Maceda Law Explained: Rights of Buyers in Installment Sales of Real Property (Philippine Context)

Maceda Law—formally Republic Act No. 6552, the Realty Installment Buyer Act—is a pro-consumer statute that protects people who buy real property in the Philippines on installment. It establishes grace periods, cash surrender value (CSV) refunds, and strict notice rules before a seller can cancel (rescind) an installment sale.

This article walks you through who is covered, what rights you get, how to compute refunds, and common pitfalls—plus practical checklists and sample wording for notices.

1) What transactions are covered?

Covered:

Sales or financing of real estate on installment, whether pre-selling or ready-for-occupancy, including subdivision lots, house-and-lot packages, and condominium units.
Applies whether the seller is a developer, owner, or financing through in-house terms.

Generally not covered:

Purchases of industrial lots or commercial buildings/units.
Sales to tenant-farmers under agrarian reform laws.
Purely bank-financed deals where the developer sale was cash and the buyer’s debt is a separate mortgage to a bank (the bank loan is not an “installment sale” to the property seller).
Lease or rent-to-own arrangements that are not true sales on installment (though facts matter).

Tip: If your monthly payments go to the seller/developer under a contract to sell or installment purchase, Maceda Law likely applies. If you already bought in cash and are now paying a bank mortgage, Maceda Law typically does not govern that mortgage (other foreclosure and consumer laws might).

2) Core protections and how they work

Maceda Law recognizes two buyer tiers based on how long you’ve been paying.

A. If you have paid at least 2 years of installments

You are entitled to:

Grace period to pay arrears
- 1 month of grace for every year of installment payments made (e.g., 4 years paid = 4 months grace).
- No additional interest during the grace period.
- This grace right may be used only once every 5 years over the life of the contract.
Cash Surrender Value (CSV) if the contract is canceled
- 50% of total payments made; plus 5% per year after the 5th year, capped at 90% of total payments made.
- “Total payments” ordinarily include down payments, deposits, and installment amounts actually paid; penalties and delinquency interest are not part of “payments made.”
Strict notice rule before effective cancellation
- Cancellation becomes effective only after: (i) at least 30 days from the buyer’s receipt of a notarial notice of cancellation or demand to rescind and (ii) payment (release) of the CSV to the buyer.
- Until both occur, the cancellation is ineffective.
Right to prepay
- You may prepay any installment or the whole balance at any time without interest (other than what has accrued under the original schedule) and demand the corresponding deed/transfer upon full payment.

B. If you have paid less than 2 years of installments

You are entitled to:

Grace period: at least 60 days from due date to pay the unpaid installments.
Cancellation thereafter requires a notarial notice, and may take effect only after 30 days from your receipt of that notice.

For the <2 data-preserve-html-node="true" years tier, the law does not mandate a CSV. Developers sometimes grant courtesy refunds, but they’re not required to under RA 6552.

3) How to compute Cash Surrender Value (CSV)

Formula (≥2 years paid):

Base CSV = 50% × (Total Payments Made)
After 5th year: add 5% × (Total Payments Made) for each additional year, max 90% overall.

What counts as “Total Payments Made”?

Included: down payment, equity, and installment amounts you actually remitted.
Usually excluded: default penalties, delinquency interest, and other charges (association dues, utilities, etc., unless expressly treated as part of the price and paid to the seller as installments).

Example 1 (Year 4 cancelation)

Down payment + installments paid: ₱900,000
Years paid: 4 (≥2, <5) data-preserve-html-node="true"
CSV = 50% × ₱900,000 = ₱450,000

Example 2 (Year 8 cancelation)

Total payments: ₱1,600,000
Years paid: 8
CSV = 50% + (3 years beyond 5 × 5%) = 65%
CSV = 0.65 × ₱1,600,000 = ₱1,040,000
Check cap: 65% ≤ 90%, so OK.

No set-off without basis: Developers cannot condition release of CSV on payments not anchored in the contract (e.g., unrelated fees). They may deduct legitimate, contractually due amounts that lawfully reduce “payments made” (e.g., properly applied rebates/credits already netted).

4) The grace period in practice

Start counting the grace period from the due date of the unpaid installment(s).
During the grace period, the buyer can update without additional interest.
The “once every five years” limit applies only to the special grace under the ≥2-years tier—not to the baseline 60-day grace in the <2 data-preserve-html-node="true"-years tier.

Reinstatement vs. cancellation:

If you fully update within the grace period, the contract continues.
If you do not, the seller may cancel—but only with a notarial notice and after paying the CSV (for buyers ≥2 years).

5) Notarial notice and effectivity of cancellation

For any valid cancellation under RA 6552:

The seller must send a notice of cancellation or demand to rescind by notarial act.
30 days must pass from your receipt of that notarial notice.
For ≥2-years buyers, the seller must also pay the CSV.
Only after both the 30-day period and (if applicable) CSV payment does cancellation become effective.

A mere demand letter that isn’t notarized, or a notice not received by the buyer, does not satisfy Maceda Law.

6) Prepayment and document release

A buyer may prepay any installment or the entire unpaid balance at any time, without being charged extra interest for prepayment.
Upon full payment, the buyer may demand the transfer documents (e.g., deed of absolute sale/transfer, condo certificate of title) per the contract and applicable housing laws.

7) Interaction with other laws and forums

PD 957 (Subdivision and Condominium Buyers’ Protective Decree) and its rules complement Maceda Law for subdivision and condo projects (e.g., developer permits, project delays, material changes).
DHSUD/HSAC: Many housing disputes against developers (e.g., refund, cancellation compliance, PD 957 violations) are brought before the Human Settlements Adjudication Commission (HSAC); others may belong in regular courts depending on the nature of the claim and parties.
Recto Law (Civil Code Art. 1484) governs sale of personal property on installments (e.g., vehicles, appliances). It is different from Maceda Law, which covers real property.

8) Practical checklists

For buyers (≥2 years paid)

Count years paid (round down to full years for grace computation).
Compute grace months = 1 per year paid; confirm you’ve not used the special grace in the last 5 years.
If unable to update, compute CSV (50% + 5%/year after 5th, capped at 90%).
Insist on notarial notice; track actual receipt date.
Cancellation is ineffective until both the 30-day post-receipt period and CSV payment occur.
Keep copies of receipts; verify that interest/penalties weren’t counted as “payments made.”

For buyers (<2 data-preserve-html-node="true" years paid)

You have at least 60 days to pay arrears.
If not updated, any cancellation still requires a notarial notice and 30-day wait from receipt.
CSV is not mandated by law at this tier.

For sellers/developers

Audit years paid and payments before acting.
If ≥2 years, offer/update grace or compute CSV.
Serve a notarial notice and keep proof of buyer’s receipt.
Release CSV (if applicable) before treating the contract as canceled.
Align your contract terms with RA 6552; stricter terms adverse to buyers may be unenforceable.

9) FAQs and edge cases

Q1: Does the CSV include interest paid? Generally, CSV is computed from amounts applied to the price (down payment + principal installments). Contractual interest and penalties are not part of “total payments made” for CSV, unless your contract and posting of payments make them part of the base price (unusual).

Q2: Can the developer deduct unpaid charges from the CSV? They may deduct lawful, contract-based amounts that properly reduce “payments made” (e.g., properly credited rebates). But CSV cannot be withheld to coerce payment of unrelated or disputed charges. Cancellation is not effective until CSV is paid (≥2 years).

Q3: What if the buyer already vacated the unit/lot? Vacating does not waive Maceda rights. The seller must still comply with the notice and CSV requirements where applicable.

Q4: Can I invoke Maceda Law against the bank that holds my mortgage? Typically no. Maceda Law targets installment sales of real property; a separate bank mortgage after a cash sale is a different legal relationship (foreclosure law and consumer statutes apply there).

Q5: Can the buyer sell/assign the contract? Assignments are usually allowed before cancellation, subject to the contract (e.g., developer consent/fees) and general law. Maceda Law does not prohibit assignment.

Q6: What if the developer delayed the project? Delays and misrepresentation issues are often addressed under PD 957 and your contract; remedies may include rescission and refunds independent of Maceda Law’s CSV schedule.

Q7: When does the “1 month per year” grace begin? Count from the due date of the unpaid installment(s). Use whole years paid (e.g., 3.6 years → 3 months grace).

Q8: Can the “once every 5 years” rule stop me from paying during the 60-day grace (<2 data-preserve-html-node="true" years)? No. The once-in-5-years limit applies only to the enhanced grace under the ≥2 years tier.

10) Sample computations (quick guide)

Scenario	Years Paid	Total Paid	Grace Period	CSV (if canceled)
Buyer A	1.5	₱300,000	≥60 days	None mandated
Buyer B	3	₱900,000	3 months	50% × 900k = ₱450,000
Buyer C	6	₱1,200,000	6 months	(50% + 5% + 5%) = 60% → ₱720,000
Buyer D	12	₱2,500,000	12 months	Cap applies at 90% → ₱2,250,000

The CSV adds 5% per year after year 5 (years 6, 7, 8, …), capped at 90%.

11) Sample buyer letter to claim CSV (≥2 years)

Subject: Demand for Compliance with RA 6552 (Maceda Law) – Cash Surrender Value and Notice Requirements Dear [Developer/Seller], I have paid installments for [X] years with total payments of ₱[amount] under [Contract Title/Date] for [Unit/Lot]. Under RA 6552, I am entitled to a grace period of [X months] and, upon cancellation, a Cash Surrender Value of [computed %] of ₱[amount] = ₱[CSV]. Please ensure any cancellation strictly complies with notarial notice, 30-day waiting period from my receipt, and payment of CSV. Kindly remit CSV to [bank details] and confirm in writing. Sincerely, [Buyer]

12) Common mistakes to avoid

Accepting cancellation from a non-notarized letter/email.
Counting penalties/interest as “payments made.”
Ignoring the CSV cap (cannot exceed 90%).
Treating cancellation as effective without paying CSV (for ≥2-years buyers).
For sellers: canceling twice for the same default without resetting the Maceda requirements; denying the once-in-5-years grace when the buyer has not used it during the last five years.

13) Remedies and strategy

Buyers who meet the ≥2-years threshold can:
- Cure within the grace period (once in five years), or
- Negotiate a dacion (turnover) with CSV netting, or
- Pursue action for CSV and damages if the seller cancels without complying with RA 6552, often through HSAC (for subdivision/condo projects) or courts.
Sellers should:
- Maintain payment ledgers and proof of notice service;
- Use notarial notices;
- Release CSV promptly (≥2 years) to make cancellation effective.

14) Key takeaways (TL;DR)

≥2 years paid: 1-month grace per year paid (once every 5 years) and CSV = 50% of payments, +5%/year after the 5th, max 90%.
<2 data-preserve-html-node="true" years paid: ≥60-day grace; no mandatory CSV.
Cancellation is valid only after (a) notarial notice is received, (b) 30 days pass, and (c) for ≥2-years buyers, CSV is paid.
Prepayment allowed anytime without extra prepayment interest.
Coverage focuses on installment sales of real property; bank mortgages from separate cash sales are generally outside RA 6552.

Final note

This article provides a practical view of RA 6552. Specific contracts and project types can alter how these rules apply. For high-stakes decisions (e.g., cancellation, refund, foreclosure risk), consider consulting a Philippine real-estate or housing-law practitioner with your contract and payment ledger in hand.