License to Sell: What Developers Must Secure
Understand the registration and license to sell requirements under PD 957. Learn what developers must file, the performance bond requirement, and which transactions are exempt.
Project Registration with the Authority
“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.”
What This Means
Before a developer can sell any subdivision lot or condominium unit, the project must first be registered with the government authority (now DHSUD, formerly HLURB). The developer files a sworn registration statement with basic business information, plus supporting documents including the approved subdivision/condominium plan, advertising materials, financial statements, and a clean title.
- Registration is mandatory before any sale can take place
- A sworn registration statement with business details must be filed
- Supporting documents include approved plans, advertising materials, and balance sheets
- The title must be free from liens and encumbrances
- If lots are mortgaged, the mortgage must allow release upon full buyer payment
Real-World Scenario
Developer ABC Corporation starts pre-selling subdivision lots through social media ads. They have an approved subdivision plan from the local government but have not yet filed a registration statement with DHSUD.
Can Developer ABC legally sell these lots?
License to Sell Requirement
“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.”
What This Means
Registration alone is not enough. The developer must also obtain a separate License to Sell within two weeks of registration. The Authority evaluates three things: the developer's reputation, financial stability, and whether the sale would be fraudulent. Without this license, no sale. not even a reservation or contract to sell. is legally permitted.
- A License to Sell is separate from and in addition to project registration
- Must be obtained within 2 weeks from project registration
- Authority checks: good repute, financial stability, and non-fraudulent intent
- No lot or unit can be sold without this license. even pre-selling is covered
- The broad definition of "sale" includes contracts to sell, options, and solicitations
Real-World Scenario
Greenfield Realty obtained their registration certificate for a new condominium project on January 15. On January 20, they began accepting reservation fees from buyers, reasoning that reservations are "not yet sales." They apply for the License to Sell on February 1.
Is Greenfield Realty compliant with PD 957?
Performance Bond & Exempt Transactions
“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.”
What This Means
The performance bond is the government's insurance policy for buyers. It guarantees that the developer will actually build the roads, drainage, water systems, lighting, and other promised infrastructure. If the developer fails, the bond can be forfeited and used to complete the development. However, certain transactions. like sales between co-owners/co-heirs, resales by original buyers, and foreclosure sales. are exempt from both the license and bond requirements.
- Performance bond guarantees full development of infrastructure
- Covers roads, gutters, drainage, sewerage, water, and lighting systems
- Bond is executed in favor of the Republic of the Philippines
- Exempt transactions: partition among co-owners/co-heirs
- Also exempt: resale by original buyer and mortgagee foreclosure sales
Real-World Scenario
Maria bought a subdivision lot from Developer XYZ five years ago. She now wants to sell the lot to her colleague Juan at a profit. The lot has not been fully developed. roads and drainage are still incomplete.
Does Maria need a License to Sell and performance bond to sell her lot to Juan?
Frequently Asked Questions
What is a License to Sell (LTS) under PD 957?
A License to Sell is a government permit issued by DHSUD (formerly HLURB) that authorizes a developer to sell subdivision lots or condominium units. It is separate from project registration and requires the developer to demonstrate good repute, financial stability, and non-fraudulent intent, plus post a performance bond.
Can a developer sell subdivision lots without a License to Sell?
No. Under Sections 4-5 of PD 957, selling without a License to Sell is illegal. The broad definition of "sale" under Section 2 includes contracts to sell, reservations, options, solicitations, and even advertisements offering lots for sale. Violations carry fines and imprisonment under Section 39.
What does the performance bond cover under PD 957?
Under Section 6, the performance bond guarantees the construction and maintenance of roads, gutters, drainage, sewerage, water systems, lighting systems, and full development of the project. If the developer defaults, the bond can be forfeited and the proceeds used to complete development.