The Republic Act No. 6552, popularly known as the Maceda Law or the Realty Installment Buyer Protection Act, serves as the primary shield for Filipino homebuyers against oppressive conditions in real estate installment contracts. When a buyer has paid at least two years of installments and defaults on subsequent payments, the law grants specific, non-waivable rights regarding refunds and grace periods.
The Scope of Coverage
The Maceda Law applies specifically to residential real estate sold on installment plans. This includes:
- Residential condominiums
- House and lots
- Residential subdivisions/lots
Important Exclusions:
- Industrial lots
- Commercial buildings
- Sales to tenants under the Code of Agrarian Reforms
- Straight-cash sales (where no installment plan exists)
Rights After Two Years of Payments
If a buyer has paid at least two years' worth of installments, they are entitled to a "Refund and Grace Period" package under Section 3 of the law.
1. The Right to a Cash Refund (Cash Surrender Value)
If the contract is cancelled due to default, the seller must refund the Cash Surrender Value (CSV) to the buyer.
- The 50% Rule: For the first five years of payments, the buyer is entitled to 50% of the total payments made.
- The Annual Increment: After five years of installments, the buyer is entitled to an additional 5% every year, provided that the total refund does not exceed 90% of the total payments made.
- What is included in "Total Payments"? This includes the down payment, options, and reservation fees, in addition to the regular monthly installments.
2. The Right to a Grace Period
Before a seller can cancel a contract, they must grant the buyer a grace period to catch up on unpaid installments.
- Duration: The buyer is entitled to one month for every one year of installments paid.
- Frequency: This right can only be exercised by the buyer once every five years of the life of the contract.
The Cancellation Process
For a cancellation to be legally binding and effective under the Maceda Law, the seller must strictly follow a two-step procedure after the grace period has expired:
- Notice of Cancellation: The seller must send a notarized notice of cancellation or demand for rescission to the buyer.
- Payment of Refund: The cancellation only takes effect thirty (30) days after the buyer receives the notarized notice AND the full payment of the Cash Surrender Value.
Legal Note: Failure by the developer or seller to pay the refund or send a notarized notice renders the "cancellation" void. The contract remains valid, and the buyer retains the right to update their account.
Additional Rights of the Buyer
Regardless of whether two years of installments have been met, the Maceda Law provides these additional protections:
- Right to Sell or Assign: The buyer has the right to sell their rights or assign them to another person.
- Right to Reinstate: The buyer can reinstate the contract by updating the account during the grace period and before the actual cancellation of the contract.
- Right to Advance Payment: The buyer may pay any installment or the full unpaid balance at any time without interest and have such full payment of the price annotated in the Certificate of Title.
Summary Table: Refund Calculation
| Years of Installments Paid | Cash Surrender Value (Refund) |
|---|---|
| Less than 2 Years | No refund (Grace period only: 60 days) |
| 2 Years to 5 Years | 50% of total payments |
| 6 Years | 55% of total payments |
| 10 Years | 75% of total payments |
| 15 Years or more | 90% (Maximum limit) |
Common Misconceptions
- "Penalty Charges are Refundable": Generally, late payment penalties and interests are not included in the "total payments" calculation for the refund; only the principal and standard fees are considered.
- "Automatic Cancellation": Many sellers claim the contract is "automatically cancelled" upon missed payment. This is false. Under the Maceda Law, a notarized notice and the actual payment of the refund are mandatory prerequisites for a valid cancellation.
- "Waiving Rights": Any stipulation in a contract that asks the buyer to waive their rights under the Maceda Law is considered null and void as it is contrary to public policy.