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PD 957: The Subdivision and Condominium Buyers' Protective Decree

by Administrator

PD 957 Condominium Buyers Protective Degree

    WHEREAS, it is the policy of the State to afford its inhabitants the requirements of decent human settlement and to provide them with ample opportunities for improving their quality of life;

     WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems, and other similar basic requirements, thus endangering the health and safety of home and lot buyers;

     WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles free from liens and encumbrances, and to pay real estate taxes, and fraudulent sales of the same subdivision lots to different innocent purchasers for value;

     WHEREAS, these acts not only undermine the land and housing program of the government but also defeat the objectives of the New Society, particularly the promotion of peace and order and the enhancement of the economic, social and moral condition of the Filipino people;

     WHEREAS, this state of affairs has rendered it imperative that the real estate subdivision and condominium businesses be closely supervised and regulated, and that penalties be imposed on fraudulent practices and manipulations committed in connection therewith.

     NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby decree and order:

Title I


     Sec. 1. Title - This Decree shall be known as THE SUBDIVISION AND CONDOMINIUM BUYERS' PROTECTIVE DECREE.

     Sec. 2. Definition of Terms - When used in this Decree, the following terms shall, unless the context otherwise indicates, have the following respective meanings:

     a) Person. - "Person" shall mean a natural or a juridical person. A juridical person refers to a business firm whether a corporation, partnership, cooperative or associations or a single proprietorship.

     b) Sale or sell. - "Sale" or "sell" shall include every disposition, or attempt to dispose, for a valuable consideration, of a subdivision lot, including the building and other improvements thereof, if any, in a subdivision project or a condominium unit in a condominium project. "Sale" and "sell" shall also include 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, directly or by an agent, or by a circular, letter, advertisement or otherwise.

     A privilege given to a member of a cooperative, corporation, partnership, or any association and/or the issuance of a certificate or receipt evidencing or giving the right of participation in, or right to, any land in consideration of payment of the membership fee or dues, shall be deemed a sale within the meaning of this definition.

     c) Buy and purchase. - The "buy" and "purchase" shall include any contract to buy, purchase, or otherwise acquire for a valuable consideration a subdivision lot, including the building and other improvements, if any, in a subdivision project or a condominium unit in a condominium project.

     d) Subdivision project. - "Subdivision project" shall mean a tract or a parcel of land registered under Act No. 496 which is partitioned primarily for residential purposes into individual lots with or without improvements thereon, and offered to the public for sale, in cash or in installment terms. It shall include all residential, commercial, industrial and recreational areas as well as open spaces and other community and public areas in the project.

     e) Subdivision lot. - "Subdivision lot" shall mean any of the lots, whether residential, commercial, industrial, or recreational, in a subdivision project.

     f) Complex subdivision plan. - "Complex subdivision plan" shall mean a subdivision plan of a registered land wherein a street, passageway or open space is delineated on the plan.

     g) Condominium project. - "Condominium project" shall mean the entire parcel of real property divided or to be divided primarily for residential purposes into condominium units, including all structures thereon.

     h) Condominium unit. - "Condominium unit" shall mean a part of the condominium project intended for any type of independent use or ownership, including one or more rooms or spaces located in one or more floors (or part of parts of floors) in a building or buildings and such accessories as may be appended thereto.

     i) Owner. - "Owner" shall refer to the registered owner of the land subject of a subdivision or a condominium project.

     j) Developer. - "Developer" shall mean the person who develops or improves the subdivision project or condominium project for and in behalf of the owner thereof.

     k) Dealer. - "Dealer" shall mean any person directly engaged as principal in the business of buying, selling or exchanging real estate whether on a full-time or part-time basis.

     l) Broker. - "Broker" shall mean any person who, for commission or other compensation, undertakes to sell or negotiate the sale of a real estate belonging to another.

     m) Salesman. - "Salesman" shall refer to the person regularly employed by a broker to perform, for and in his behalf, any or all functions of a real estate broker.

     n) Authority. - "Authority" shall mean the National Housing Authority.

Title II


     Sec. 3. National Housing Authority - The National Housing Authority shall have exclusive jurisdiction to regulate the real estate trade and business in accordance with the provisions of this Decree.

     Sec. 4. Registration of Projects - The registered owner of a parcel of land who wishes to convert the same into a subdivision project shall submit his subdivision plan to the Authority which shall act upon and approve the same, upon a finding that the plan complies with the Subdivision Standards and Regulations enforceable at the time the plan is submitted. The same procedure shall be followed in the case of a plan for a condominium project except that, in addition, said Authority shall act upon and approve the plan with respect to the building or buildings included in the condominium project in accordance with the National Building Code (R.A. No. 6541).

     The subdivision plan, as so approved, shall then be submitted to the Director of Lands for approval in accordance with the procedure prescribed in Section 44 of the Land Registration Act (Act No. 496, as amended by R.A. No. 440): Provided, that it case of complex subdivision plans, court approval shall no longer be required. The condominium plan as likewise so approved, shall be submitted to the Register of Deeds of the province or city in which the property lies and the same shall be acted upon subject to the conditions and in accordance with the procedure prescribed in Section 4 of the Condominium Act (R.A. No. 4726).

     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:

a) Name of the owner;
b) The location of the owner's principal business office, and if the owner is a non-resident Filipino, the name and address of his agent or representative in the Philippines is authorized to receive notice;
c) The names and addresses of all the directors and officers of the business firm, if the owner be a corporation, association, trust, or other entity, and of all the partners, if it be a partnership;
d) The general character of the business actually transacted or to be transacted by the owner; and
e) A statement of the capitalization of the owner, including the authorized and outstanding amounts of its capital stock and the proportion thereof which is paid-up.

     The following documents shall be attached to the registration statement:

a) A copy of the subdivision plan or condominium plan as approved in accordance with the first and second paragraphs of this section.
b) A copy of any circular, prospectus, brochure, advertisement, letter, or communication to be used for the public offering of the subdivision lots or condominium units;
c) In case of a business firm, a balance sheet showing the amount and general character of its assets and liabilities and a copy of its articles of incorporation or articles of partnership or association, as the case may be, with all the amendments thereof and existing by-laws or instruments corresponding thereto.
d) A title to the property which is free from all liens and encumbrances: Provided, however, that in case any subdivision lot or condominium unit is mortgaged, it is sufficient if the instrument of mortgage contains a stipulation that the mortgagee shall release the mortgage on any subdivision lot or condominium unit as soon as the full purchase price for the same is paid by the buyer.

     The person filing the registration statement shall pay the registration fees prescribed therefor by the Authority.
Thereupon, the Authority shall immediately cause to be published a notice of the filing of the registration statement at the expense of the applicant-owner or dealer, in two newspapers general circulation, one published in English and another in Pilipino, once a week for two consecutive weeks, reciting that a registration statement for the sale of subdivision lots or condominium units has been filed in the National Housing Authority; that the aforesaid registration statement, as well as the papers attached thereto, are open to inspection during business hours by interested parties, under such regulations as the Authority may impose; and that copies thereof shall be furnished to any party upon payment of the proper fees.

     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.

     Sec. 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 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.

     Sec. 6. Performance Bond. - No license to sell subdivision lots or condominium units shall be issued by the Authority under Section 5 of this Decree unless the owner or dealer shall have filed an adequate performance bond approved by said Authority to guarantee the construction and maintenance of the roads, gutters, drainage, sewerage, water system, lighting systems, and full development of the subdivision project or the condominium project and the compliance by the owner or dealer with the applicable laws and rules and regulations.

     The performance bond shall be executed in favor of the Republic of the Philippines and shall authorize the Authority to use the proceeds thereof for the purposes of its undertaking in case of forfeiture as provided in this Decree.

     Sec. 7. Exempt transactions. - A license to sell and performance bond shall not be required in any of the following transactions:

a) Sale of a subdivision lot resulting from the partition of land among co-owners and co-heirs.
b) Sale or transfer of a subdivision lot by the original purchaser thereof and any subsequent sale of the same lot.
c) Sale of a subdivision lot or a condominium unit by or for the account of a mortgagee in the ordinary course of business when necessary to liquidate a bona fide debt.

     Sec. 8. Suspension of license to sell. - Upon verified complaint by a buyer of a subdivision lot or a condominium unit in any interested party, the Authority may, in its discretion, immediately suspend the owner's or dealer's license to sell pending investigation and hearing of the case as provided in Section 13 hereof.

     The Authority may motu proprio suspend the license to sell if, in its opinion, any information in the registration statement filed by the owner or dealer is or has become misleading, incorrect, inadequate or incomplete or the sale or offering for a sale of the subdivision or condominium project may work or tend to work a fraud upon prospective buyers.

     The suspension order may be lifted if, after notice and hearing, the Authority is convinced that the registration statement is accurate or that any deficiency therein has been corrected or supplemented or that the sale to the public of the subdivision or condominium project will neither be fraudulent not result in fraud. It shall also be lifted upon dismissal of the complaint for lack of legal basis.

     Until the final entry of an order of suspension, the suspension of the right to sell the project, though binding upon all persons notified thereof, shall be deemed confidential unless it shall appear that the order of suspension has in the meantime been violated.

     Sec. 9. Revocation of registration certificate and license to sell. - The Authority may, motu proprio or upon verified complaint filed by a buyer of a subdivision lot or condominium unit, revoke the registration of any subdivision project or condominium project and the license to sell any subdivision lot or condominium unit in said project by issuing an order to this effect, with his findings in respect thereto, if upon examination into the affairs of the owner or dealer during a hearing as provided for in Section 14 hereof, if shall appear there is satisfactory evidence that the said owner or dealer:

a) Is insolvent; or
b) has violated any of the provisions of this Decree or any applicable rule or regulation of the Authority, or any undertaking of his/its performance bond; or
c) Has been or is engaged or is about to engage in fraudulent transactions; or
d) Has made any misrepresentation in any prospectus, brochure, circular or other literature about the subdivision project or condominium project that has been distributed to prospective buyers; or
e) Is of bad business repute; or
f) Does not conduct his business in accordance with law or sound business principles.
Where the owner or dealer is a partnership or corporation or an unincorporated association, it shall be sufficient cause for cancellation of its registration certificate and its license to sell, if any member of such partnership or any officer or director of such corporation or association has been guilty of any act or omission which would be cause for refusing or revoking the registration of an individual dealer, broker or salesman as provided in Section 11 hereof.

     Sec. 10. Registers of subdivision lots and condominium units. - A record of subdivision lots and condominium units shall be kept in the Authority wherein shall be entered all orders of the Authority affecting the condition or status thereof. The registers of subdivision lots and condominium units shall be open to public inspection subject to such reasonable rules as the Authority may prescribe.

Title III


     Sec. 11. Registration of dealers, brokers and salesmen. - No real estate dealer, broker or salesman shall engage in the business of selling subdivision lots or condominium units unless he has registered himself with the Authority in accordance with the provisions of this section.

     If the Authority shall find that the applicant is of good repute and has complied with the applicable rules of the Authority, including the payment of the prescribed fee, he shall register such applicant as a dealer, broker or salesman upon filing a bond, or other security in lieu thereof, in such sum as may be fixed by the Authority conditioned upon his faithful compliance with the provisions of this Decree: Provided, that the registration of a salesman shall cease upon the termination of his employment with a dealer or broker.

     Every registration under this section shall expire on the thirty-first day of December of each year. Renewal of registration for the succeeding year shall be granted upon written application therefor made not less than thirty nor more than sixty days before the first day of the ensuing year and upon payment of the prescribed fee, without the necessity of filing further statements or information, unless specifically required by the Authority. All applications filed beyond said period shall be treated as original applications.

     The names and addresses of all persons registered as dealers, brokers, or salesmen shall be recorded in a Register of Brokers, Dealers and Salesmen kept in the Authority which shall be open to public inspection.

     Sec. 12. Revocation of registration as dealers, brokers or salesmen. - Registration under the preceding section may be refused or any registration granted thereunder, revoked by the Authority if, after reasonable notice and hearing, it shall determine that such applicant or registrant:

1) Has violated any provision of this Decree or any rule or regulation made hereunder; or
2) Has made a material false statement in his application for registration; or
3) Has been guilty of a fraudulent act in connection with any sale of a subdivision lot or condominium unit; or
4) Has demonstrated his unworthiness to transact the business of dealer, broker, or salesman, as the case may be.

     In case of charges against a salesman, notice thereof shall also be given the broker or dealer employing such salesman.
Pending hearing of the case, the Authority shall have the power to order the suspension of the dealer's, broker's, of salesman's registration; provided, that such order shall state the cause for the suspension

     The suspension or revocation of the registration of a dealer or broker shall carry with it all the suspension or revocation of the registrations of all his salesmen.

Title IV


     Sec. 13. Hearing. - In the hearing for determining the existence of any ground or grounds for the suspension and/or revocation of registration certificate and license to sell as provided in Section 8 and 9 hereof, the following shall be complied with:

a) Notice. - No such hearing shall proceed unless the respondent is furnished with a copy of the complaint against him or is notified in writing of the purpose of such hearing.
b) Venue. - The hearing may be held before the officer or officers designated by the Authority on the date and place specified in the notice.
c) Nature of proceeding. - The proceedings shall be non-litigious and summary in nature without regard to legal technicalities obtaining in courts of law. The Rules of court shall not apply in said hearing except by analogy or in a suppletory character and whenever practicable and convenient.
d) Power incidental to the hearing. - For the purpose of the hearing or other proceeding under this Decree, the officer or officers designated to hear the complaint shall have the power to administer oaths, subpoena witnesses, conduct ocular inspections, take depositions, and require the production of any book, paper, correspondence, memorandum, or other record which are deemed relevant or material to the inquiry.

     Sec. 14. Contempt.

a) Direct contempt. - The officer or officers designated by the Authority to hear the complaint may summarily adjudge in direct contempt any person guilty of misbehavior in the presence of or so near the said hearing officials as to obstruct or interrupt the proceedings before the same or of refusal to be sworn or to answer as a witness or to subscribe an affidavit or deposition when lawfully required to do so. The person found guilty of direct contempt under this section shall be punished by a fine not exceeding Fifty (P50.00) Pesos or imprisonment not exceeding five (5) days, or both. a
b) Indirect contempt. - The officer or officers designated to hear the complaint may also adjudge any person in indirect contempt on grounds and in the manner prescribed in Rule 71 of the Revised Rules of Court.

     Sec. 15. Decision. - The case shall be decided within thirty (30) days from the time the same is submitted for decision. The Decision may order the revocation of the registration of the subdivision or condominium


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