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Performing thorough due diligence is the most effective way to protect your financial interests when investing in real estate. Among the many documents you should review, the License to Sell (LTS) is arguably the most critical requirement for any developer.

What is a License to Sell?

The License to Sell is a government-issued certification that confirms a real estate project has been properly registered, vetted, and approved for public sale.

Under Section 4 of Presidential Decree No. 957, known as the Subdivision and Condominium Buyers’ Protective Decree, the law states:

“No owner or developer shall sell any disposable subdivision lot or condominium unit in the project without a license to sell issued by the Authority…”

This mandate ensures that the Department of Human Settlements and Urban Development (DHSUD) has evaluated the developer’s financial stability, track record, and the legitimacy of the project to protect the public from fraudulent schemes.

Verifying a Developer’s Credentials

Never rely exclusively on brochures, digital advertisements, or the word of a sales agent. Before signing a reservation agreement or releasing any payment, you must verify the project’s legal status independently.

You can verify if a project has an active, valid license by accessing the official DHSUD database: https://dhsud.gov.ph/services/list-of-license-to-sell/

The Legal Consequences of Non-Compliance

Operating without an LTS is a serious violation of the law. Pursuant to Section 39 of P.D. 957, the penalties for violating these provisions are significant:

• Rescission and Refund: Buyers who discover a developer is operating without a license have the legal right to rescind their contracts and demand a full refund of all payments made, including interest.
• Criminal and Administrative Penalties: The law stipulates:”Any person who shall violate any of the provisions of this Decree and/or any rule or regulation that may be issued pursuant to this Decree shall, upon conviction, be punished by a fine of not more than twenty thousand (P20,000.00) pesos and/or imprisonment for not more than ten (10) years…”
• Liability of Corporate Officers: The law further clarifies that for entities such as corporations or partnerships, the burden of accountability falls on leadership:”…in the case of corporations, partnerships, cooperatives, or associations, the President, Manager or Administrator or the person who has charge of the administration of the business shall be criminally responsible for any violation of this Decree and/or the rules and regulations promulgated pursuant thereto.”

Due diligence matters. Consider that there are a rising number of cases where buyers make several years of monthly payments to a real estate developer, who, despite receiving full payment, has not commenced construction nor is able to turnover units as promised. It is possible that these cases involve a real estate developer who does not have a validly-issued LTS.

DISCLAIMER: This article is for educational and informational purposes and should not be considered formal legal advice. If you need assistance in any potential conflicts with a real estate developer lacking a License to Sell in Cebu City, Mandaue, and Lapu-Lapu or anywhere in Cebu Province, consult with a legal professional.

Schedule a free 15-minute call with an attorney today.