In the Philippines, purchasing real estate is often done through long-term installment plans. To protect buyers from onerous contract conditions and to prevent the forfeiture of hard-earned investments, Republic Act No. 6552, popularly known as the Maceda Law (or the Realty Installment Buyer Protection Act), was enacted.
This law governs the rights of buyers of real estate on installment payments, specifically focusing on residential properties. Below is a comprehensive guide to its provisions, applications, and protections.
I. Scope and Coverage
The Maceda Law applies to all transactions involving the sale or financing of real estate on installment payments.
- Included: Residential condominiums, apartments, houses and lots, and residential subdivisions.
- Excluded: Commercial buildings, industrial lots, and sales to tenants under the Land Reform Code.
It is important to note that the law protects the buyer regardless of whether the contract is labeled a "Contract to Sell" or a "Contract of Sale."
II. Categories of Buyers and Their Rights
The law distinguishes between two types of buyers based on the duration of payments made.
1. Buyers who have paid at least two (2) years of installments
These buyers enjoy the most significant protections under Section 3 of the Act:
- The Right to a Grace Period: The buyer is entitled to a grace period of one (1) month for every year of installments paid. This right can be exercised only once every five years of the contract's life.
- The Right to a Refund (Cash Surrender Value): If the contract is cancelled, the seller must refund the "Cash Surrender Value" (CSV) to the buyer.
- The CSV is equivalent to 50% of the total payments made.
- After five years of installments, an additional 5% is added every year, but the total refund cannot exceed 90% of the total payments made.
- Note: "Total payments" include the down payment, options, and deposits added to the installments.
2. Buyers who have paid less than two (2) years of installments
Under Section 4, buyers who have not yet reached the two-year mark have more limited, but still vital, protections:
- The Right to a Grace Period: The buyer is entitled to a grace period of not less than sixty (60) days from the date the installment became due.
- Cancellation Process: If the buyer fails to pay within the 60-day grace period, the seller may cancel the contract. however, this cancellation can only take place 30 days after the buyer receives a notice of cancellation or a demand for rescission by a notarial act.
III. The Process of Cancellation
For a cancellation to be legally binding under the Maceda Law, the seller must strictly follow these steps:
- Notice of Cancellation: The seller must provide a formal notice of cancellation or a demand for rescission via a notarial act.
- Refund Payment: For buyers who have paid at least two years, the cancellation only becomes effective thirty (30) days after the full payment of the Cash Surrender Value is made to the buyer.
Crucial Note: If the seller fails to provide the notarial notice or fails to pay the required refund, the contract remains valid and the buyer retains the right to update their account.
IV. Additional Rights of the Buyer
Beyond grace periods and refunds, the Maceda Law grants buyers several other protections:
- Right to Sell or Assign: The buyer has the right to sell their rights or assign them to another person. They may also reinstate the contract by updating the account during the grace period and before actual cancellation.
- Right to Prepay: The buyer can pay any installment or the full unpaid balance at any time without interest. This payment can be annotated on the certificate of title.
- No Additional Interest: During the grace periods mentioned above, the seller is prohibited from charging additional interest on the delayed installments.
V. Void Stipulations
The Maceda Law is a matter of public policy. Any clause in a contract that waives, limits, or modifies the rights granted by this law is considered null and void. Sellers cannot "contract out" of the Maceda Law; the legal protections automatically override any contrary provision in a purchase agreement.
Summary Table: Quick Reference
| Feature | Paid < 2 Years | Paid 2+ Years |
|---|---|---|
| Grace Period | 60 days (minimum) | 1 month per year paid |
| Cash Surrender Value | None | 50% to 90% of total payments |
| Notice Period | 30 days after Notarial Act | 30 days after CSV payment |
| Frequency of Grace | Not specified | Once every 5 years |
Conclusion
The Maceda Law serves as a critical shield for Filipino homeowners. By ensuring that buyers do not lose their entire investment due to temporary financial hardship, it balances the scales between powerful developers and individual consumers. Understanding these rights is essential for anyone entering the Philippine real estate market on an installment basis.