Executive Summary

The Maceda Law (Republic Act No. 6552) protects buyers of residential real property sold on installment. Two of the most litigated questions are: (1) whether down payments and reservation deposits count toward the buyer’s statutory benefits, and (2) how they affect the cash surrender value (CSV) and grace periods upon default or cancellation.

Bottom line: If the payment is part of, or ultimately applied to, the purchase price of a covered residential installment sale (e.g., reservation fee, down payment, equity installments), it is generally included in the “total payments made” for computing benefits under the Maceda Law. Sums that do not form part of the price (e.g., processing fees, documentary fees not credited to the price, association dues, move-in fees, utility deposits) are not included.

Scope and Thresholds

Covered Transactions

Residential real estate sold on installment, including subdivision lots, house-and-lot, condominium units.
Applies whether the seller is a developer or a private seller, and whether the plan is in-house or installment-type financing originated/managed by the seller (prior to any bank take-out).

Exclusions (typical)

Industrial or commercial properties.
Pure bank mortgages after loan take-out (relationship is primarily borrower–bank; titling and foreclosure rules govern).
Payments not tied to the purchase price (e.g., HOA dues, separate parking rental, utility deposits).

Two Buyer Protection Tracks

< 2 years of installments paid
- Grace period: at least 60 days to pay unpaid installments without additional interest.
- If still unpaid after the grace period, seller may cancel by notarial cancellation after a 30-day notice from buyer’s receipt.
≥ 2 years of installments paid
- Grace period: 1 month for every year of installments paid (e.g., 3 years paid → 3 months grace).
- Cash Surrender Value (CSV): 50% of total payments made, plus 5% per additional year after five years, capped at 90% of total payments.
- Cancellation still requires notarial act and 30-day notice after buyer’s receipt.

Key definition: “Total payments made” includes money paid on the property toward the price—down payments, reservation deposits, and installment amortizations—not just the monthly installments.

Down Payments and Deposits: What Counts?

Included in “Total Payments Made”

Reservation fee / deposit credited to the price (even if described as “non-refundable” in marketing materials).
Down payment / equity (lump-sum or staggered).
Monthly amortizations on the purchase price (principal/price component).
Lump-sum catch-up payments that reduce the balance of the price.

Typically Excluded

Processing / handling / admin fees not applied to the price.
Documentary/registration charges (e.g., DST, transfer taxes) unless expressly credited to the price under the contract.
Late payment penalties and default interest.
Association dues, move-in fees, utility connection deposits, parking or storage fees if these are separate from the unit’s purchase price.
Upgrade/fit-out costs paid to third-party contractors unless the contract integrates them into the real estate purchase price (rare).

Practical test: Ask “Does this peso reduce the purchase price balance under the contract?” If yes, it is usually counted toward total payments for CSV and grace computations.

Effects on Grace Periods and CSV

Grace Period Computation

For ≥ 2 years paid, count full years of installments from the first price-crediting payment (including down payment/equity) to determine months of grace (1 month per year).
For < 2 years paid, the 60-day minimum applies regardless of down payment size.

Cash Surrender Value (CSV)

Formula:
- Base CSV = 50% × (Total payments made on price).
- After 5 years of installments, add 5% per additional year, maximum 90% of total payments.
When claimable: Upon cancellation consistent with the Law’s notice and notarial requirements, or if the buyer opts to cancel and claim CSV in lieu of continuing.

Worked Examples (for clarity)

Two years paid + down payment

Reservation: ₱50,000 (credited)
Down payment: ₱200,000
24 monthly installments: ₱20,000 × 24 = ₱480,000
Total payments on price: ₱730,000
CSV: 50% × ₱730,000 = ₱365,000
Grace period: 2 months (1 month × 2 years)

Seven years paid

All price-crediting payments total ₱2,100,000
CSV base: 50% = ₱1,050,000
Additional years beyond 5: 2 → +10% of total = ₱210,000
CSV: ₱1,050,000 + ₱210,000 = ₱1,260,000 (60% of total), below 90% cap.

Eleven years paid (Cap example)

Total on price: ₱3,000,000
Base 50% = ₱1,500,000
Years beyond 5: 6 → +30% = ₱900,000
CSV tentative: ₱2,400,000 (80%) → still below 90% cap; payable.
If “beyond 5” additions would exceed 90%, cap applies.

Notice, Cancellation, and Release of CSV

No valid cancellation, no CSV yet. Seller must comply with statutory notice and notarial cancellation.
Tendering CSV vs. demanding accelerated forfeiture: A seller cannot defeat the law by labeling amounts “non-refundable” if they were price-crediting.
Timing of payment: CSV is due upon valid cancellation (or upon buyer’s election to cancel in exchange for CSV, where allowed).
Set-offs: Seller may offset legitimate unpaid obligations (e.g., undisputed damage charges) if contractually and legally proper, but may not dilute CSV by netting non-price fees that are unrelated to the purchase price unless expressly allowed by law and contract.

Interaction with Bank Take-Outs and Mortgages

Pre–take-out (developer still unpaid): Maceda Law benefits apply; installments (including down payment and reservation credited to price) count toward CSV and grace periods.
Post–take-out (bank fully paid the developer; buyer now pays the bank under a loan): The legal relationship has shifted to loan repayment secured by a real estate mortgage. Foreclosure and banking laws will generally govern defaults, not the Maceda Law, because the sale on installment between buyer and developer has effectively ended.

Frequent Gray Areas (and Practical Treatment)

Reservation “not credited to price” in the brochure but credited in the SPA/Computation Sheet:
- The governing contract/computation controls. If credited there, include in total payments.
“Processing fee” bundled into the first equity billings:
- If the SOA/ledger shows it as separate and not price-reducing, exclude from total payments.
Unit upgrades (e.g., premium finishes) billed by the developer:
- If the contract amends the purchase price to include upgrades, include the payments; if billed as separate works, exclude.
Parking slot sold separately:
- If it is another real property sale on installment (residential parking appurtenant to the unit), it may independently be covered; otherwise, treat it separately for coverage and computations.

Buyer Options Besides CSV

Reinstatement within grace: Pay unpaid installments within the applicable grace period without additional interest, and continue the contract.
Assignment of rights: Transfer buyer’s rights to another person, subject to contract terms and legal limits.
Full prepayment: If allowed, may request interest reduction or rebate consistent with contract and policy.

Seller / Developer Compliance Checklist

Provide clear ledgers distinguishing price-crediting items vs. non-price fees.
Use notarial cancellations and document buyer’s receipt for the 30-day period.
Compute CSV on the full price-crediting total (down payment, reservation credited, installments). Keep a computation sheet.
Issue CSV promptly upon effective cancellation; avoid blanket “non-refund” clauses that contradict the Law.
Preserve the right to offset only for lawful, documented obligations.

Buyer Self-Audit Before Cancelling

Collect documents: Contract to Sell/Deed, payment schedule, official receipts, SOAs, ledger.
Mark price-crediting payments: Reservation (if credited), down payment, monthly amortizations, lump sums applied to price.
Exclude non-price charges: Processing, penalties, HOA dues, move-in, utilities, separate fit-out.
Count years paid: Determine grace period and whether you cross the two-year and five-year thresholds.
Compute CSV: Apply the 50% + (5% per year after five) rule, cap 90%.
Insist on proper cancellation: 60-day grace (if <2 data-preserve-html-node="true" years) or 1-month-per-year grace (if ≥2 years) plus 30-day notarial cancellation notice.
Request a written CSV breakdown and release timeline.

FAQs

Q1: Is a “non-refundable” reservation fee lost if I default? If the reservation fee is credited to the price, the Maceda Law still counts it toward total payments for CSV and grace computations. Labels like “non-refundable” do not defeat the statute.

Q2: Are late penalties and interest returned under CSV? CSV is computed on total payments on the price. Penalties/interest don’t reduce the price balance and are normally excluded from the base.

Q3: I paid a huge down payment but only 10 months of monthly amortizations—do I qualify for the 2-year track? The two-year threshold refers to years of installments paid, not the amount. A large down payment helps the CSV base, but you’re still in the <2 data-preserve-html-node="true" years track for grace/cancellation until you’ve completed two years of installment payments.

Q4: Can a seller deduct damages or unpaid utilities from my CSV? Only lawful, documented offsets may be applied, and these cannot be used to evade the statutory CSV. Disputed claims should be resolved separately or as allowed by contract and law.

Q5: What if my contract shifted to a bank loan? After bank take-out, defaults are typically governed by loan/mortgage rules, not the Maceda Law. Your earlier price-crediting payments to the developer still matter if the developer seeks to cancel pre-take-out; once cancelled properly, CSV applies.

Model CSV Computation Clause (Illustrative)

“For purposes of the Maceda Law, ‘total payments made’ shall include reservation deposits, down payments, and installment payments that are credited to the purchase price under this Contract and the Buyer’s ledger, but shall exclude penalties, default interest, processing fees, documentary and registration charges not applied to the price, association dues, utility deposits, move-in fees, and third-party fit-out charges.”

Takeaways

Down payments and reservation deposits credited to price are counted in determining CSV and grace periods under the Maceda Law.
Distinguish price-crediting payments (included) from non-price charges (excluded).
Observe grace and notarial cancellation rules; compute CSV using 50% + 5% per year after five, capped at 90%.
Bank take-out generally moves you outside Maceda coverage and into mortgage rules for later defaults.
Maintain clear ledgers and written breakdowns—they decide what’s in or out of the CSV base.

This article is for general guidance on Philippine practice. For specific cases, review your contract, official receipts/ledgers, and seek tailored legal advice.