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.
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