Buyer Refund Rights Under the Maceda Law for Cancelled Condominium Purchases
A comprehensive Philippine-law primer
1. Overview
Republic Act No. 6552 – popularly called the “Maceda Law” or the Realty Installment Buyer Protection Act (enacted 27 August 1972) – is the chief statute that cushions installment buyers of real property against forfeiture when they default. While it was drafted in the era of subdivision lots, it squarely applies to condominium units sold on installment because:
- (a) A condominium purchase is, in essence, a sale of real property in installments;
- (b) The law is expressly declared to cover all sales or financing schemes “on installment payments, including rent-to-own arrangements, of real estate located in the Philippines.”
The core purpose is to balance the developer’s right to cancel a delinquent sale with the buyer’s equitable right to recover a fair portion of what has already been paid.
2. Key Statutory Rights of the Buyer
Situation | Statutory Right | Statute/Locus |
---|---|---|
< 2 years of paid installments | One-time 60-day absolute grace period to pay all unpaid installments without interest. If still unpaid, cancellation may proceed only after a 30-day written notice (served by notarial act). | Sec. 3, 1st par. |
≥ 2 years of paid installments | • Grace period of 1 month per year of paid installments (fractions counted as one). | |
• Refund of cash surrender value (CSV): 50 % of all payments made, plus 5 % per year beyond the fifth year (capped at 90 %). | ||
• CSV payable within 30 days from actual cancellation. | Sec. 3, 2nd par.; Sec. 4 | |
Right to sell or assign | Buyer may sell or assign his rights to another, or reinstate the contract by updating arrears before actual cancellation. | Sec. 5 |
Mortgage Take-out | Buyer may, before cancellation, obtain a bank or Pag-IBIG loan to pay off the balance; the developer must cooperate. | Sec. 6 |
Note: The Maceda Law protects only in-house or direct-to-developer installment contracts (Contract to Sell, Conditional Deed, Rent-to-own, etc.). Once the unit is mortgaged to a bank and the buyer defaults on the bank loan, bank foreclosure rules (and the Recto Law for chattel or the Civil Code for mortgages) – not the Maceda Law – govern.
3. Typical Cancellation Workflow for a Condo Sale
Default arises: Buyer misses one or more installment payments.
Developer issues demand (often a 30-day “Notice of Default”).
Statutory Grace Period starts:
- < 2 yrs paid → fixed 60 days.
- ≥ 2 yrs paid → 1 month per paid year.
If unpaid at grace-period end, developer issues a notarized Notice of Cancellation/Rescission, giving an additional 30 days.
Cancellation takes effect upon expiry of that 30-day notice.
CSV becomes due (if qualified) within 30 days from effective date.
Unit is returned to the developer’s inventory; seller may now resell.
Failure to observe the exact notice and timing nullifies the cancellation, as reaffirmed in multiple Supreme Court cases (e.g., Luzon Development Bank v. Enriquez, G.R. 168646, 2010).
4. Computation of Cash Surrender Value (CSV)
Example: Purchase price ₱5,000,000 Down-payment ₱500,000 Monthly amortization ₱50,000 Installments actually paid 36 months → Total installments ₱1,800,000 Total cash outlay ₱2,300,000 Years paid = 36 ⁄ 12 = 3 yrs
CSV = 50 % × ₱2,300,000 = ₱1,150,000 payable within 30 days of cancellation. (No additional 5 % increments because buyer did not exceed five years.)
Important nuances:
- Delinquency, penalty, or late-payment charges may not be deducted from the CSV; only lawful taxes and association dues may be offset if the contract so provides.
- Reservation fees and interest form part of “total payments” and are included in the 50 % base.
- If partial refunds were earlier granted (e.g., voluntary cancellation), they are credited against the CSV.
5. Interplay with Other Condominium Laws
Law | Interaction with Maceda |
---|---|
P.D. 957 (Subdivision & Condominium Buyers’ Protective Decree) | Gives buyers additional remedies (e.g., refund plus legal interest) if the developer fails to deliver title or amenities, independent of default. |
R.A. 4726 (Condominium Act) | Governs transfer of title, common areas, and registration; silent on installment rescission – hence Maceda fills the gap. |
Civil Code, Art. 1191 | General rule on rescission of reciprocal obligations; Maceda is a special law that supersedes Art. 1191 where the sale is by installment. |
6. Leading Jurisprudence
Case | Holding (condensed) |
---|---|
Spouses Abaya v. Ebdane, G.R. 164446 (2009) | Cancellation void for non-compliance with Maceda notices; buyer entitled to reconveyance. |
Luzon Dev. Bank v. Enriquez, G.R. 168646 (2010) | Banks stepping into shoes of original seller via dacion must still honor Maceda remedies. |
Fortune Life v. CA, G.R. 110745 (1996) | Reservation fee and interest included in “total payments” for CSV. |
Susana Realty v. Court of Appeals, G.R. 135640 (2000) | Buyer who paid < 2 yrs not entitled to CSV, but grace period is mandatory and non-waivable. |
7. Common Pitfalls & Practical Tips
For Buyers
- Keep proof of every payment – CSV is computed on actual cash outlay.
- Watch the calendar: assert your 60-day/1-month-per-year grace as soon as default looms.
- Insist on notarized notices: Demand letters not notarized do not trigger Maceda timelines.
- Explore assignment: You can sell your rights to another buyer before cancellation.
- Attend HLURB / DHSUD mediation promptly – it can halt illegal cancellations.
For Developers
- Strictly observe notice formalities or risk nullity of rescission.
- Maintain a payment ledger accessible to the buyer to avoid CSV disputes.
- Release CSV within 30 days – delays accrue legal interest (currently 6 % p.a.).
- Spell out penalty clauses but remember they cannot eat into the statutory refund.
8. Frequently-Asked Questions
Question | Answer (short) |
---|---|
Does the law apply to a bank mortgage? | No. Once a bank loan takes out the balance, foreclosure rules apply. |
Is Maceda protection waivable? | No. Any waiver is void for being contrary to public policy. |
What if I have paid exactly 24 monthly amortizations? | You qualify for CSV because the law uses “years of installments paid,” not cash amount. |
Can the developer resell my unit before paying the CSV? | It may market the unit, but ownership transfer cannot be completed until CSV is settled. |
9. Legislative & Policy Updates
- Several bills (e.g., House Bill 8967, 19th Congress) propose raising the base refund to 65 % and shortening the CSV payout to 15 days, but none have become law as of July 2025.
- DHSUD’s 2023 draft Implementing Rules recommend e-mail service for cancellation notices; final rules are still pending.
10. Conclusion
The Maceda Law remains the buyer’s strongest shield against total forfeiture when a condo purchase on installment is cancelled. Understanding its grace periods, notice requirements, and refund formula empowers both buyers and developers to navigate defaults lawfully and equitably. While jurisprudence continually clarifies grey areas, the statutory core – fair refund for substantial performance – has stayed intact for over five decades.
This article is for general information only and does not constitute legal advice. Consult counsel or the DHSUD for case-specific guidance.