Penalties, Enforcement & Government Take-Over
Understand the penalties for PD 957 violations, the government's power to suspend or revoke licenses, and the Authority's take-over power when developers fail to deliver.
Suspension & Revocation of 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.”
What This Means
DHSUD can both suspend (Section 8) and permanently revoke (Section 9) a developer's license to sell. Suspension can happen immediately upon a verified buyer complaint, even before a hearing. Revocation requires a hearing but covers broad grounds. from insolvency and fraud to simply conducting business not "in accordance with law or sound business principles." The Authority can also act on its own initiative (motu proprio), without waiting for a complaint.
- Suspension can be immediate pending investigation. no hearing required first
- Revocation requires a hearing with six broad grounds
- Authority can act motu proprio (on its own) or upon buyer complaint
- Grounds include: insolvency, violations, fraud, misrepresentations, bad repute
- For corporations: actions of any officer or director can trigger revocation
Real-World Scenario
Builder's Corp has been selling lots in Phase 2 of their subdivision despite receiving a suspension order from DHSUD on their License to Sell due to buyer complaints about Phase 1. They argue that the suspension only covers Phase 1 and they can continue selling Phase 2.
Is Builder's Corp correct?
Fines & Criminal Penalties
“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 of not more than ten years: Provided, That in the case of corporations, partnership, 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.”
What This Means
PD 957 carries serious criminal penalties: fines up to P20,000 and/or imprisonment up to 10 years for ANY violation. For corporate developers, the law pierces the corporate veil. the president, manager, or administrator is personally and criminally liable. There are also administrative fines (Section 38) of up to P10,000 that DHSUD can impose directly without going to court. Additionally, controlling persons are jointly and severally liable (Section 40).
- Criminal: fine up to P20,000 and/or imprisonment up to 10 years
- Administrative: DHSUD can impose fines up to P10,000 without court action
- Corporate officers (President, Manager, Administrator) are PERSONALLY liable
- Controlling persons are jointly and severally liable (Section 40)
- Penalties apply to violations of PD 957 AND its implementing rules
Real-World Scenario
A condominium developer sold 50 units without a License to Sell, failed to deliver promised amenities, and charged illegal "title processing fees." The developer is a corporation. The company president claims he "didn't personally do these things. the sales team did."
Can the president be held personally liable?
Government Take-Over Power
“The Authority, may take over or cause the development and completion of the subdivision or condominium project at the expense of the owner or developer, jointly and severally, in cases where the owner or developer has refused or failed to develop or complete the development of the project as provided for in this Decree. The Authority may, after such take-over, demand, collect and receive from the buyers the installment payments due on the lots, which shall be utilized for the development of the subdivision.”
What This Means
This is the nuclear option. When a developer refuses or fails to complete a project, DHSUD can take over the entire development. at the developer's expense. After take-over, the Authority collects installment payments directly from buyers and uses those funds to complete the project. The developer is jointly and severally liable for all costs. This power ensures that even if a developer abandons a project, the government can step in to protect buyers' investments.
- DHSUD can take over development if the developer refuses or fails to complete
- All costs are charged to the developer (jointly and severally)
- After take-over, buyer installments go directly to the Authority
- Funds collected are used exclusively for completing the development
- This is a remedy of last resort for abandoned or failed projects
Real-World Scenario
Five years after obtaining a License to Sell, Developer Golden Acres has sold 150 lots but only completed 30% of the promised infrastructure. The developer's bank accounts are nearly empty. They tell buyers: "We don't have funds to continue. You can stop paying if you want." Buyers have collectively paid over P75 million.
What recourse do the buyers have?
Frequently Asked Questions
What are the penalties for selling subdivision lots without a License to Sell?
Under Section 39 of PD 957, any violation carries a fine of up to P20,000 and/or imprisonment of up to 10 years. Additionally, DHSUD can impose administrative fines of up to P10,000 under Section 38. For corporations, the president, manager, or administrator is personally and criminally responsible.
Can the government take over a subdivision project from a developer?
Yes. Under Section 35, DHSUD can take over the development and completion of a subdivision or condominium project when the developer has refused or failed to complete it. All costs are charged to the developer. After take-over, buyer installments go directly to the Authority for use in completing the project.
Can a developer's License to Sell be suspended without a hearing?
Yes. Under Section 8, DHSUD can immediately suspend a developer's License to Sell upon a verified buyer complaint, pending investigation and hearing. This protects prospective buyers from further harm while the case is being investigated. Full revocation under Section 9 requires a hearing.