The “Maceda Law”, named after the late Sen. Ernesto Maceda, was enacted in 1972 as Republic Act (RA) No. 6552 or the “Realty Installment Buyer Act” to protect buyers of real properties who default on installment payments, by providing them with certain rights.
Covered transactions involve the sale or financing of real estate, including residential condominiums and apartments. Industrial lots, commercial buildings, and sales to tenants under RA 3844 (Agricultural Land Reform Code), as amended by RA 6389 (Code of Agrarian Reform of the Philippines) are excluded. In addition, it does not apply to bank loans and mortgage agreements, as these are not considered installment sales.
Defaulting buyer’s entitlement
Paid at least 2 years. In case a buyer defaults in the payment of installments but paid at least two years of installments, he is entitled to:
a. One month’s grace period for every year of installment payments made. A buyer is eligible to pay, without added interest, the unpaid installments due within the total grace period provided that such right shall be exercised only once every five years of the contract’s life and its extensions, if any.
b. Refund the cash surrender value if the contract is canceled. The seller shall refund to the buyer the cash surrender value of the payments equivalent to 50 percent of the total payments made, and after five years of installments, an additional five percent every year but not to exceed 90 percent of the total payments made. Provided further that the actual cancellation of the contract shall take place after 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.
Paid less than 2 years. In case the installments paid were less than two years, a buyer is entitled to a grace period of not less than 60 days from the date the installment becomes due. If the buyer still fails to pay the installment due at the expiration of the grace period, the seller may cancel the contract after 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.
Two years, how computed?
According to Supreme Court rulings, two years of installments refers to the total payments made over the said period, i.e. aggregate value of 24-month installments. In the computation, down payments, deposits, or options on the contract are included.
Buyer’s recourse
Regardless of the length of installment payments made, a buyer can sell his rights to the property or assign it to a third party, or reinstate the contract by updating his account during the grace period and before the actual cancellation of the contract. However, the Deed of Sale or assignment of rights should be done by a notarial act.
The buyer can also pay any installment in advance or the full unpaid balance at any time, without interest, and have such full payment annotated in the certificate of title.
Contrary to law
Stipulations in the sales contract entered by the seller/buyer that contradict with the provisions of the Maceda Law are considered null and void.
Know your rights.
* * *
Henry L. Yap is an Architect and Fellow of both Environmental Planning and Real Estate Management. He is one of the Undersecretaries of the Department of Human Settlements and Urban Development.
