies provided

shall be in addition to any and all other rights and remedies that may be available under existing laws

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SUSPENSION OF LICENSE TO SELL

Grounds for immediate suspension of license to sell

a.) Verified complaint subject to further investigation and hearing

b.) Fraudulent information in the registration

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REVOCATION OF REGISTRATIONCERTIFICATE & LICENSE TO SELL

• Insolvent

• Violated any provision of this Decree or any applicable rule

• Engaged in fraud

• Misrepresented in any literature abut the project which is given to prospective buyers

• Bad business representation

• Does not conduct business in accordance with the law

For partnership/corporation/unincorporated association

Any member/officer/director is guilty of any act of omission which would cause revocation of a dealer/broker/salesman (Sec. 11)

EVIDENCE that owner or dealer is/has

How to start?

Trigger Points

Issuing an order

• Motu proprio, or• Verified complaint filed by a buyer

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REVOCATION OF REGISTRATIONOF DEALERS, BROKERS & SALESMEN

a.) Violation of any provisionb.) Material misstatement in applicationc.) Fraudulent actd.) Demonstrated unworthiness to transact the businesse.) For salesmen, give Notice to broker or dealer

Pending hearing, CAN order suspension of the registration - indicate cause

Grounds for revocation

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HEARING

Either:•copy of the complaint against him, or•notified in writing

Notice

• Before the officer/s designated by the Authority, on the date and place in the notice

• Non-litigious, summary in nature

Nature of proceeding

Venue

• Rules of Court shall not apply, except:o By analogy or in a suppletory

character, ando Whenever practicable and convenient

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DECISION

The Decision may order the:

1. Revocation of the registration of the subdivision or condominium project2. Suspension, cancellation, or revocation of the license to sell, and/or3. Forfeiture, in whole or in part, of the performance bond mentioned in Section 6

Immediately executory and final after 15 days from the date of receipt of the Decision

Within 30 days from the time submitted for decision

forfeiture

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CEASE AND DESIST ORDER

Provided

There is due notice and hearing, as provided in Section 13

To whom

any person who appears to be engaged or about to engage in any act or practice which constitutes or will constitute a violation of the provisions of this

Decree

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ORGANIZATION OF HOMEOWNERS ASSOCIATION

owner/developershall initiate the organization of a

homeowner’s association among the buyers and residents

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PRESIDENTIAL DECREE NO. 957PRESIDENTIAL DECREE NO. 957The Subdivision and Condominium Buyers‘ Protective Decree

Documents

PD 957 Report