Published — February 23, 2021
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
More on real estate aside from amortization: FORECLOSURE OF A REAL ESTATE MORTGAGE (REM)
-
A buyer is entitled to demand reimbursement of the total amount paid in case of incomplete development of the subdivision or condominium
-
A buyer may suspend amortization payments until the completion of the project
-
In case of incomplete development, the developer is at fault
May buyers of a real estate suspend amortization payments?
For a better understanding, let us take the case of Zamora Realty and Development Corporation and/or Ernesto Zamora vs. Office of the President of the Philippines and Edilberto C. Gallardo, G.R. No. 165274, November 2, 2006.
In this case, Edilberto entered into a contract to sell with Amlac Development Corporation regarding a specific lot located at Amlac-Ville Subdivision. Under the contract, Edilberto was to pay a downpayment. The balance is to be paid in installments until full settlement of the purchase price. Edilberto delivered the downpayment upon signing the contract, and several months later, the initial installment.
However, Edilberto later informed the owner/developer of his intention to stop further payments due to the latter’s non-compliance with its obligation to complete the development of the subdivision project. The owner/developer nevertheless made several demands for him to pay the monthly amortizations, which the latter ignored, insisting that he would suspend payment until the completion of the subdivision project
Edilberto then sent a letter to the Amlac-Ville Subdivision reiterating his stand to suspend the amortization payments. The realty firms still made demands on Edilberto to pay his back arrears. Eventually, Amlac/Zamora Realty sent Edilberto a notarial notice of cancellation of the contract.
To protect his right, Edilberto filed a complaint with the Housing and Land Use Regulatory Board (HLURB) assailing the notarial cancellation of the contract. He averred that his suspension of the amortization payment was justified by the non-development of the subdivision project.
To cut it short, may the buyer, Edilberto in this case, suspend amortization payments?
The Supreme Court says:
Yes.
The two remedies in case of incomplete development of the subdivision project are the following:
- reimbursement of the total amount paid, including amortization interest; or
- for the buyer to suspend amortization payments until the completion of the project.
The above-mentioned remedies are available to the prospective buyer to give effect to the law’s intent to protect the buyers from the abusive owners/developers of subdivisions. In cases of incomplete development, it is the developer who is at fault, as it would then have violated its promise to the prospective buyers to provide the necessary facilities in the subdivision. The aggrieved party, therefore is the prospective buyer because the non-fulfillment of the developers’ commitment. As such, it is but logical that the option is given to the prospective buyer, not to the developer.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
All rights reserved.
SUBSCRIBE NOW FOR MORE LEGAL UPDATES!
[email-subscribers-form id=”4″]
Dear Sir,
Hope is all is fine. My daughter purchased a Condominium with SMDC Sta Rosa Laguna.
The Equity will end by May 2022. The handover as per contract should be this August 2022 however as per advised by the developer that due to Covid 19 issue the project hand over moved to August 2023. In this matter can we Stop The Payment until the unit is finish and hand over to me buyer.
Thank you for your advise
Ramon Garcia
May I have a question about a condo in Cebu City IT Park that will not be turnover as previously agreed with Ayala Avida.
This project is supposed to be turnover by June 2022 with 20% of the down payment already satisfied by May 2022.
Now, buyers were notified that the project will be delayed and instead of the June 2022 completion it is now expected to be finished by 2nd or 3rd quarter of 2023.
Now, Ayala is demanding to buyers that they must PAY IN FULL regardless if the condo is turnover or not by June 2022. They claimed that the buyers agreed previously to the terms of the contract that since the installment agreement ends in May 2022, the FULL amount is due. And the Ayala Management stated that it does not matter whether the condo is ready to be turnover or not.
Now, we seriously disagree with their contention. We want the condo and will not cancel and we are willing to wait until completed. However, we feel that it is not proper nor legal for Ayala to demand FULL payment until they completed the project and ready to turnover. Until such time that they are ready to turnover then that is the time that we will pay the full amount. Please let us know what shall we do? Thank you.