Truth in real estate promos

MANILA, Philippines–The construction industry in the country is in a roll.

There is a boom in condominium and housing projects. The liquidity in the market has encouraged many banks to offer housing loans at affordable and liberal terms.

On weekends, the broadsheets are awash with advertisements of residential subdivisions and condominium buildings under construction or ready for occupancy.

Many first time buyers look to photos and testimonials that accompany promotional materials as for real. They assume that what they read or was advertised is what they will get.

Unfortunately, like other businesses, the real estate industry has its fair share of crooks who think deceptive sales pitches are par for the course.

The Housing and Land Use Regulatory Board (HLURB), the government’s regulatory agency for housing and land development, has its hands full with complaints of buyers of houses and lots, condominium units and other similar projects getting raw deals from unscrupulous developers or brokers.

To address this problem, HLURB recently issued Board Resolution No. 921, Series of 2014, setting strict rules on the advertisement of subdivisions, condominiums and other projects required by law to be registered with it before they can be constructed and offered for sale.

Coverage

The resolution aims to ensure that prospective buyers are fairly informed of relevant facts relating to real estate projects so they will not be misled or deceived by announcements or advertisements.

These projects are subdivisions (i.e., residential, commercial, industrial and farmlot), residential and commercial condominiums and other similar projects, including cemeteries, memorial parks, and columbaria.

That’s right, even the final resting places of our dearly departed are under the regulatory umbrella of HLURB.

Any form of information, whether in words or by way of illustration, about a project that is disseminated or communicated through various media outlets is considered advertisement.

This covers newspapers and magazines, TV, radio, billboards, brochures, leaflets, digital and electronic means of communications, scale models, and briefings conducted by developers, dealers, brokers and sales persons.

The resolution states that announcements or advertisements about a project “must reflect the real facts and must be presented in a manner that will not tend to mislead or deceive the public.”

In addition, all representations made about the payment and financing scheme, design and standards and the amenities, facilities and other privileges related to the sale should be consistent with HLURB’s rules and guidelines.

Responsibilities

The most significant aspect of the resolution is the provision that “all representations in an advertisement shall form part of the sales warranties enforceable against the owner or developer, jointly and severally.

“Such owner or developer shall be answerable and liable for the facilities, improvements, infrastructures, or other forms of development represented or promised in an advertisement.”

Under ordinary circumstances, a representation may be likened to a promise or statement of intention that may or may not be realized depending on the sincerity or ability of the person who made it.

A warranty, on the other hand, is in the nature of a commitment that something offered or agreed to be given will be fulfilled in the manner it is presented and that failure to do so would make the offering party liable for damages.

Warranties are taken seriously in our jurisdiction that a whole section in the Civil Code is devoted to this subject matter, on top of the Consumer Act (Republic Act No. 7394) which aims to protect consumers from dishonest or predatory businessmen.

What’s more, the rules on the interpretation and enforcement of warranty clauses have been the subject of numerous decisions by our Supreme Court.

In other words, the elbow room for people who want to extricate themselves from the accompanying responsibilities of express or implied warranties is quite small.

Obligation

Thus, for example, if an advertisement for a residential condominium building states that an Olympic-size swimming pool will be part of the facilities to be provided to its residents and will be available on a specific date, the developer is bound by that commitment.

He cannot excuse himself from that undertaking by, say, claiming the condominium’s foundation is not strong enough to hold the weight of the swimming pool, or the costs of building it would eat into his profit margin.

Since the availability of that facility may have induced the buyers into buying units in the condominium, it is grossly unfair to the buyers if the developer will later turn around and say he cannot deliver on his warranty.

The warranty clause in the HLURB resolution is, in effect, an instruction to real estate owners or developers to put their money where their mouths are.

In case they renege on their warranties, they will face serious administrative, civil and criminal sanctions under our laws.

Whether or not HLURB can effectively enforce this warranty obligation remains to be seen. Laying down a policy is one thing, implementing it is another. Sadly, our government offices are sorely wanting on the latter.

Be that as it may, the resolution is welcome news to the public, especially first time buyers who, in their ardent desire to have a house and lot they can call their own, sometimes fail to see the difference between hype and reality in real estate advertisements.

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