ASG Law

Tag: License to Sell

  • Valid Contracts Despite Regulatory Lapses: Understanding Moldex Realty vs. Flora Saberon

    The Supreme Court ruled that a contract to sell remains valid even if the developer lacks a license to sell at the time of the agreement. This means buyers aren’t automatically entitled to nullify contracts based solely on this regulatory oversight. However, the buyer may still be entitled to certain remedies under the Maceda Law, such as a refund, if they default on payments after a certain period.

    Can a Missing License Invalidate Your Property Contract? The Case of Flora and Moldex

    Flora A. Saberon sought to acquire a lot from Moldex Realty, Inc. in Metrogate Subdivision, making installment payments from 1992 to 1996, totaling P375,295.49. Later, Flora received notices about her outstanding balance, which she disputed, claiming inconsistencies in the amounts. She then discovered Moldex didn’t have a license to sell when they initially agreed on the sale, leading her to file a complaint with the Housing and Land Use Regulatory Board (HLURB), seeking to nullify the contract. The core legal question revolves around whether the lack of a license to sell at the time of contract perfection automatically invalidates the agreement between the buyer and the developer.

    The HLURB Arbiter initially sided with Flora, declaring the contract void due to Moldex’s lack of a license to sell, citing Section 5 of Presidential Decree (PD) No. 957, which requires developers to obtain a license before selling subdivision lots. Moldex was ordered to refund Flora’s payments, plus legal interest, and to pay attorney’s fees, along with an administrative fine for violating PD 957. On appeal, the HLURB Board of Commissioners affirmed the Arbiter’s decision. They emphasized the importance of a license to sell as a prerequisite for developers, reinforcing the invalidity of the contract and the refund order. The Office of the President (OP) also upheld the ruling, citing Article 5 of the Civil Code, stating that acts against mandatory laws, like Section 5 of PD 957, are void, which further strengthened the stance that the contract was a nullity.

    Moldex argued that the absence of a license should not automatically void the contract, fearing developers might exploit this as an excuse to back out of agreements. They also pointed out that their license application was pending and later granted. Moldex elevated the case to the Court of Appeals (CA), which also sided with Flora, reinforcing the lower tribunals’ findings. The CA reasoned that Moldex’s non-compliance with Section 5 of PD 957 rendered the contract void, despite Flora’s payments and knowledge of the missing license. However, the Supreme Court reversed these decisions, holding that the lack of a license to sell does not automatically invalidate the contract to sell. The Court emphasized that while PD 957 penalizes selling without a license, it doesn’t explicitly nullify contracts entered without one.

    The Supreme Court referenced the case of Spouses Co Chien v. Sta. Lucia Realty and Development Corporation, Inc., which established the precedent that a missing license to sell does not automatically invalidate a contract. The Court also quoted the ruling, which stated that:

    “A review of the relevant provisions of P.D. 957 reveals that while the law penalizes the selling of subdivision lots and condominium units without prior issuance of a Certificate of Registration and License to Sell by the HLURB, it does not provide that the absence thereof will automatically render a contract, otherwise validly entered, void.”

    Building on this principle, the Supreme Court also addressed Flora’s claim that the contract was void due to Moldex’s failure to register the contract with the Register of Deeds, violating Section 17 of PD 957. The Court noted that Section 17, like Section 5, does not state that failure to register the contract results in its nullification. Non-registration primarily affects third parties, serving as a constructive notice under PD 1529, the Property Registration Decree.

    Despite upholding the validity of the contract, the Supreme Court recognized Flora’s entitlement to a refund under the Maceda Law (Republic Act No. 6552), which protects buyers who default on installment payments for real estate. Section 3 of the Maceda Law provides certain rights to buyers who have paid at least two years of installments, including a grace period or a cash surrender value:

    “Section 3. In all transactions or contracts involving the sale or financing of real estate on installment payments… where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments:
    (b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made…”

    Since Flora had paid installments for more than two years, the Court ruled that she was entitled to a 50% refund of her total payments, amounting to P187,647.75. Moldex was ordered to refund this amount to Flora within 15 days of the decision’s finality. Therefore, while Moldex’s violation of PD 957 did not nullify the contract, Flora was still entitled to relief under the Maceda Law due to her payments and the subsequent cancellation of the contract.

    FAQs

    What was the key issue in this case? The central issue was whether the lack of a license to sell by the developer, Moldex Realty, at the time of the contract’s perfection automatically invalidated the contract to sell with the buyer, Flora Saberon. The court ultimately ruled that it did not.
    Did Moldex Realty have a license to sell at the time of the contract? No, Moldex Realty did not have a license to sell when the contract with Flora Saberon was initially made. This was a key point of contention in the case.
    What is Presidential Decree (PD) No. 957? PD No. 957, also known as “The Subdivision and Condominium Buyers’ Protective Decree,” is a law designed to regulate the real estate industry and protect buyers from fraudulent practices by developers. It requires developers to obtain a license to sell before offering subdivision lots or condominium units to the public.
    What is the Maceda Law? The Maceda Law (Republic Act No. 6552) protects real estate installment buyers who default on their payments. It provides rights such as a grace period to pay or a refund of a portion of the payments made, depending on the number of years of installments paid.
    Was the contract between Moldex and Flora declared entirely void? No, the Supreme Court reversed the lower courts’ decisions and declared that the contract to sell was not void despite Moldex’s lack of a license. The Court found the contract valid but canceled it due to Flora’s default, entitling her to a refund under the Maceda Law.
    What refund was Flora entitled to? Under the Maceda Law, Flora was entitled to a refund of 50% of the total payments she made to Moldex. This amounted to P187,647.75.
    Does failure to register a contract invalidate it? No, the Supreme Court clarified that failure to register a contract to sell with the Registry of Deeds does not invalidate the contract between the parties. Registration primarily serves as constructive notice to third parties.
    What was the legal basis for the Supreme Court’s decision? The Supreme Court based its decision on the interpretation of PD 957 and the Maceda Law, as well as the precedent set in the Spouses Co Chien v. Sta. Lucia Realty case. The Court emphasized that while PD 957 penalizes selling without a license, it does not explicitly nullify the contract.

    This case clarifies that regulatory missteps by developers don’t automatically void property contracts. While the absence of a license to sell at the time of contract may trigger administrative penalties, it doesn’t necessarily nullify the agreement itself. Buyers in default may still have recourse through the Maceda Law, ensuring a degree of protection for payments made.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Moldex Realty, Inc. v. Saberon, G.R. No. 176289, April 08, 2013

  • Protecting Condo Buyers: When Developers Fail to Secure Proper Licenses and Complete Projects

    The Supreme Court ruled that developers can be held criminally liable under Presidential Decree No. 957 if they sell condominium units without securing the required licenses and fail to complete projects on time. This decision clarifies the scope of P.D. 957, emphasizing its protective intent for condominium buyers. The court found that engaging in any form of sale, including reservation agreements, without proper licensing constitutes a violation. This ruling empowers buyers by reinforcing the obligations of developers and providing legal recourse for non-compliance, ultimately strengthening consumer protection in real estate transactions.

    Megaworld’s Tower Troubles: Did Reservation Agreements Trigger Penalties for Unlicensed Sales and Project Delays?

    In Julieta E. Bernardo v. Andrew (Chong Lujan) L. Tan, et al., the Supreme Court grappled with the extent of developer liability under Presidential Decree No. 957, also known as “The Subdivision and Condominium Buyers’ Protective Decree.” The case arose after Julieta Bernardo sought to purchase a condominium unit in Megaworld Corporation’s Paseo Parkview Suites Tower II project. A dispute ensued when Bernardo learned that Megaworld lacked the necessary licenses when the initial agreement was made and the project faced delays. This prompted her to file a criminal complaint against the company’s officers, alleging violations of Sections 5, 17, and 20 of P.D. 957. The central legal question was whether the actions of Megaworld constituted violations of the decree, specifically concerning unlicensed sales, failure to register contracts, and project completion delays.

    The case hinges on whether Megaworld violated the law by entering into a Reservation Agreement with Bernardo before securing the necessary licenses. Section 5 of P.D. 957 explicitly states:

    SECTION 5. License to sell. – Such owner or dealer to whom has been issued a registration certificate shall not, however, be authorized to sell any subdivision lot or condominium unit in the registered project unless he shall have first obtained a license to sell the project within two weeks from the registration of such project.

    The law defines “sale” broadly, including “every disposition, or attempt to dispose, for a valuable consideration” and extends to “a contract to sell, a contract of purchase and sale, an exchange, an attempt to sell, an option of sale or purchase, a solicitation of a sale, or an offer to sell.” This broad definition is crucial because it clarifies that even preliminary agreements like reservation contracts can trigger the penalties under P.D. 957 if entered into without the requisite licenses.

    Building on this principle, the Court emphasized the protective intent of P.D. 957, designed to shield buyers from unscrupulous developers. The Supreme Court cited its previous ruling, stating:

    “One of the reasons behind the expanded meaning of the term “sale” was to deter the rising cases of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators against unknowing buyers.”

    Engaging in any form of “sale” without a license is a crime, irrespective of intent. This means that developers cannot claim good faith or argue that the subsequent acquisition of a license retroactively cures the violation. The Court underscored that these violations are malum prohibitum, meaning the act itself is prohibited, regardless of whether the conduct is inherently immoral or not.

    Furthermore, the case addresses the issue of project completion deadlines under Section 20 of P.D. 957, which requires developers to complete projects within one year from the issuance of the license or within a time frame set by the HLURB. Section 20 states:

    SECTION 20. Time of Completion. – Every owner or developer shall construct and provide the facilities, improvements, infrastructures and other forms of development, including water supply and lighting facilities, which are offered and indicated in the approved subdivision or condominium plans, brochures, prospectus, printed matters, letters or in any form of advertisement, within one year from the date of the issuance of the license for the subdivision or condominium project or such other period of time as may be fixed by the Authority.

    The Court clarified that the HLURB, not the developer or the purchase agreement, has the authority to extend project completion dates. Therefore, failure to meet the HLURB-set deadline constitutes a violation, holding developers accountable for delays that impact buyers.

    However, the Court also clarified that not all preliminary agreements trigger the registration requirements under Section 17 of P.D. 957, which mandates the registration of “all contracts to sell, deeds of sale and other similar instruments.” The Court held that an option contract, such as the Reservation Agreement in this case, does not fall under this requirement. The rationale is that an option contract merely grants the privilege to buy or sell property within a specified time and price, rather than constituting an actual sale or agreement to sell. The ruling distinguishes between instruments that definitively transfer property rights and those that merely create an option for future transactions.

    The Supreme Court ultimately reversed the Court of Appeals’ decision regarding the violations of Sections 5 and 20, emphasizing that probable cause existed to indict the respondents. It found that the trial court committed grave abuse of discretion in granting the motion to withdraw the informations related to these sections. However, the Court affirmed the CA’s decision regarding the Section 17 violation, concluding that the Reservation Agreement did not require registration. The case was remanded to the Regional Trial Court for further proceedings, underscoring the importance of holding developers accountable for complying with P.D. 957.

    This case has significant implications for both developers and condominium buyers. It reinforces the necessity of obtaining all required licenses before engaging in any form of property sale, including preliminary agreements such as reservation contracts. Developers must adhere to the HLURB-set project completion deadlines to avoid criminal liability. While option contracts do not require registration, any agreement that constitutes a sale or agreement to sell must be registered with the Register of Deeds. The decision emphasizes the protective nature of P.D. 957 and the state’s commitment to safeguarding the interests of condominium buyers.

    FAQs

    What was the key issue in this case? The key issue was whether Megaworld violated P.D. 957 by selling condominium units without the necessary licenses, failing to register the reservation agreement, and not completing the project on time. The Supreme Court clarified the scope of developer liability under the decree.
    What is Presidential Decree No. 957? P.D. 957, also known as “The Subdivision and Condominium Buyers’ Protective Decree,” is a law designed to protect individuals who purchase subdivision lots or condominium units. It regulates the real estate industry and sets standards for developers to follow.
    What does Section 5 of P.D. 957 prohibit? Section 5 of P.D. 957 prohibits owners or dealers from selling subdivision lots or condominium units without first obtaining a license to sell from the HLURB. The term “sale” is broadly defined to include any disposition or attempt to dispose of property for valuable consideration.
    Is a reservation agreement considered a ‘sale’ under P.D. 957? Yes, the Supreme Court has interpreted the definition of “sale” under P.D. 957 to include reservation agreements. This means that a developer must have the necessary licenses even when entering into preliminary agreements with potential buyers.
    What does Section 20 of P.D. 957 require? Section 20 of P.D. 957 requires developers to complete the project, including facilities and infrastructure, within one year from the date of the license issuance or within a period set by the HLURB. Failure to meet this deadline constitutes a violation.
    Can developers extend the project completion date on their own? No, developers cannot unilaterally extend the project completion date. Only the HLURB has the authority to extend the completion date if justified by circumstances such as fortuitous events or legal orders.
    Does Section 17 of P.D. 957 require the registration of all agreements? No, Section 17 of P.D. 957 requires the registration of “contracts to sell, deeds of sale, and other similar instruments” but not option contracts like reservation agreements. These agreements must involve the actual transfer of ownership or the right to ownership.
    What is the consequence of violating P.D. 957? Violating P.D. 957 can lead to criminal penalties, including fines and imprisonment. In the case of corporations, the responsible officers, such as the president, manager, or administrator, can be held criminally liable.

    In conclusion, the Supreme Court’s decision in Bernardo v. Tan serves as a reminder of the importance of strict compliance with P.D. 957. It empowers condominium buyers by holding developers accountable for securing proper licenses, adhering to project completion timelines, and registering relevant agreements. This decision reinforces consumer protection in real estate transactions.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: JULIETA E. BERNARDO v. ANDREW (CHONG LUJAN) L. TAN, G.R. No. 185491, July 11, 2012

  • Protecting Buyers: Rescission Rights in Philippine Condominium Purchases

    In the Philippines, a buyer’s right to rescind a contract for a condominium unit and demand a refund hinges on whether the developer failed to meet project completion deadlines. The Supreme Court, in G.G. Sportswear Mfg. Corp. v. World Class Properties, Inc., clarified that rescission is not automatically granted due to a developer’s initial lack of a license to sell, especially if the license is obtained before the complaint is filed. Furthermore, a buyer cannot demand rescission prematurely; it must be proven that the developer failed to complete the project within the agreed timeframe. This ruling underscores the importance of adhering to contractual obligations and statutory requirements in real estate transactions, providing clarity for both buyers and developers.

    Delayed Dreams: Can Buyers Rescind Condominium Agreements Over Completion Concerns?

    The case of G.G. Sportswear Mfg. Corp. v. World Class Properties, Inc. revolves around a dispute over a reservation agreement for a penthouse unit and parking slots in the Global Business Tower, later known as Antel Global Corporate Center. G.G. Sportswear sought to rescind the agreement, citing dissatisfaction with the project’s completion date and the absence of a formal Contract to Sell. World Class Properties countered that G.G. Sportswear had not fulfilled its payment obligations and that a license to sell had been secured before the complaint was filed. The central legal question is whether G.G. Sportswear had valid grounds to rescind the agreement and demand a refund of payments made.

    The Housing and Land Use Regulatory Board (HLURB) initially ruled in favor of G.G. Sportswear, but this decision was later modified by the HLURB Board of Commissioners, which found that the absence of a Certificate of Registration and License to Sell (CR/LS) could no longer be grounds for rescission because World Class had obtained the necessary license before the complaint was filed. Despite this, the Board still awarded a refund, citing World Class’s implied admission that it would be unable to complete the project by the initial deadline. The Office of the President (OP) upheld the Board’s decision, but the Court of Appeals (CA) reversed the OP’s ruling, denying G.G. Sportswear’s claims for rescission and refund.

    The Supreme Court affirmed the CA’s decision, emphasizing that the Board’s ruling on the non-rescissible character of the Agreement had become final because G.G. Sportswear did not appeal it. The Court also highlighted that G.G. Sportswear had no legal basis to demand rescission or a refund. Rescission is only allowed when a breach of contract is substantial and fundamental. The Court pointed out that a specific completion date was not a material consideration when G.G. Sportswear entered into the Agreement. The provisional Contract to Sell provided that the project would be ready for turnover no later than December 15, 1998. Furthermore, G.G. Sportswear had only paid 21% of the total contract price, falling short of the 30% required to trigger World Class’s obligation to execute a Contract to Sell.

    The Supreme Court further examined the relevance of Presidential Decree (P.D.) No. 957, also known as the “Subdivision and Condominium Buyers’ Protective Decree.” According to Section 23 of P.D. No. 957:

    Section 23. Non-Forfeiture of Payments. No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate.

    The Court underscored that a buyer’s cause of action against a developer for failure to develop ripens only when the developer fails to complete the project on the lapse of the completion period stated on the sale contract or the developer’s License to Sell. At the time G.G. Sportswear filed its complaint, the agreed completion date had not yet arrived, making any complaint for a refund premature. World Class completed the project in August 1999, within the time period granted by the HLURB under the second License to Sell.

    The Court emphasized that G.G. Sportswear, not World Class, had substantially breached its obligations by being remiss in the timely payment of its obligations. A substantial breach of a reciprocal obligation, like failure to pay the price in the manner prescribed by the contract, entitles the injured party to rescind the obligation. The Court also reiterated its ruling in Co Chien v. Sta. Lucia Realty & Development, Inc., stating that the requirements of Sections 4 and 5 of P.D. No. 957 are intended merely for administrative convenience and do not automatically render a contract null and void.

    The Court quoted the ruling in Co Chien v. Sta. Lucia Realty & Development, Inc.:

    The lack of certificate and registration, without more, while penalized under the law, is not in and of itself sufficient to render a contract void.

    The Supreme Court concluded that the Arbiter erred in declaring the Agreement void due to the absence of a CR/LS at the time the Agreement was executed.

    FAQs

    What was the key issue in this case? The key issue was whether G.G. Sportswear had valid grounds to rescind its reservation agreement with World Class Properties and demand a refund of payments made, based on alleged dissatisfaction with the project’s completion date and the absence of a formal Contract to Sell.
    What is a Certificate of Registration and License to Sell (CR/LS)? A CR/LS is a document required by the HLURB for developers to legally sell subdivision lots or condominium units. It ensures that the developer meets certain regulatory standards and protects the interests of buyers.
    When can a buyer rescind a contract under P.D. No. 957? Under P.D. No. 957, a buyer can rescind a contract if the developer fails to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with them. This is only a valid ground for rescission once the project is delayed beyond the agreed completion date.
    What is the significance of a completion date in a real estate contract? The completion date is a crucial element as it sets the timeline for the developer to finish the project and turn over the unit to the buyer. Failure to meet this deadline can trigger the buyer’s right to rescind the contract and demand a refund.
    What happens if a developer obtains a license to sell after the reservation agreement is signed? If a developer obtains a license to sell before the buyer files a complaint for rescission, the initial lack of a license may not be sufficient grounds for rescission. The HLURB and courts may consider the subsequent issuance of the license as a mitigating factor.
    What is the effect of a buyer’s failure to make timely payments? A buyer’s failure to make timely payments constitutes a breach of contract, which may entitle the developer to rescind the agreement and potentially forfeit the payments already made by the buyer, depending on the contract terms.
    What is the difference between a Reservation Agreement and a Contract to Sell? A Reservation Agreement is a preliminary agreement where the buyer pays a reservation fee to secure a unit, while a Contract to Sell is a more formal agreement outlining the terms and conditions of the sale, including payment terms and the developer’s obligations.
    Can a buyer demand a Contract to Sell before paying a certain percentage of the total price? Generally, a buyer cannot demand a Contract to Sell until they have paid the percentage of the total contract price specified in the Reservation Agreement, which in this case was 30%.

    The Supreme Court’s decision in G.G. Sportswear Mfg. Corp. v. World Class Properties, Inc. provides essential guidance on the rights and obligations of both buyers and developers in condominium transactions. It clarifies the circumstances under which a buyer can rescind a contract and seek a refund, emphasizing the importance of adhering to contractual terms and statutory requirements. This ruling serves as a reminder that rescission is not a readily available remedy and that both parties must fulfill their respective obligations in good faith.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: G.G. Sportswear Mfg. Corp. v. World Class Properties, Inc., G.R. No. 182720, March 02, 2010

  • Is Your Property Contract Valid? Navigating License to Sell Requirements in Philippine Real Estate Law

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    Contracts to Sell Remain Valid Despite Initial Lack of License to Sell: Key Takeaways for Property Buyers and Developers

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    TLDR: Philippine Supreme Court clarifies that a Contract to Sell for real estate is not automatically void even if the developer lacked a License to Sell at the time of signing, especially if the license is secured later and no fraud is evident. Buyers cannot simply nullify contracts based solely on this technicality, particularly if they delayed asserting their rights and the project is substantially complete.

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    Spouses Howard T. Co Chien and Susan Y. Co Chien v. Sta. Lucia Realty & Development, Inc., and Alsons Land Corporation, G.R. No. 162090, January 31, 2007

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    INTRODUCTION

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    Imagine investing your hard-earned savings into your dream home, only to later question the very validity of your purchase agreement. This scenario is not uncommon in the Philippines, where real estate transactions are governed by specific regulations designed to protect buyers. The case of Spouses Co Chien v. Sta. Lucia Realty addresses a critical question: What happens when a property developer sells lots without the required government license? This Supreme Court decision provides crucial insights into the validity of Contracts to Sell and the importance of regulatory compliance in the Philippine real estate market, offering clarity for both buyers and developers alike.

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    In this case, Spouses Co Chien sought to invalidate their Contract to Sell with Sta. Lucia Realty and Alsons Land Corporation because the developers lacked a License to Sell and Certificate of Registration from the Housing and Land Use Regulatory Board (HLURB) at the time the contract was signed. The Supreme Court ultimately ruled in favor of the developers, upholding the contract’s validity. Let’s delve into the details of this landmark case and understand its implications.

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    LEGAL CONTEXT: PRESIDENTIAL DECREE NO. 957 AND PROTECTING PROPERTY BUYERS

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    The legal backbone of this case is Presidential Decree No. 957 (PD 957), also known as the Subdivision and Condominium Buyers’ Protective Decree. This law was enacted to safeguard the interests of property buyers from unscrupulous developers. Recognizing the alarming rise of fraudulent practices in real estate, PD 957 mandates strict regulations for subdivision and condominium projects.

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    Two key provisions of PD 957 are central to the Co Chien case: Sections 4 and 5. Section 4 mandates the registration of subdivision and condominium projects with the HLURB. Crucially, Section 5 explicitly requires developers to obtain a License to Sell before they can market and sell lots or units.

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    To understand the weight of these requirements, let’s look at the exact wording of these sections:

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    Section 4. Registration of Projects

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    “The owner or the real estate dealer interested in the sale of lots or units, respectively, in such subdivision project or condominium project shall register the project with the Authority by filing therewith a sworn registration statement containing the following information… The subdivision project of the condominium project shall be deemed registered upon completion of the above publication requirement. The fact of such registration shall be evidenced by a registration certificate to be issued to the applicant-owner or dealer.”

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    Section 5. License to Sell

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    “Such owner or dealer to whom has been issued a registration certificate shall not, however, be authorized to sell any subdivision lot or condominium unit in the registered project unless he shall have first obtained a license to sell the project within two weeks from the registration of such project. The Authority, upon proper application therefor, shall issue to such owner or dealer of a registered project a license to sell the project if, after an examination of the registration statement filed by said owner or dealer and all the pertinent documents attached thereto, he is convinced that the owner or dealer is of good repute, that his business is financially stable, and that the proposed sale of the subdivision lots or condominium units to the public would not be fraudulent.”

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    These provisions are designed to ensure that developers are legitimate, financially sound, and their projects are properly vetted before they can offer properties to the public. A Certificate of Registration signifies that the project itself is registered with HLURB after meeting certain requirements. A License to Sell, on the other hand, authorizes the developer to actually sell lots or units within that registered project, confirming their reputability and the project’s viability.

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    CASE BREAKDOWN: THE CO CHIEN’S QUEST FOR A REFUND

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    In December 1995, Spouses Howard and Susan Co Chien entered into a Contract to Sell with Sta. Lucia Realty and Alsons Land Corporation for a lot in Eagle Ridge Golf and Residential Estates. They paid a significant down payment after receiving a 10% discount. However, at the time of the contract, Sta. Lucia and Alsons did not possess the required License to Sell and Certificate of Registration from HLURB. These licenses were only issued in July 1997, about a year and a half later.

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    In January 1998, the developers informed the Spouses Co Chien that the title was ready for delivery and demanded the remaining balance. Instead of paying, the Spouses Co Chien attempted to renegotiate the deal, seeking a bigger discount or a better lot. When negotiations failed and they didn’t pay the balance within the stipulated seven days, the developers forfeited the 10% discount, as per their agreement.

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    Fast forward to June 1999, the Spouses Co Chien, now armed with the knowledge that the developers lacked the licenses at the time of the contract, demanded a refund of their down payment. They argued that the Contract to Sell was void from the beginning due to this regulatory lapse. When Sta. Lucia and Alsons refused, the Spouses Co Chien filed a complaint with the HLURB.

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    Initially, the HLURB Arbiter sided with the Spouses Co Chien, ordering a refund with interest and attorney’s fees, declaring the contract null and void. However, this decision was overturned on appeal by the HLURB Board of Commissioners, which validated the Contract to Sell but fined the developers for operating without the necessary licenses initially.

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    The legal battle continued through the Office of the President and the Court of Appeals, both of which affirmed the HLURB Board’s decision. Finally, the case reached the Supreme Court. The central question before the Supreme Court was: Does the absence of a License to Sell and Certificate of Registration at the time of contract execution automatically render a Contract to Sell void?

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    The Supreme Court ruled decisively against the Spouses Co Chien. Justice Puno, writing for the First Division, emphasized that while PD 957 penalizes selling without a license, it does not explicitly state that contracts entered without such licenses are automatically void. The Court highlighted the principle that