The Temporary License to Sell escrow requirements introduced by the Department of Human Settlements and Urban Development (DHSUD) have become a point of discussion within the Philippine real estate industry. While the rules are intended to protect homebuyers who purchase properties under temporary selling authority, developers are concerned that restricting access to buyer payments could affect construction financing and delay housing project delivery.
The Chamber of Real Estate and Builders’ Associations Inc. (CREBA) has called on the government to reconsider certain provisions of the policy, arguing that developers need access to working capital to complete projects and maintain their construction schedules.
The issue highlights an important challenge for the Philippine housing sector: how can regulators protect buyers’ payments while ensuring that legitimate housing developments have the financial resources to move forward?
What Is DHSUD’s Temporary License to Sell?
A Temporary License to Sell (TLS) is a regulatory authorization that allows qualified developers to begin selling units or lots while completing certain outstanding documentary and regulatory requirements for a regular License to Sell (LTS).
Under DHSUD Department Circular No. 2026-012, issued on July 22, 2026, qualified developers may apply for a TLS when they have substantially complied with the requirements for a regular license but are still awaiting specified documents, including applicable Environmental Compliance Certificates, approved survey plans, or building permits.
The temporary authorization applies to qualifying subdivision, condominium, and similar development projects.
The TLS is valid for one year. Developers may apply for a final extension of up to six months on justifiable grounds, subject to regulatory evaluation and approval.
The framework is intended to allow eligible projects to proceed with selling activities while outstanding requirements are being completed. However, the temporary authorization comes with additional conditions, particularly regarding the handling of payments collected from buyers.
Why Are Developers Required to Place Buyer Payments in Escrow?
One of the central provisions of Department Circular No. 2026-012 is the requirement for developers to deposit all proceeds from sales made under a TLS into an escrow account.
The account must be established through an agreement involving the developer, DHSUD, and an accredited bank acceptable to the department.
Under the circular, the funds cannot be withdrawn by the developer or released by the bank until DHSUD expressly authorizes their release after the applicable conditions have been satisfied.
The purpose is to protect buyers’ payments in case a developer fails to secure the regular License to Sell before the temporary authorization expires.
The circular also requires developers to submit monthly reports covering sales and project operations. Banks holding the escrow accounts must provide monthly account statements to the concerned DHSUD regional office.
If the TLS expires without a regular LTS being issued, DHSUD may issue an order requiring the developer to refund buyers. The circular provides a 30-day period for complying with the refund order.
These provisions are designed to strengthen accountability and provide a safeguard for buyers who purchase properties while a developer is operating under temporary selling authority.
It is important to clarify that the escrow requirement discussed in the report applies to sales made under the TLS framework. It should not be interpreted as a blanket requirement covering every pre-selling transaction under an ordinary, valid License to Sell.
CREBA Warns That Escrow Restrictions Could Delay Housing Projects
CREBA has raised concerns that restricting access to buyer payments could affect the financing arrangements developers use to complete housing developments.
CREBA president Noel Toti Cariño argued that developers have already committed substantial capital before reaching the stage of applying for selling authority.
These expenses include land acquisition, permits, architectural plans, professional services, surveys, site preparation, and other pre-development costs.
For developers, pre-selling is one way to recover part of these initial investments and maintain the cash flow needed to support ongoing construction.
When payments collected from buyers remain inaccessible in escrow, developers may need to rely more heavily on bank financing, additional capital, or other funding arrangements.
CREBA warned that this could be particularly challenging for affordable and mass housing developments, where project margins and available working capital may be more constrained.
The organization also pointed to an estimated 82 percent decline in License to Sell issuances, based on figures cited by industry representatives in The Freeman report. CREBA called for the underlying data to be examined, emphasizing the need to distinguish between applications with genuine compliance deficiencies and projects experiencing broader administrative delays.
The association has formally raised its concerns with the government and is seeking further discussions with DHSUD.
These are industry concerns and projections, not confirmation that all housing developments covered by the policy have experienced delays.
How Could the Escrow Rule Affect Homebuyers?
The discussion is not limited to developers. Changes in project financing and regulatory processing can also affect people planning to purchase residential properties.
Potential Delays in Housing Construction
If developers have less access to working capital, some may need to adjust their financing arrangements or construction schedules.
For buyers purchasing properties under a TLS, this creates a reason to pay close attention to the project’s regulatory status and development progress.
However, an escrow requirement alone does not establish that a particular project will be delayed. Actual construction schedules depend on several factors, including available financing, permits, contractor performance, construction progress, and the developer’s financial capacity.
Stronger Protection for Buyer Payments
The escrow mechanism also provides a meaningful consumer-protection benefit.
By restricting access to payments collected under a TLS, the policy is intended to help preserve funds that may need to be returned if the developer fails to obtain a regular License to Sell.
This is particularly important because buyers may commit substantial amounts of money before a housing project is completed.
The requirement creates an additional safeguard, although buyers should still conduct proper due diligence before entering into a purchase agreement.
Possible Effects on Affordable Housing Availability
CREBA has expressed particular concern about the effect of restricted pre-selling proceeds on mass and affordable housing developments.
If financing becomes more difficult or expensive, developers may have less flexibility when planning new projects or maintaining construction schedules.
Over time, any sustained reduction in housing development activity could affect the availability of new residential units.
However, this remains a potential industry impact rather than an established outcome of the circular.
CREBA Proposes Controlled Release of Escrow Funds
Rather than removing buyer protections, CREBA has proposed allowing the controlled and progressive release of escrow funds exclusively for the project where the payments were collected.
Under its proposed approach, developers could access portions of the funds as construction progresses, provided that specific milestones and engineering accomplishments have been independently verified.
The proposed arrangement would also involve strict monitoring by the bank holding the escrow account and DHSUD.
This approach seeks to address both sides of the issue.
For buyers, escrow would continue to provide safeguards over their payments. For developers, controlled access to project-specific funds could help support construction and reduce cash-flow pressure.
The proposal is an industry recommendation, not an approved amendment to Department Circular No. 2026-012. The existing escrow requirements remain the applicable framework unless DHSUD issues a change.
What This Means for Cebu’s Real Estate and Housing Market
The issue is relevant to Cebu and other growing regional property markets because housing development depends on both regulatory compliance and access to financing.
Cebu’s residential sector includes condominiums, subdivision developments, and affordable housing projects that serve different buyer segments. Changes to licensing requirements can influence how eligible projects approach pre-selling, financing, and regulatory planning.
For developers, the policy makes it important to evaluate outstanding permits, funding requirements, and the conditions for obtaining a regular License to Sell before relying on a Temporary License to Sell.
For brokers and property sellers, understanding the distinction between a TLS and a regular LTS is equally important when presenting projects to prospective buyers. A temporary license should not be represented as an unrestricted regular license.
For buyers, the development reinforces the importance of verifying a project’s regulatory status, checking the license number indicated in advertisements, and understanding the conditions attached to the purchase.
Cebu’s housing market will continue to depend on a regulatory environment that protects consumers while allowing compliant developers to deliver residential projects. The challenge for policymakers is to ensure that safeguards do not unintentionally make housing development more difficult or costly.
Frequently Asked Questions About Temporary License to Sell and Escrow
1. What is a Temporary License to Sell in the Philippines?
A Temporary License to Sell is an authorization issued by DHSUD to qualified developers that allows them to begin selling eligible housing units or lots while completing certain outstanding requirements for a regular License to Sell.
2. Are developers required to place buyer payments in escrow?
Under DHSUD Department Circular No. 2026-012, all proceeds from sales made under a Temporary License to Sell must be deposited into an escrow account established through an agreement involving the developer, DHSUD, and an accredited bank. The funds cannot be withdrawn without the department’s authorization.
3. How long is a Temporary License to Sell valid?
A TLS is valid for one year from its issuance. A final extension of up to six months may be granted on justifiable grounds, subject to DHSUD evaluation and approval.
4. What happens if a developer fails to obtain a regular License to Sell?
If the TLS expires without a regular License to Sell being issued, DHSUD may issue an order requiring the developer to refund all payments made by buyers. The circular provides 30 days from the issuance of the refund order for the developer to comply.
5. Does the escrow requirement apply to all pre-selling properties?
No. The specific escrow requirement discussed under Department Circular No. 2026-012 concerns sales made under a Temporary License to Sell. It should not be confused with a blanket escrow requirement for every property being offered through pre-selling under a regular License to Sell.
6. Has DHSUD approved CREBA’s proposed changes?
The November 2026 report described CREBA’s request for reconsideration and its efforts to engage with DHSUD. Its proposed controlled release of escrow funds remains an industry recommendation, not an approved replacement for the existing circular.
Credited Sources: https://www.pna.gov.ph/article/sc-recognizes-bir-for-enotarization-rollout
