Introduction

The Maceda Law, officially known as Republic Act No. 6552, is a Philippine law enacted to protect buyers of real estate on installment payments. It provides specific rights and remedies to buyers who default on their payments, particularly regarding refunds and grace periods. One of the most common questions concerning this law involves how the refund is computed after two years of installment payments, especially when fees and charges—such as interest, penalties, or miscellaneous costs—are involved.

This article comprehensively explains how the refund works under the Maceda Law, what deductions are allowed, and whether fees are excluded before computing the 50% refund.

The Maceda Law: Scope and Coverage

Who is Protected

The Maceda Law covers real estate buyers who purchase residential units—including houses, lots, and condominium units—through installment payments. It does not apply to:

Industrial lots,
Commercial buildings,
Sales under a rent-to-own scheme that are not installment-based.

The protection begins after two years of regular installment payments.

Rights of the Buyer Under the Law

1. Grace Periods for Buyers

Under Section 3 of the law:

A buyer who has paid less than two years of installments is entitled to a grace period of 60 days from the due date to pay unpaid installments before the contract can be canceled.
A buyer who has paid two years or more of installments is entitled to a grace period of one month for every year of payment made before the contract can be canceled.

2. Refund or Cash Surrender Value

Section 3(b) of the Maceda Law provides that:

“In case the contract is canceled, the seller shall refund to the buyer the cash surrender value equivalent to fifty percent (50%) of the total payments made.”

If the buyer has paid for more than five years, an additional 5% refund per year is added, up to a maximum of 90% of total payments made.

The Core Issue: Are Fees Deducted Before the 50% Computation?

The Legal Basis

The law states that the refund is based on “total payments made”, without any express mention of deducting penalties, interest, or other fees prior to computing the refund. Therefore, the 50% computation should be based on the total amount paid by the buyer, not the net amount after deducting fees.

However, in practical application, developers or sellers often argue that:

Only the principal portion of the payments should be counted, or
Penalties, interest, and processing fees should be excluded since they do not constitute “installments” toward ownership.

This interpretation is not supported by the wording of the law. The Housing and Land Use Regulatory Board (HLURB)—now under the Department of Human Settlements and Urban Development (DHSUD)—has consistently ruled that the refund computation must be based on the total amount actually paid by the buyer, including interest and amortizations, unless the buyer expressly agreed otherwise in the contract.

Jurisprudence and Administrative Interpretations

Although few Supreme Court cases have directly tackled the specific issue of deductions before the 50% computation, several administrative rulings by the HLURB/DHSUD affirm the principle that:

The refund is computed based on the total payments received by the developer, regardless of how the payments were allocated (principal, interest, or others).

This is because the Maceda Law aims to protect the buyer, and the law should be liberally construed in their favor.

For example:

In HLURB decisions, the term “total payments made” includes down payments, deposits, and amortizations, regardless of allocation.
Administrative fees or notarial charges, however, may be excluded if they were not part of the actual installment payment.

Illustrative Example

Suppose a buyer paid:

₱20,000 per month for 30 months (2.5 years) = ₱600,000 total payments
Includes ₱60,000 total interest and ₱10,000 in penalties

Under the Maceda Law:

Buyer is entitled to 50% of ₱600,000 = ₱300,000 refund.
The developer cannot deduct the interest and penalties first before computing the 50%.
Only legitimate administrative deductions (e.g., documentation fees paid separately) may be excluded.

Important Notes and Exceptions

Voluntary Cancellation Requirements
- The developer must serve a 30-day notice of cancellation to the buyer after the grace period expires.
- Cancellation takes effect only after this notice and refund are made.
Assignment and Substitution
- The buyer may assign their rights to another person before cancellation, subject to the seller’s consent.
Not Applicable to Non-Installment or Spot-Cash Sales
- Buyers who pay in lump sum or under short-term financing arrangements are not covered.
Contract Stipulations
- Any waiver by the buyer of Maceda Law rights is null and void, as the law provides mandatory protections.

Practical Takeaways

Refund Basis: The refund should be computed from the total payments made, without prior deductions for interest, penalties, or similar charges.
Developer’s Obligations: A seller must issue the refund simultaneously with contract cancellation.
Buyer’s Rights: The buyer has grace periods and refund entitlements after two years of installment payments.
Legal Recourse: Disputes can be filed with the DHSUD/HLURB or in civil court for enforcement.

Conclusion

Under the Maceda Law, buyers who have paid at least two years of installments are entitled to a 50% refund of all total payments made, increasing by 5% per year thereafter (up to 90%). The computation is based on gross payments, and fees or penalties are not to be deducted before applying the refund percentage. This interpretation aligns with the law’s intent—to protect the buyer’s equity and investment in real estate purchases made on installment.

In essence, developers must compute the refund from the total payments received from the buyer, ensuring that the protections of Republic Act No. 6552 remain meaningful and effective in the Philippine real estate landscape.