Contract to Sell
Also known as: CTS · Conditional Contract to Sell
Definition
A Contract to Sell (CTS) is a bilateral agreement used in Philippine real estate transactions where the seller reserves ownership of the property and agrees to transfer it to the buyer only after the full payment of the purchase price or the fulfillment of specific conditions. Unlike a Deed of Absolute Sale, a Contract to Sell does not transfer ownership immediately; it is a preparatory contract where the transfer of title is suspended until the purchase price is fully paid. This is the standard contract issued by developers during the pre-selling phase of condominiums and subdivisions. (Lawphi)
Identities
| Source Type | Identity |
|---|---|
| Wikipedia | Contract |
| Wikidata | Q935702 |
| DBpedia | Contract |
| ProductOntology | N/A |
| Wiktionary | contract |
| Library of Congress Subject Headings (LCSH) | Contracts — Philippines |
| MeSH | N/A |
| NCBI Taxonomy | N/A |
| AGROVOC | N/A |
| Google Scholar | Contract to Sell Philippines real estate pre-selling |
| ConceptNet | contract |
| OpenCyc | N/A |
Also Known As
- CTS
- Conditional Contract to Sell
Examples and Analogies
- Pre-selling Condo Agreement: A buyer signs a Contract to Sell for an under-construction condo unit, agreeing to pay monthly downpayments over 36 months.
- Bank Financing Transition: Upon paying 20% downpayment under the Contract to Sell, the buyer obtains a bank loan to pay the remaining 80%, triggering the developer to issue the Deed of Absolute Sale.
Usage Scenarios
1. Amortizing a Pre-selling Property
A buyer makes monthly payments to a developer under a Contract to Sell, tracking their progress toward the 100% payment milestone.
2. Converting CTS to Deed of Sale
A buyer completes the final payment for a subdivision lot. The developer cancels the Contract to Sell and drafts the final Deed of Absolute Sale.
Strategies
- Review the Contract to Sell for clauses regarding payment schedules, grace periods, default penalties, and the target completion date of the project.
- Ensure the Contract to Sell is registered or annotated if possible to protect your buyer’s interest against subsequent buyers.
- Verify that the developer has a License to Sell issued by the DHSUD before signing a Contract to Sell.
Security and Safety Measures
- Check that all payments made under the Contract to Sell are acknowledged with official receipts rather than temporary vouchers.
- Verify the developer’s corporate identity and project registration on the DHSUD portal to avoid real estate scams.
Historical Context
The Contract to Sell became a widespread legal instrument in the Philippines during the growth of the subdivision and condominium industry in the 1970s. The legal distinction between a conditional sale and a contract to sell was clarified through numerous Supreme Court rulings, establishing that in a Contract to Sell, the seller retains title until full payment, protecting the developer’s interest during long installment periods. (Lawphi)
Challenges and Controversies
Delayed Project Completions
Buyers are sometimes locked into contracts to sell where developers delay construction, requiring buyers to invoke PD 957 to suspend payments lawfully.
Onerous Forfeiture Clauses
Many contracts to sell contain clauses forfeiting all payments in case of default, which may conflict with the protections of the Maceda Law.
Related Topic
- Deed of Absolute Sale
- Maceda Law
- PD 957
- Condominium
- Subdivision