Condo Contract Cancellation under Presidential Decree No. 957
(Subdivision and Condominium Buyers’ Protective Decree, Philippines)
Quick take‑away: A developer cannot simply declare your purchase forfeited because you missed payments. Section 23 of PD 957 builds in a grace period, a mandatory written notice, and a cash‑back formula that lets you recover 50‑90 % of everything you have already paid. The Housing and Human Settlements Adjudication Commission (HSAC) now polices these rules, and the Supreme Court repeatedly voids cancellations that skip even one of the statute’s safeguards.
1. Legal Foundations
| Instrument | Key provisions on cancellation | Notes |
|---|---|---|
| PD 957 (1976), §§ 23 & 24 | “Non‑Forfeiture of Payments”; notice and refund; HSAC/HLURB jurisdiction | Applies ex proprio vigore to all condominium and subdivision projects, whether or not there is a separate Maceda Law clause in the contract. |
| RA 6552 (Maceda Law, 1972) | 60‑day grace; 30‑day notarial notice; 50 % refund +5 %/yr after 5 yrs, up to 90 % | Subsidiary: governs condos only when sold on installment and the project is not covered by a license to sell under PD 957. |
| RA 11201 (2019) | Abolished HLURB ➜ created HSAC (adjudication) & DHSUD (regulation) | Jurisdiction over all PD 957 disputes transferred to HSAC in 2020. |
| Civil Code Art. 1191 | General action for rescission and mutual restitution | Invoked when PD 957/Maceda safeguards are observed but parties still litigate. |
2. When Can a Developer Cancel?
- Buyer default in installment payments.
- Breach of material covenants (e.g., prohibition against structural alterations).
- Fraud or misrepresentation by the buyer.
Important: Buyer default alone is never self‑executing. The developer must first exhaust the statutory cancellation process; otherwise, any forfeiture clause in the contract is void for being contrary to public policy (Art. 1306, Civil Code; Spouses Abella v. HLURB, G.R. 162015, 16 June 2009).
3. Statutory Cancellation Workflow under PD 957
| Step | What the developer must do | Time‑frame / formula |
|---|---|---|
| a. Grace period | Allow the buyer 60 days from the due date of the missed installment to pay without additional interest (Sec. 23 [a]). | Runs automatically; no notice required to start the clock. |
| b. Notarized notice of cancellation / demand for rescission | Serve a notarial notice personally or by registered mail. Copy furnished to HSAC field office. | PD 957 is silent on form; Maceda Law adds that after the notice the buyer still gets 30 days to pay in full. Smart practice: observe both statutes. |
| c. Cash surrender value computation | At expiry of the grace + notice periods, compute refund: • 50 % of all payments • **+5 %* of all payments for each full year after the 5th year • Cap: 90 % |
Identical to Maceda formula; Supreme Court treats PD 957 as lex specialis for realty developers. |
| d. Tender of refund & execution of deed of cancellation | Refund must be in cash or certified check simultaneously with the deed of cancellation; refund cannot be deferred or installment. | Cancellation takes effect only upon actual refund, not on the date of notice ( Gotesco v. Chatto, G.R. 157690, 16 July 2012). |
| e. Registration / annotation | Developer files the deed and proof of refund with the Registry of Deeds to clear the unit’s title. | Required before reselling the unit. |
Shortcut attempts—e.g., mere demand letters, “acceptance of cancellation” clauses, or crediting the refund against future sales—have been struck down consistently by HSAC and the courts.
4. Buyer’s Toolbox
| Remedy | Statutory / Jurisprudential basis | Practical use |
|---|---|---|
| Pay & reinstate | 60‑day grace + additional 30‑day notarial notice | Bring account current, including interests/penalties allowed by contract; developer must accept. |
| Suspend payment | Sec. 20 PD 957 (failure to deliver title or amenities) | Place money in escrow or HSAC; no interest accrues while suspension is justified. |
| File HSAC complaint | Sec. 3 RA 11201; HSAC Rules on Procedures (2020) | For declaration of nullity of cancellation, refund, damages, monthly rental subsidy if unit is not delivered. |
| Civil action for rescission or specific performance | Art. 1191 Civil Code | When issues (e.g., fraud, validity of contract) fall outside HSAC’s exclusive jurisdiction. |
| Annotation of adverse claim | Sec. 70 Property Registration Decree | Protects buyer’s interest on the condominium certificate of title (CCT). |
5. Developer Counter‑Remedies & Defenses
- Sale on cash terms: PD 957 safeguards apply only to purchases “on installment.” Lump‑sum defaulters fall under ordinary Civil Code rules on rescission.
- Proof of willful abandonment: If the buyer vanished and the developer deposited the refund in escrow, strict tender may be relaxed.
- Condonation/novation: A new payment schedule signed after default may waive statutory refund, but courts examine such waivers with extreme caution.
6. Interplay with Maceda Law (RA 6552)
| Issue | PD 957 route | Maceda route |
|---|---|---|
| Coverage | All licensed condo projects, even if sold via Contract to Sell or Deed of Absolute Sale. | Unlicensed condos or sales not considered “projects” (rare today). |
| Grace period | Fixed 60 days. | Also 60 days, but only for buyers who have paid ≥2 yrs. (If <2 data-preserve-html-node="true" yrs, grace = 60 days total of one month per year paid.) |
| Refund formula | 50 % + 5 %/yr over five years (cap 90 %). | Same. |
| Venue of disputes | HSAC. | HSAC or RTC, depending on cause. |
| Notice | PD 957 itself does not specify the 30‑day notarial notice, but courts graft Maceda’s notice as minimum standard. | Express 30‑day requirement. |
Bottom line: Buyers in PD 957‑covered projects effectively enjoy Maceda‑plus protection.
7. Jurisdiction & Procedure before HSAC
- Complaint (verified, with Certificate of Non‑Forum Shopping) ➜ HSAC Regional Adjudication Branch where project is located.
- Mediation within 15 days of answer; if failed, case goes to formal hearing.
- Decision within 90 days from submission for resolution (Sec. 21 HSAC Rules).
- Appeal to HSAC Board of Commissioners within 15 days; thereafter to the Court of Appeals via Rule 43.
- Execution: writ of execution for money judgments or special writ to compel release of title / refund.
8. Frequently Litigated Scenarios
| Situation | Court / HSAC ruling | Citation |
|---|---|---|
| Developer canceled after only 30‑day notice, no actual refund. | Cancellation void; buyer may demand release of TCT and damages. | Abella, 2009 |
| Developer tendered refund after it resold the unit. | Tender ineffective; buyer entitled to damages for bad‑faith cancellation. | Gotesco, 2012 |
| Buyer ceased payment because amenities (pool, elevator) were unfinished. | Suspension justified; no cancellation allowed until amenities delivered. | RBC Realty v. Soriano, HLURB Case No. REM‑120910‑13580, 2013 |
| Contract labeled “lease with option to purchase.” | Substance controls over form; PD 957 still applies if payments function as installments toward ownership. | Villareal v. Phil. Global Dev., HSAC Ruling 2021 |
9. Beyond Cancellation: Other Buyer Protections in PD 957
- Section 19 – Right to mortgage redemption.
- Section 20 – Suspension of payment for failure to deliver title or facilities.
- Section 21 – Nullity of mortgages without buyer’s consent.
- Section 24 – No lien for unpaid HOA dues until common areas are conveyed.
All of these interact with cancellation because a developer’s own breach (e.g., missing amenities, lack of license to sell) bars it from invoking default remedies.
10. Practical Counsel for Buyers
- Document everything. Keep official receipts, statements of account, screenshots of e‑mail exchanges, and courier tracking slips for notices.
- Insist on notarial notices. Ordinary e‑mails or text messages do not start the 30‑day rescission period.
- Promptly compute your refund. The 50–90 % formula is of total payments, not merely of the equity. Include reservation, down‑payment, and amortizations.
- File early. HSAC has a two‑year prescriptive period for money claims, counted from receipt of the void cancellation or from last payment.
- Stay reasonable. Courts frown on buyers who exploit PD 957 to live rent‑free for years; deposit disputed installments in escrow if you can.
11. Tips for Developers & Brokers
- Use templated notices that satisfy both PD 957 and RA 6552.
- Compute and tender the refund before you re‑sell. A manager’s check handed with the Deed of Cancellation is best practice.
- Log your mails. Registry receipts and returned cards are your lifeline in litigation.
- Secure HSAC rulings on abandonment if buyer cannot be located; escrow the refund.
- Maintain transparency—updated brochures, license to sell displayed, and accurate marketing avoids later rescissions for misrepresentation (§§ 19‑20 PD 957).
12. Tax & Registration Footnotes
| Item | Effect of cancellation |
|---|---|
| Documentary Stamp Tax (DST) | No outright refund from BIR; apply for tax credit within two years of cancellation. |
| Capital Gains / VAT paid on original sale | Can often be net‑off in substituted sale if within same taxable year. |
| Real property tax (RPT) | Liability usually shifts back to developer upon reconveyance; check local ordinance. |
13. Conclusion
Condo contract cancellation in the Philippines sits at the intersection of consumer‑oriented decree (PD 957), installment‑buyer statute (RA 6552), and classical civil‑law rescission. The legislature, the HSAC, and the Supreme Court treat these rules as public policy, so private stipulations yield whenever they collide with the statute’s three imperatives:
- Due process (grace + notarized notice).
- Substantial refund (50–90 %).
- Actual tender before rights are divested.
Both buyers and developers ignore—or abbreviate—these steps at their peril. When in doubt, seek professional advice and, if you are a buyer, err on the side of filing a protective complaint with HSAC; if you are a developer, tender the refund in cash and document every step.
Disclaimer: This article is for educational purposes only and does not constitute legal advice. Laws and regulations may change; always consult a qualified Philippine lawyer or the Housing and Human Settlements Adjudication Commission for current guidance.