Temporary License to Sell: What DHSUD’s New Escrow Rule Means for Your Pre-Selling Payments

When BusinessMirror reported this month that developers were opposing a new DHSUD rule, the headline suggested a conflict between regulators and the real estate industry — the kind of policy story that might be overlooked by buyers. However, it’s important to pay attention. Hidden in that opposition is a license category that most Philippine property buyers are unfamiliar with, related to a new protection for your money.

The DHSUD Department Circular No. 2026-12 introduced a Temporary License to Sell. If a project you’re looking at has this license, your payments should be held in escrow and can be refunded if the developer doesn’t obtain the full license. This guide explains what a Temporary License to Sell is, why it requires escrow, and what to verify before paying a reservation fee for any pre-selling unit, whether it’s under TLS or not.

Under DHSUD Department Circular No. 2026-12, a developer can receive a Temporary License to Sell (TLS), which allows them to market and collect payments for a project while still obtaining necessary permits from other agencies. This means DHSUD has completed its review, but other approvals, like local government clearance or environmental permits, are still needed.

That’s an earlier stage than most buyers think about when they hear “pre-selling is open.” That’s why the circular includes a specific requirement: any money a developer collects while under a TLS must be kept in escrow. The reason is clear — if the developer never moves from that temporary status to the regular License to Sell, buyers who paid during the TLS period will get their money back.

This rule doesn’t apply to all pre-selling transactions in the country. Most pre-selling occurs under a full, regular LTS, as it always has — with DHSUD’s review completed, other permits obtained, and no special escrow conditions. The TLS is a new option that allows developers to start selling sooner instead of waiting for DHSUD’s full approval. The escrow requirement is a trade-off that DHSUD implemented to manage the additional uncertainty of selling before all approvals are finalized.

Real estate group CREBA has criticized the escrow requirement, claiming it could limit developers’ cash flow during pre-selling. While this concern is important — and discussed later in this guide — buyers should focus on a more immediate question: is the project you’re considering under a full LTS or a TLS? This guide will help answer that.

What a Full LTS Means for Buyer Protection

A regular License to Sell (LTS) confirms that a project has met the requirements of Presidential Decree No. 957, which regulates subdivision and condominium sales in the Philippines, as well as any other necessary permits before it can legally accept buyer payments. With a full LTS, you are assured that the project has completed all reviews. For details on how to verify this, including using the DHSUD registry lookup and understanding what a valid certificate looks like, please refer to the dedicated walkthrough available on the site.

What a Temporary License to Sell Means Instead

A TLS indicates that the developer has received DHSUD’s preliminary approval to sell, but still needs to complete certain requirements, especially permits from other agencies. It is not a lesser version of an LTS; it’s an official regulatory status under Circular No. 2026-12. However, the project is still in the approval stages. Some risks that a fully-licensed project has resolved may still be present for a TLS project — which is why the escrow requirement is in place.

Why This Should Change How You Read a Project’s Paperwork

Most buyers see “does this project have a license” as a simple yes or no question. However, it has become more complex regarding pre-selling risk. A project can say “yes” but the meaning varies depending on the type of license it has. The table below shows the practical differences.

The Temporary License to Sell was created due to pressure from developers who urged DHSUD to approve permits faster, claiming that delays were slowing down project launches and reducing housing supply. Concerns about the slow pace of License to Sell approvals appeared frequently in industry reports, highlighting a real issue since the delays are preventing the country from getting the housing it needs.

Seen against that backdrop, the TLS is DHSUD’s solution to its backlog: instead of making every developer wait in line before receiving payment, DHSUD allows them to sell once its review is completed, even if other approvals are still pending. This helps developers move faster and, potentially, gives buyers earlier access to units and prices.

But speeding up the front end of the process doesn’t eliminate the underlying uncertainty; it simply shifts the buyer’s risk to an earlier point in time. A project that hasn’t obtained all necessary permits still has a slight risk of not converting to a full LTS. This is the gap that the escrow requirement addresses. It’s not a broad anti-developer approach — it’s a specific solution to a risk created by the TLS pathway.

It’s important to understand what “your money is in escrow” really means, as it’s easy to assume more than what the rule states.

The guarantee is clear: if you paid a developer during the TLS period and they don’t secure the regular License to Sell, you can get a refund from the funds set aside. This provides real protection against the worst-case scenario of a project that stalls without being fully licensed.

What it doesn’t guarantee is that the project will be built, finished on time, or match the original specifications. Escrow only protects your money if the developer fails to convert to a full LTS. It doesn’t cover delays, disputes with contractors, or quality issues for projects that do get their license. These risks still exist, with or without TLS, and are addressed by the refund and rescission protections already offered under Philippine real estate law — protections this site has already detailed for buyers facing stalled or failed projects.

Treat the escrow requirement as a way to reduce one specific risk, not as a total safety net for the entire transaction.

CREBA, the Chamber of Real Estate and Builders’ Associations, expressed concern after the circular’s escrow requirement was announced. They believe buyers need protection, but worry about where the funds will be held. CREBA president Noel “Toti” Cariño noted that pre-selling proceeds help developers recover costs like land acquisition and permits, and reinvesting that money into construction is a common practice. He argued that locking these funds could limit cash flow when capital is scarce and interest rates are high, impacting mass and affordable housing developers the most, as they work with narrow margins and rely heavily on presale cash flow.

Cariño’s alternative doesn’t suggest eliminating the escrow requirement; instead, it proposes a system where funds are released gradually as construction milestones are verified by banks and DHSUD, rather than holding all funds until the LTS is complete.

Determining the answer is still unclear, which is why it’s more beneficial for a buyer to check a project’s license status themselves instead of assuming whether the rule applies.

None of this matters if you can’t tell what license the project is using. Usually, it’s not clearly stated in brochures, so you might need to ask directly.

A developer who is sure about a full LTS will typically state it right away and can refer to the DHSUD registry entry as proof. If they are vague or a broker avoids the topic, consider it as important as any other document you requested but didn’t receive.

Buying under a TLS carries different risks and needs a more detailed checklist than fully-licensed projects, even though many successful projects have completed the TLS phase.

Escrow under a TLS addresses one specific situation. It doesn’t account for what happens if a project completes its full LTS but then faces issues like financing problems, contractor disputes, or developer failure years later, even though it was compliant from the start.

Presidential Decree No. 957 and the Maceda Law protect buyers of subdivisions and condominiums in the Philippines by ensuring rights like refunds, rescission options, and a way to file complaints with DHSUD/HSAC if a developer fails to deliver. Understanding this process is important, and this site provides detailed information for buyers with stalled or failed projects, making it a valuable resource for anyone, whether their project falls under a TLS or a full LTS, as the associated risks are similar.

Pre-selling is essentially a trade-off: buyers get a lower price, flexible payment options, and the chance to choose their unit, but they also face construction delays and a longer wait to move in. The TLS escrow requirement doesn’t remove this trade-off; it merely alters it for some pre-selling buyers.

If you buy a fully-licensed pre-selling project, your decision-making remains the same; the usual trade-offs still apply. However, if you invest in a TLS-stage project, you’re making an earlier-stage bet that now includes an escrow-backed refund option, which was not available before this circular. This could be a better risk for TLS buyers than before, even though there are concerns about liquidity that may lead to changes in the mechanism.

The table below puts the three common paths side by side.

Investors considering pre-selling versus RFO should read Pre-Selling vs. RFO for Investors: Which Is the Better Investment? for a more detailed analysis of the trade-offs.