Sharp Business Practices of Property “Developers” in Manila
Professor Gill H. Boehringer
Some Thoughts On the Sharp Business Practices of Property “Developers” in Manila:
The Case of Federal Land, Inc. and Regulatory Agency “Capture”
A paper delivered at the Conference of Asia-Pacific Lawyers 5 (COLAP 5)
Manila, September 2011 (Revised, June 2013)
Gill H. Boehringer
former Dean, Macquarie University School of Law, Sydney, Australia
Assuming that Federal Land, Inc. (FLI) is operating in a Philippine market dominated by a small number of mega-firms such as itself, backed by a major bank such as Metrobank both of which are part of tycoon George Ty’s conglomerate, and that it is also operating in a political and legal context where its actions are rarely challenged, and even more rarely challenged successfully, it would be surprising indeed if the behavior of FLI was other than “sharp.” i.e. while it may be seen as lawful according to legislation and judicial decisions or pronouncements by the Housing and Land Use Regulatory Board, nevertheless it fails to live up to normal standards of fairness, decency and, we might say, morality.
Let me be specific. According to the system of property registration, FLI has registered the Master Title Deed for the development of a site which is called Oriental Gardens Makati (OGM) at Makati City Hall. As I understand it, buyers from FLI are deemed to have constructive notice of the FLI interest as registered. And where, as here, FLI indicated by a Reservation on the Title Deed that it might be further developing the site, buyers of units in Orchid and Lotus Towers on what was at that time a site with only those two towers and lots of space, have bought with constructive notice that there could be, sometime in the future, at least one more tower, at least according to FLI’s interpretation of the law on “contracts of adhesion.”
Further, in the Contract of Sale which buyers were all offered – a Standard Form Contract – it was stated that the buyer acknowledged seeing a copy of the Master Deed, which was, in effect, the registered interest of FLI, including the Reservation of the possibility that a third tower might be built in the future. When the buyer signed the Contract they therefore signaled that they had knowledge of the possibility revealed in the Reservation (Restrictions) in the Master Deed. At least that is the abstract legal position, according to FLI.
So it would seem that following the legal rules on property interest registration, and making available the Master Deed copy for the purchasers, FLI had followed standard legal practice, and presumably the expectations of those who created the Registration system, as well as the politicians, judges and lawyers who have created and maintained this system. No doubt it is seen as functioning in a way that protects the interests of all: the developers and the purchasers who deal with them in order to have a home (or investment) and the politicians and bureaucrats who want the efficient and orderly development of the real estate sector
One of the problems with the law is that it often does not take into consideration the facts of life as lived by ordinary people. And thus a system of law which is supposed to apply universally, to be equal for all, is heavily tilted in favor of the wealthy and powerful. As we will see, this is the case in the dealings which ordinary people have with “developers” such as FLI.
The continued existence of the Housing and Land Use Regulatory Board (HLURB), indicates that the legislators have been aware that people were being ripped off in many ways by unscrupulous sellers. (I am not here going into the actual history of the HLURB and why Pres. Marcos had it established; it was, perhaps, in preparation for a building boom and he wished to get disputes out of the court system, perhaps to expedite that boom which he foresaw and worked toward.)
Research would show whether these sellers were smaller “cowboys” who operated on the fringes of the major market in condominiums. It would be my guess – totally without long experience or knowledge of the Manila property market – that the HLURB was not primarily set up to regulate the activities of the big developers, nor is it expected to do so today. For the most part, the mega-firms like to project an image of trustworthiness and reliability. A good reputation is extremely important in a highly competitive (but immensely profitable) business sector. They endeavor to act “under color of law” i. e. they try to be seen as acting legally in their dealings with their largely more affluent, business and professional clientele. These people are articulate and generally wish to treat with reputable firms from whom they expect good, honest and fair dealing.
It would be my guess that the HLURB mainly deals with sellers who are willing to violate the law because of the advantage they have when dealing with people who are generally less well off and maybe even more used to dealing with vendors where there is a degree of risk involved. What I might call “downsiders” who look for a “deal” which they can afford. Again, research on this aspect of the law-in-action is needed.
The point I am making is that if FLI makes all the right moves, and if the purchasers are stopped because of constructive notice from saying they did not know about the third tower which FLI now proposes to build, how can the purchasers argue that FLI should be prevented from going ahead with their proposed scheme?
The law on the issue is not clear, but a group of us were advised we had a legal case, and sought relief from the HLURB. In fact the HLURB determination by the late lawyer Soriano (later executed as he was leaving the HLURB compound, in a professional hit!) was that the complainants, we buyers had no case. This unconvincing decision was appealed; again the HLURB supported FLI. That decision has been on appeal to the Office of the President, Legal Counsel for about two years. (The tower has been built.)
I argue that what FLI has done in this matter is effectively no different from the actions of the shadowy rip-off merchants, and that the practice of FLI is calculated to maximize their profits at the expense of buyers who wish to live in (or invest in) open spaces with low population density and relatively safe surroundings. I claim that what FLI has done is equivalent to what University of California Law Prof. W. David Slawson, writing in a law review, called “Mass Contracts: Lawful Fraud in California” way back in 1974.
So far as we can determine, none of the buyers were shown copies of the Master Title Deed referred to in the fine print in their contracts of sale. I definitely was not shown it. I, like many others, was overseas when I purchased. I relied on the reputation of FLI. I did not expect a major property developer to rip me off. Nor, did the many lawyers and doctors, accountants and other professional people who bought into this very desirable condominium. From our inquiries and from common sense and observation, the agents selling condos in Orchid and Lotus Towers were acting in accordance with instructions from FLI. (Interestingly, while they are now selling units in the third tower, the brochures they are handing out in Metro Manila show only the new tower! The other two towers have been “air-brushed” out of the picture of the site. So the deceptive practice continues. These brochures are supplied to the agents by FLI, of course.) There is no possibility that FLI was unaware of how buyers were – and continue to be – duped.
From information we have gathered from numerous others who bought units in other condominiums in Metro Manila (several developed by FLI, but other developers also are involved) one is foolish to expect to get a fair deal from major property developers. You may, but there is a good chance you will not. Insiders in the business will tell you the same thing. As, will lawyers familiar with the real estate development sector. None to whom I have spoken, including investigative journalists, are surprised at what has been done to us.
What about the HLURB? Well they seem to favor the big developers. As the Head of their Monitoring Unit said to a group of us who were trying to get them to take action (FLI was selling units in the new tower without a license), “we must not harass the developers and do harm to the industry.”
In March 2012, Vice President Binay, former Mayor of Makati City whose reign saw a huge growth in property development in the city, and who now has overall responsibility for property development and land use in the country, stated, in unison with Atty. Antonio Bernardo (CEO of HLURB) that under his regime, HLURB rules and government legislation would be strictly enforced (see Manila Bulletin, March 2012). One could raise the question: what has been the policy in the past, and why?!
In pursuing justice in this matter, I and two others were prosecuted for criminal libel by FLI for attempting to protest their actions. A conviction makes the defendant liable to 6 years in prison and very large fines. Fortunately, the three of us charged were found to have no case to answer.
Two of us were sent “death barongs.” A barong is the traditional dress shirt for Filipinos, but ours had black ribbons attached, symbolizing a burial garment. They were sent anonymously. We have no evidence that they were sent by anyone connected with FLI.
To try to see that the law was enforced and punishment meted out against people who I see as corporate crooks, I have had to take a criminal prosecution against FLI for selling units in the third tower without a license, and in violation of a Cease and Desist Order which we had previously obtained. The only action HLURB took, at our insistence and with the evidence we uncovered from their files, was to impose a derisory fine of P10,000 for each of 17 illegal sales (the units were selling for 2-5 million pesos); and another slap on the wrist: P10,000 for violating the Cease and Desist Order they had imposed when we informed them of the illegal sales.
My criminal prosecution awaits the Makati City state prosecutor’s decision whether there is a case to go to trial. The final papers were given to her in mid-September 2012. One wonders what is going on behind the scenes as the case is clear and not complex. Units were sold without a license – this has been established in the administrative case where FLI effectively accepted that they had violated the law (they did not appeal of course, as the fines were minimal).
While the relevant legislation allows for administrative fines and criminal prosecutions, the HLURB has failed to prosecute FLI for the sales which it found them guilty of in an administrative, or civil procedure, even though their CDO was willfully and contemptuously violated: FLI continued to sell without a license for several months after they had been fined for doing so! Clearly, FLI is not concerned by such minimal sanctions. If a state regulatory agency fails to impose real deterrent fines, and is not even concerned that its injunctions are blatantly ignored, then it seems we have a case of “regulatory capture,” and impunity for law violators. In such circumstances, is there any wonder that violators such as FLI will pursue “sharp practices” in the future?
To make matters worse, but to underline the regulatory capture, I have been trying for almost two years to persuade the HLURB to take action against FLI for the illegal sales which the corporation continued to make after they were fined for the 17 violations indicated above. HLURB is well aware of those additional illegal sales, but have refused thus far to take administrative action to sanction FLI, nor have they taken criminal action against FLI.
I must say that trying to enforce the rule of law in the Philippines is like trying to put your finger on a blob of mercury.
And it is clear, if you are an ordinary citizen with few resources, and with the threat of a libel prosecution intimidating you (as intended), or even death threats for “causing trouble,” you may not be willing to stand up to assert your rights (putting aside the substantial cost of lawyers and legal actions). It is not surprising then that the real estate developers do pretty much what they wish.
In his election speeches in 2010, President Aquino promised that his administration would have, as a major priority, the ending of the rampant corruption which the country, sadly, is infamous for. He promised to root out all kinds of corruption from which the masses suffered. It was to be, for his administration, the “straight path” or in Tagalog, dawaang matuwid. His somewhat naïve comment was – if there is no corruption there will be no poverty.
Well, sad to say, there is still plenty of corruption (not least in the recent elections which I have written about elsewhere) and more poverty. Interestingly, in view of my experience in the “justice system,” a commentator has remarked that she was told by a visiting professor that the major problem with governance of the Philippines was the poor state of “the administration of justice” in the country: “Cases are decided at a snail’s pace. Some judges are known to accept bribes.” (See: Rosalinda L. Orosa, “Sundry Strokes: The country above all,” The Philippine Star, May 25, 2013).
It reminds me of the advice I was given recently by an experienced Filipino lawyer: “in our country the law is discretionary.”
Last edited by Epsilon=One : 04-19-2018 at 12:09 PM.