Condominium Reservation Fee Refunds in the Philippines

(A comprehensive legal primer as of 21 April 2025)

1. What exactly is the “reservation fee”?

Feature	Reservation fee	Earnest money (Art. 1592 Civil Code)	Option money (Art. 1324 Civil Code)
Purpose	“Holds” a specific unit for a short, stated period while buyer reviews and completes requirements	Part of the purchase price; proof of perfected contract of sale	Consideration for an independent option to buy; seller is bound while buyer may walk away
Typical amount (practice)	₱10 000 – ₱100 000 (1 – 5 % of list price)	Negotiated	Negotiated
Governing contract	Reservation Agreement (usually 2–5 pages, pre‑printed)	Contract of Sale / Deed of Absolute Sale	Option Contract

Most developers describe the reservation fee as “non‑refundable, non‑transferable” if the buyer backs out. Legally, that stipulation is not absolute; public policy and the Buyer’s Protective Decree (PD 957) override manifestly unconscionable forfeitures.

2. Governing statutes & regulations

PD 957 (Subdivision and Condominium Buyers Protective Decree, 1976)
Sections 20–23 give the Department of Human Settlements and Urban Development (DHSUD, formerly HLURB) power to regulate condominium pre‑sale, impose penalties, and adjudicate refund disputes.
RA 6552, the “Maceda Law” (Realty Installment Buyer Protection Act, 1972)
Applies to residential real estate sold on installment, including condominium units. It grants a cash‑surrender value—i.e., a refund—after at least 24 monthly installments have been paid.
Civil Code
Articles 1318, 1479, 1482, 1592–1599 on consent, earnest money, and remedies for breach.
RA 7394 (Consumer Act) & RA 10667 (Competition Act)
Protect buyers against deceptive sales acts.
DHSUD/HLURB Rules
- Revised Implementing Rules for PD 957 (2021)
  • Sec. 23: failure to secure a License to Sell or to deliver the unit on schedule → full refund of all amounts paid including reservation fee, plus legal interest.
- Board Res. No. 922‑14 (computation of penalties & interest).
BIR Revenue Regulations (for documentary stamp tax/VAT on rescission).

3. When is the buyer entitled to a refund of the reservation fee?

Scenario	Statutory / contractual basis	What must be refunded	Practical notes
A. Developer fails to obtain a DHSUD License to Sell within the reservation period	PD 957 § 5; HLURB Adm. Case doctrine	100 % of all payments (reservation + any installments) plus 12 %/year legal interest from date of demand	Strict liability; buyer need not show fault
B. Material change or misrepresentation about size, layout, amenities, or project completion	Civil Code Arts. 1170, 1338; PD 957 § 23	Full refund; buyer may also recover damages	Proven by brochures, ads, or website captures
C. Construction delay beyond 1 year of promised turnover	PD 957 § 23; DHSUD Res. 770‑2021	Full refund; or buyer may choose to wait and demand penalty interest
D. Buyer paid ≥ 24 monthly installments and opts to cancel	Maceda Law	50 % of total payments made; +5 % per year beyond 5th year, max 90 %	Reservation fee counts toward “total payments”
E. Loan disapproval despite buyer’s diligence (bank financing route)	Common stipulation in Reservation/CTS; Art. 1306 freedom to contract	Varies: usually full refund less admin fee (₱10 000–₱50 000)	Courts will strike down a forfeiture if disproportionate
F. Developer unilaterally cancels the reservation before contract signing	Arts. 1189, 1191 CC; PD 957 in relation to consumer protection	100 % refund + atty.’s fees if through fault or bad faith

Key doctrine: A forfeiture clause is enforceable only when it is reasonable. In Philippine National Bank v. CA (G.R. 84607, 18 May 1992) the Court voided forfeiture “out of all proportion to the amount of damages actually suffered.”

4. When may the developer validly keep the reservation fee?

Buyer’s unilateral withdrawal within the reservation period and before paying two years of installments, provided:
1. The Reservation Agreement clearly labels the amount as non‑refundable consideration for an option to buy (Art. 1324), and
2. The forfeited amount is not unconscionable (generally ≤ 10 % of contract price).
Cooling‑off lapse: Some projects grant a 7‑ to 15‑day cooling‑off period. After that, cancellation triggers forfeiture.
Breach of Reservation Agreement (falsified documents, check bounce, failure to submit requirements).

Even then, DHSUD has repeatedly ruled that if the unit is re‑sold promptly the seller recovered any loss and must still return all or part of the fee (Skyline Realty v. Torres, HLURB Case No. 11‑04‑2192).

5. Procedure for demanding a refund

Letter of Cancellation & Refund Demand
- Address to the developer’s Customer Care / Legal.
- Attach: reservation agreement, official receipts, proof of payments, ID.
- Cite PD 957, Maceda (if applicable), and Civil Code articles.
File a Complaint with DHSUD Adjudication Commission (optional but recommended if no action within 30 days)
- Venue: Regional Field Office where the project is located.
- Filing fee: ≈ ₱3 000 – ₱5 000 (based on claim).
- Relief prayed: rescission, refund, interest, moral damages, atty.’s fees.
DHSUD Mediation → Formal Hearing → Decision / Writ of Execution.
Developers who fail to comply may be fined up to ₱50 000 per day and their licenses suspended.
Civil Action in RTC (optional) if claim exceeds ₱2 million or involves ancillary damages the buyer prefers to litigate.

6. Timelines

Stage	Governing rule	Typical duration
Developer to act on written demand	PD 957 IRR	30 days
DHSUD Mediation	DHSUD Rules	30–60 days
Decision to refund payment	Upon finality	immediate, but in practice 60–90 days release

7. Tax & accounting effects

VAT & DST paid on a rescinded sale may be credited or refunded under BIR RR 13‑99 § 12.
Developers reverse the sale in their books; buyers issuing post‑dated checks must stop payment to avoid B.P. 22 liability.

8. Jurisprudence snapshot

Case	G.R. No. & Date	Take‑away
Coastal Bay Realty v. Urdaneta	G.R. 194064 (17 Feb 2021)	PD 957 refund covers all payments if the developer is in substantial delay.
Spouses Abella v. Spouses Concepcion	G.R. 191145 (7 Apr 2014)	Maceda Law applies to condo installment buyers; reservation fee included in “total payments.”
Spouses Chua v. Timan Realty	HLURB EN Banc, Res. 848‑18	Flat “non‑refundable” clause struck down as unconscionable; ordered 100 % refund.

9. Practical tips for buyers

Ask for an express “loan disapproval = full refund” clause before paying the fee.
Pay only after verifying the project’s License to Sell on the DHSUD website.
Keep every Official Receipt; screenshots of online postings can prove misrepresentation.
If negotiating a voluntary cancellation, offer to let the developer deduct “processing costs” (₱5 000–₱20 000) in exchange for prompt release of funds.
Send refund demands by registered mail or courier for proof of service.

10. Developer compliance checklist (for sellers)

Provide a standard reservation agreement pre‑approved by DHSUD.
State the exact refund formula and timeline.
Escrow reservation fees in a separate account until CTS is executed.
Issue refund checks jointly to all buyers if multiple purchasers appear on the reservation form.
Report rescinded reservations in the Quarterly Project Status Report to DHSUD.

11. Penalties for non‑compliance

Violation	Penalty (PD 957 IRR, 2021)
Failure to refund within 30 days of final DHSUD order	Fine up to ₱50 000/day
Continuing to market a unit with forfeited reservation but without executing a CTS	Suspension / Revocation of License to Sell
Refusal to mediate	Contempt, administrative fines, endorsement to DOJ

12. Frequently asked questions

Is the reservation fee always deductible from the down‑payment?

Yes, unless the contract calls it “option money.” Even then, DHSUD requires disclosure and may still treat it as part of the price.
Does Maceda Law protect buyers who have paid less than two years?

No cash‑surrender value is mandated, but PD 957 still lets DHSUD award refunds if the seller is at fault.
Can I assign my reservation to someone else?

Only if the Reservation Agreement allows assignment or you secure written developer consent; a ₱5 000–₱10 000 transfer fee is typical.
What interest rate applies to delayed refunds?

Courts and DHSUD use 12 % p.a. (legal interest prior to 1 July 2013) or 6 % p.a. thereafter, depending on the period covered (Nacar v. Gallery Frames, G.R. 189871, 13 Aug 2013).

Conclusion

While marketing materials often trumpet “non‑refundable” reservation fees, Philippine law—anchored on PD 957, the Maceda Law, and consumer‑protection principles—tilts strongly in favor of the buyer. A developer may retain the fee only when a truly independent option contract exists and no statutory policy is violated. Conversely, delays, misrepresentations, or failure to obtain regulatory approvals entitle the buyer to a full or substantial refund, usually with interest. Prompt written demand, careful record‑keeping, and, when needed, recourse to DHSUD adjudication are the keys to enforcing these rights.

Disclaimer: This article is for general informational purposes and is not a substitute for individualized legal advice. Laws, regulations, and jurisprudence continue to evolve; consult a Philippine lawyer or DHSUD for guidance on your specific facts.