Property Developers Strike Back: How Can Developers Assert their Rights Against Buyers During this Pandemic?

REVERSAL OF FORTUNE

Almost all real estate management cases that fall under the jurisdiction of the Department of Human Settlements and Urban Development (formerly Housing and Land Use Regulatory Board-HLURB), involve buyers against developers. There are very little to no known cases that have prospered involving the reverse: developer vs. buyer. However, there are a few special instances when the law tilts on the side of the developer. Two Marcos-era edicts provide the following remedies:

IMPLEMENTATION OF REPUBLIC ACT NO. 6552, OTHERWISE KNOWN AS THE MACEDA LAW

The Maceda Law or The Realty Installment Buyer Protection Act deals with a property buyer’s inability to pay further installments. It only covers the sale of residential houses or condominium units on installment. It does not include commercial or industrial property.

Either of two scenarios may play if a buyer fails to pay his monthly installments, one more grim than the other. If the total payments made to the developer amounts to at least two years of amortizations, the developer has to give back 50% of all payments (including downpayments, deposits, reservation fees, etc.) made by the buyer. If the buyer has not yet reached a total of at least two years of payment, he unfortunately gets nothing back and everything if forfeited. 

SECTION 20 OF PRESIDENTIAL DECREE NO. 957: PROJECT’S TIME OF COMPLETION

Section 20 of PD 957 or The Subdivision and Condominium Buyers’s Protective Decree is both one of the most feared and at the same time, most exploited provision of property developers.

Before HLURB grants a project its license to sell, the developer must first submit a timetable for the project’s completion. It is most feared because HLURB may exercise the discretion to either penalize the developer with a fine, suspend/revoke its license to sell, or both, if the project is not completed on the approved date.  

Adding insult to injury, the developer is then directed to refrain from further collecting amortization payments from its buyers. Because this serves as a devastating blow, I advise developers to apply for an extension of time to develop, citing various valid reasons for the delay.

While it is feared, Sec. 20 is also most exploited because some developers give reasons that are generic and templated such as “slow/weak market“, “force majeure“, “irreversible business losses“, etc. in applying for an extension. During the late 1990s and early 2000s, HLURB encountered an uptrend of reasons given by developers such as “asian financial crisis” and “surge in price of steel“.

architecture building city concrete
Photo by SevenStorm JUHASZIMRUS on Pexels.com
COMMUNITY QUARANTINE AND COVID19 PANDEMIC AS A VALID REASON

Even though HLURB is mandated by law to strictly implement the Time of Completion provision of PD 957, there is no hard and fast rule when it comes to exercising discretion.

Developers often ask me if the ECQ and COVID19 Pandemic in general may be used as a valid excuse for developers to apply for an extension of time to develop, and avoid being penalized for violating Sec. 20 of PD 957.

I advise my clients that similar to special circumstances such as the “asian financial crisis” and “surge in price of steel“, developers may use ECQ and COVID19 Pandemic as a valid reason to extend their time to develop, and avoid being flagged down by HLURB. They must convince HLURB however, that the above-mentioned reasons have directly stifled the company’s operations.

cameraman in protective mask and glasses filming video
Photo by Luis Quintero on Pexels.com
IS THERE A LAW PROTECTING DEVELOPERS?

Presidential Decree No. 957 is unfortunately named The Subdivision and Condominium Buyers’s Protective Decree; emphasis on the word “Buyer” and an absence of the word “Developer“. However, developers are not without recourse or remedy in certain cases, because there are still provisons of law that may be utilized in their favor.

 

Karl S. Borja is a Partner at Borja Salem Panis Baldonado and Associates. His practice includes real estate transactions, property law, and government regulatory compliance.

You may reach him at:

ksborja@bspba.law

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