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Documents Any Developer Should Have

Many first time buyers are usually excited about their first purchase but have little knowledge about what they should consider. For the new buyers, and others who care to double check their purchase, here are some tips on what government issued documents to look for from a developer and its project, especially when the company is new and has no track record.

1. Development permit

Under the Local Government Code of 1992, the Local Government Unit, through the city engineers and its local council, is tasked to provide a development permit for subdivision developers. This permit ensures that the said subdivision complies with land use policies and zoning ordinances of the locality, as well as, subdivision standards it has set. The permit also assures the buyer that the land to be developed into a subdivision is free of any problems insofar as its title is concerned. The development permit is also a prerequisite of the Housing and Land Use Regulatory Board (HLURB) to issue a License to Sell (LTS) to the developer.

Without this permit, the developer can not start any construction in the area. There have been such cases wherein the developer has almost completely sold all their subdivision properties only for buyers to find out that the development permit has not yet been issued. Perhaps because of red tape or some unscrupulous officials awaiting their share of “facilitating fee,” the permit remains unreleased more than a year beyond the promised start of development. Without this permit, the project is technically illegal.

2. Certificate of Registration and License to Sell

The Certificate of Registration and the License to Sell are given only by the HLURB. The Certification of Registration attests to the completeness of the prerequisite documents and permits for a given project. These documents include: the title certified by register of deeds, articles of incorporation of the developer, brochures and contract/s to be used, certified copy of developer’s environmental compliance (ECC from the DENR), survey plan approved by the land management bureau, project study, tax declaration, subdivision plan approved by the LGU and others. A notice of filing of registration should also be published by the developer for two consecutive weeks in two newspapers as a chance for dissenters, if any, to object.

Having a Certification of Registration does not mean that the developer may already start marketing the properties. A License to Sell is still needed. This is issued by the HLURB, if they believe that the developer has the financially capability to implement the project and that the project is not fraudulent. This is usually issued two weeks from the release of the Certificate of Registration.

If this is the case, how come there are developers which start selling without the LTS? Is this legal? What are the risks involved for the buyer? Strictly speaking, the developer is not allowed to advertise or market the property. However, the may give an Offer to Buy (to purchase the property with the full knowledge of its status) or a Letter of Intent (as a promise to buy the property once the required licenses are complete and get it at its initial price offering). The industry even has a term for transanctions prior to having the complete documents: pre-selling.

Buying pre-selling properties is very common. In fact, investors prefer pre-selling properties. This is because the prices of these properties are at its lowest owing to the lack of development of the area, among other reasons. As developments are introduced, the value of the real estate could double in a few years, depending on the location and quality of amenities. In fact, there have been a few subdivisions in Cebu which have been practically sold out long before the LTS has been issued.

As mentioned above, there are some cases wherein subdivisions which are almost sold out have yet to start development more than a year after its targeted ground breaking simply because not all documents and permits have yet been complied. This is the risk which the buyer bares should he or she buys pre-selling properties. For many, however, it might be worth the risk because of the price. Besides, they can, theoretically, still retrieve almost all of their payments made should they decide not to continue with the purchase, again, because the property has no LTS yet.

Buyers of pre-selling properties should therefore be doubly careful in deciding to buy such properties. It would be wise to check documents, as further explained below, and see which would probably be a cause of delay or non-continuance of the project. Expect delays in the commencement of construction if permits are not yet issued.

3. Transfer Certificate of Title (TCT) for houses

There are a few important things to look out for as far as titles are concerned. One is whether or not a title is a fake. This is a concern, particularly for some parts of Cebu known to have had lots of fake titles proliferating in the past years. While that has been minimized lately and the concerned Register of Deeds serving time for such, these titles still exist. However, the risks should be minimized when buying from a reputable developer as we would expect them to double check on their investments before plunging into a multi-million, if not, billion investment. Nonetheless, it is wise to further check of the title of the land has any problems or encumbrances usually written at the back of the title and its ensuing pages. Pending cases may serve to delay development, especially of non-LTS projects.

One other thing a buyer can check on is whether or not the subdivision subject for selling has more than one owner and the status of the partnership. There have been many projects stalled because one of the parties did not honor previous agreements.

4. Other things to look out for

Aside from the above, it is a good idea to also check the following: the reservation agreement, contract to sell, deed of absolute sale, deed of restrictions, and the technical description of the lot.

Make sure you understand the conditions in the reservation agreement, especially with regards to whether or not the reservation fee is refundable. In most cases it isn’t, because the developer accounts for opportunity costs once a reservation is made under a person excluding other possible buyers for that property, especially if the one who reserves decides not to push through with the transaction.

Check as well the contract to sell to see if there are provisions which are objectionable and also to know your obligations as a buyer. Inability to fulfill your obligations may lead to certain penalties or cancellation of the sale. It is best to know the conditions in which these are deemed applicable. Know the applicable late payment charges and grace periods, if stated. Prior to signing, you may negotiate the date of monthly deadlines. Some prefer to time this with the releases of their salaries and incomes. Do check the deed of absolute sale, a document which is given usually only after the completion of the payment. This document should state that you should be the full owner and have full rights to the property.

Examine the technical description of the property you are considering. Check to see if this is consistent with that of the title, especially with regards to its size. Some basic discrepancies such as this could possibly cause big headaches.

The deed of restrictions will tell you if the developers have preset certain regulations, such as, themes of houses to be built in the area, the height of the house, number of storeys, color of the structures, height of the fences, required set back of your house from the property line, bonds for constructions, and other such concerns.

Doing these simple checks could mean a great deal in avoiding problems in buying your properties. Especially because of the large amounts involved in real estate purchases, it is best to exercise diligence with regard to these.

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