1) What the “Maceda Law” is and why refund computation matters

The Maceda Law (Republic Act No. 6552, “Realty Installment Buyer Protection Act”) is the Philippines’ baseline consumer-protection statute for buyers of residential real estate who buy on installment and later default (fail to pay).

Its core idea is simple: once an installment buyer has paid long enough, the buyer builds up an earned statutory refund—called the cash surrender value—that the seller cannot ignore when cancelling the contract.

Refund computation under the Maceda Law is not a “goodwill refund.” It is a statutory minimum that attaches when the seller cancels due to the buyer’s default (subject to the law’s coverage and conditions).

2) When Maceda Law refunds apply (coverage in practical terms)

A. Covered transactions (typical)

Maceda Law generally covers sales of residential real property on installment, such as:

Subdivision lots (residential)
House-and-lot packages
Condominium units and other residential units
Similar residential realty sold with staggered payments

It is designed for developer/seller financing (installment plans), but it can also matter whenever the seller is cancelling an installment purchase contract for residential property.

B. Common non-covered situations (typical)

Maceda is commonly treated as not applying (or not being the main governing rule) to:

Purely commercial/industrial lots or non-residential purchases
Arrangements that are not really installment sales of residential realty in substance (labels in the contract don’t control; substance does)

Also, other laws may provide additional or different refund rules in special situations (notably where the developer is at fault), but the Maceda Law remains the classic framework for buyer default in residential installment purchases.

3) The key concept: “cash surrender value” (CSV)

Under Maceda Law, when a buyer has paid at least two (2) years of installments, the buyer earns a cash surrender value—a minimum refund the seller must return if the seller cancels because of default.

CSV is computed as a percentage of the “total payments made.” That percentage depends mainly on how long the buyer has paid.

4) The two-tier system (the most important threshold)

Tier 1 — Buyer paid less than 2 years of installments

If the buyer has paid < 2 years, Maceda Law provides:

A grace period of at least 60 days from the due date of the missed installment(s), to pay without additional interest (as framed by the statute’s protections), and
No statutory cash surrender value refund is mandated by Maceda Law for cancellation due to the buyer’s default in this tier.

This tier is essentially “grace period protection,” not “refund protection.”

Tier 2 — Buyer paid at least 2 years of installments

If the buyer has paid ≥ 2 years, Maceda Law provides:

A longer grace period, and
The right to a cash surrender value refund if the seller cancels.

This is where refund computation becomes central.

5) Refund computation rules for buyers with ≥ 2 years paid

A. The statutory refund rate (percentage)

For buyers who have paid at least two (2) years of installments, the cash surrender value must be:

At least 50% of total payments made, and
After 5 years, the buyer earns an additional 5% per year (on top of the 50%), but capped at 90% total.

In rate form:

If 2 to 5 years paid → 50% refund rate
If more than 5 years paid → 50% + 5% for each year beyond 5, up to a maximum refund rate of 90%

A compact way to express the rate is:

Refund Rate = min( 50% + 5% × max(0, YearsPaid − 5), 90% )

B. What counts as “YearsPaid” (how to measure it)

“YearsPaid” is normally understood as the length of installment payment history the buyer has actually completed (often tracked in monthly installments). In practice:

24 monthly installments is commonly treated as 2 years
60 monthly installments is 5 years, etc.

Where payments are irregular (lumps, restructuring), computation usually follows the contract’s accounting of paid installments or the equivalent number of months/years covered by the payments credited as installments.

C. The base: “Total payments made” (what amount gets multiplied)

The Maceda percentage is applied to the buyer’s total payments made.

In practice, disputes often arise about what is included in “total payments made.” A careful, defensible approach is:

Typically included (most common):

Downpayment amounts that are part of the purchase price
Monthly/periodic installments credited to the price
Other amounts clearly applied to the purchase price (principal component)

Often excluded (depending on how the contract treats them):

Penalties, late-payment charges
Interest and other finance charges (especially those arising from default), if they are not treated as part of the price
Taxes, association dues, insurance premiums, utility charges, documentation fees, and other pass-through costs, unless the contract explicitly treats them as part of the purchase price

Because contracts vary, the cleanest computational starting point is:

Use the seller’s official ledger: identify all payments credited to the purchase price (including the downpayment) to get the “total payments made” base.

If the seller’s ledger lumps everything together, the buyer can challenge the base by itemizing and separating price payments from non-price charges.

6) Step-by-step: how to compute the Maceda refund (≥ 2 years paid)

Step 1 — Confirm Maceda coverage

Residential real property
Sold on installment
Cancellation is due to buyer’s default

Step 2 — Determine if the buyer crossed the 2-year threshold

Compute the equivalent paid installment period (e.g., 24 months = 2 years)

Step 3 — Compute the statutory refund rate

2–5 years paid → 50%
Beyond 5 years → 50% + 5% per year beyond 5
Cap the rate at 90%

Step 4 — Compute “total payments made” base

Add all amounts paid and credited to the purchase price (commonly: downpayment + installments to price)

Step 5 — Multiply base × rate

Cash Surrender Value (CSV) = (Total Payments Made) × (Refund Rate)

That CSV is the minimum refund the seller must return upon cancellation due to default, following the law’s required cancellation process.

7) Worked examples (with realistic installment patterns)

Example 1: Buyer paid 3 years (rate = 50%)

Downpayment credited to price: ₱300,000
Monthly installment credited to price: ₱25,000
Months paid: 36
Installments paid total: 36 × ₱25,000 = ₱900,000
Total payments made (base) = ₱300,000 + ₱900,000 = ₱1,200,000
Years paid: 3 → refund rate 50%
CSV refund = ₱1,200,000 × 50% = ₱600,000

Example 2: Buyer paid 6 years (rate = 55%)

Total payments made credited to price: ₱2,000,000
Years paid: 6 → 50% + 5%×(6−5) = 55%
CSV refund = ₱2,000,000 × 55% = ₱1,100,000

Example 3: Buyer paid 12 years (rate = 85%)

Total payments made credited to price: ₱3,500,000
Years paid: 12 → 50% + 5%×(12−5)= 50% + 35% = 85%
CSV refund = ₱3,500,000 × 85% = ₱2,975,000

Example 4: Buyer paid 16 years (rate capped at 90%)

Total payments made credited to price: ₱4,000,000
Rate would be 50% + 5%×(16−5)= 50% + 55% = 105% → cap at 90%
CSV refund = ₱4,000,000 × 90% = ₱3,600,000

8) The timing rules that affect refunds (cancellation mechanics)

Refund computation is only half the story. The seller cannot validly cancel (for buyers with ≥ 2 years paid) without complying with the law’s notice and refund requirements.

A. Grace period (≥ 2 years paid)

For buyers who have paid at least two years, the grace period is:

One (1) month grace period for every one (1) year of installments paid

During this grace period, the buyer has the right to pay the unpaid installments (and resume the contract), subject to the statute’s framework.

A commonly overlooked limitation: the right to use this grace-period remedy is generally treated as not endlessly repeatable; the statute frames it as exercisable only once in every five years of the contract’s life and its extensions. Practically, sellers often insist that repeated defaults do not keep resetting unlimited “free rescues.”

B. Mandatory notarial notice + 30-day waiting period

If the buyer does not cure within the grace period, the seller must serve:

A notice of cancellation or demand for rescission
Done by a notarial act
And then observe the 30-day period from the buyer’s receipt of that notice

C. Refund must be paid as part of valid cancellation

For buyers entitled to CSV (≥ 2 years paid), cancellation is tied to the seller’s payment of the cash surrender value. The statutory design is that the seller cannot treat the contract as cancelled while withholding the refund that the law requires.

In practical terms, compliant cancellation usually looks like this sequence:

Grace period runs (buyer has time to cure)
If uncured, seller sends notarized cancellation/rescission notice
After 30 days from buyer’s receipt, cancellation may become effective with tender/payment of the CSV

9) Frequently litigated / disputed computation points (practical knowledge)

A. Are reservation fees and “option money” included in total payments made?

It depends on how the transaction is structured and documented:

If the amount is clearly treated as part of the purchase price (credited to the price), it is more likely to be included in the base.
If it is treated as a separate non-refundable reservation not credited to the price, sellers often exclude it, and buyers often contest exclusion—especially if the fee functionally operated as part of the price.

B. Do penalties and default interest increase the refund base?

Usually not in clean accounting. The CSV is meant to protect the buyer’s equity in the property—amounts that build up the buyer’s stake—so the base is commonly computed from amounts credited to the price, not punitive charges. But sellers’ ledgers sometimes blend figures, so the base must be reconstructed.

C. What if payments were “restructured” or the contract was “extended”?

Restructuring can change how many “years paid” are counted, but the Maceda concept still focuses on:

How much has been paid (total payments made), and
The length of installment performance used to set the statutory rate

Because restructuring papers can re-label amounts, it’s important to track whether past payments remained credited to the price and whether the restructuring novated or merely amended the original schedule.

D. What if the buyer paid by lump sums rather than monthly?

Lump sums credited to the purchase price still count toward “total payments made.” For “years paid,” parties typically convert to an equivalent period based on the contract’s installment structure or by what the seller recognized as paid installments.

E. What if the buyer is in possession of the property?

Possession affects remedies and practical leverage (ejectment, turnover), but it does not erase the statutory CSV if the buyer has ≥ 2 years paid and the seller cancels for default.

10) Maceda Law vs. other refund regimes (important boundaries)

Maceda Law is most associated with buyer default scenarios. Different refund rules may apply when:

The developer/seller is the one in breach (e.g., failure to deliver, failure to develop, unlawful increases, licensing issues), where other housing and subdivision/condominium protections may be invoked.
The cancellation is not due to default but is a negotiated mutual termination, where parties may agree on terms—though statutory minimum protections are often treated as non-waivable in consumer contexts.

Maceda is best understood as the minimum floor for qualifying installment buyers facing cancellation due to nonpayment.

11) A concise computation checklist (for fast, accurate refund math)

Residential + installment + default + seller cancellation → Maceda framework is relevant
Count paid installments:
- If < 2 years → 60-day grace; typically no statutory refund
- If ≥ 2 years → compute CSV
Refund rate:
- 50% if 2–5 years
- 50% + 5% per year beyond 5, cap 90%
Base:
- Sum amounts credited to purchase price (downpayment + installments/principal)
CSV:
- CSV = Base × Rate
Ensure cancellation process is compliant:
- Grace period → notarized notice → 30 days from receipt → refund tender/payment as part of cancellation

12) Bottom line

For qualifying residential installment buyers who have paid at least two years, Maceda Law sets a statutory minimum refund: 50% of total payments made, increasing by 5% per year after the 5th year, capped at 90%. The computation hinges on two inputs—(1) total payments made credited to the purchase price and (2) years of installments paid—and it operates within strict procedural requirements for grace periods and notarized cancellation, with the refund serving as a built-in protection of the buyer’s accumulated equity.