General information only; not legal advice.

Pre-selling condominium units in the Philippines are commonly bought through installment schemes—monthly “down payment” installments during construction, sometimes followed by in-house amortization or a final “balance/balloon” due at turnover (often to be paid via bank financing). When buyers can no longer keep up with payments, developers frequently declare the contract cancelled and forfeit what has been paid.

The Maceda Law—Republic Act No. 6552, formally “The Realty Installment Buyer Protection Act”—was enacted to curb abusive forfeitures and to guarantee minimum protections to installment buyers of residential real estate, including residential condominium units. In the pre-selling condo context, it is the primary statute invoked when a purchase is cancelled due to buyer default on installment payments.

1) What the Maceda Law is (and why it matters in pre-selling condos)

The Maceda Law sets mandatory rights for buyers of residential real estate on installment when they fail to pay installments. These rights include:

Grace periods to catch up on missed payments without additional interest (as a statutory minimum).
Notice requirements before a cancellation/rescission can take effect.
For those who have paid long enough: a statutory refund called cash surrender value—a minimum percentage of what they have already paid.

These protections exist because installment buying is especially vulnerable to forfeiture: buyers can pay for years and lose everything upon default unless the law intervenes.

2) Coverage: When a pre-selling condo buyer can invoke Maceda

A. The property must be within the law’s coverage

Maceda covers sale or financing of real estate on installment payments, including residential condominium apartments/units. It generally excludes:

Industrial lots
Commercial buildings
Certain agrarian/tenanted arrangements (historical carve-outs)

For condos, the key practical question is whether what was purchased is residential (a dwelling-type unit) versus a commercial unit (e.g., office-type or purely commercial space). Many projects are mixed-use; classification can matter.

B. The transaction must be an installment arrangement

Maceda is designed for installment payments. In pre-selling, that usually means:

Monthly down payment installments over 12–36 months, and/or
In-house amortization after down payment, and/or
Installment-based financing directly with the developer.

Important nuance: If the buyer’s “default” is on a single lump-sum/balloon (not installment), Maceda arguments become more contested. Many real-world contracts have both installment portions and balloon portions; whether Maceda applies may depend on how the contract structures the obligation and how courts/tribunals treat it in context.

C. The cancellation is typically tied to buyer default

Maceda is most directly implicated when:

The buyer fails to pay installment(s), and
The developer/seller seeks to cancel or rescind the contract.

If the project is cancelled or delayed due to developer fault, other legal frameworks (e.g., rules on condominium/subdivision development, licensing, and buyer protection) may provide remedies, and Maceda may not be the only—or even the best—basis.

3) The “2-year rule”: Your rights depend on how long you have paid installments

Maceda draws a bright-line distinction based on whether the buyer has paid less than two (2) years of installments or at least two (2) years.

Category 1: Buyer has paid less than 2 years of installments

If the buyer has paid < 2 years, the law provides:

1) Minimum grace period: 60 days

The buyer is entitled to a grace period of at least 60 days from the due date of the missed installment.
During this period, the buyer may pay the overdue installment(s) without additional interest (as a minimum statutory protection).

2) Cancellation requires notarial notice + 30 days

If the buyer still does not pay after the grace period, the developer/seller may cancel—but only after:

Serving a notice of cancellation or demand for rescission by notarial act, and
Allowing 30 days from the buyer’s receipt of that notarial notice.

3) Refund: generally no statutory cash surrender value

For buyers under 2 years, Maceda does not grant the statutory refund (cash surrender value). Any refund in this category typically depends on:

The contract’s terms (so long as they don’t violate mandatory protections),
Other applicable laws/regulations, and
Whether the developer is at fault.

Practical impact in pre-selling: Buyers who default early (e.g., within the first 12–18 months of downpayment installments) often discover that Maceda gives them time and due process—but not a guaranteed refund.

Category 2: Buyer has paid at least 2 years of installments

If the buyer has paid ≥ 2 years, Maceda provides stronger protections, including a refund.

1) Grace period: 1 month per year paid

The buyer is entitled to a grace period of one (1) month for every one (1) year of installment payments made.
This grace period is a statutory minimum and allows payment without additional interest during the grace period.

Special limitation commonly overlooked: This grace-period right is generally described as exercisable only once every five (5) years of the life of the contract and its extensions. In practice, that means repeated defaults may not repeatedly generate the full statutory grace benefit on demand.

2) Cash Surrender Value (Refund): the core right for 2+ years

If the contract is cancelled, the buyer is entitled to a cash surrender value (statutory refund) computed as follows:

At least 50% of total payments made, and
After 5 years, an additional 5% per year of payments made, but total refund is capped at 90% of total payments made.

This is the headline protection most pre-selling condo buyers rely on when they have paid long enough.

3) Cancellation requires notarial notice and payment of the cash surrender value

For 2+ years paid, Maceda does not just require notice; it also effectively conditions cancellation on refunding the buyer:

Cancellation/rescission is to take effect only after:
- The buyer receives a notarial notice of cancellation/demand for rescission, and
- A period (commonly treated as 30 days from receipt) runs, and
- The seller makes full payment of the cash surrender value.

In plain terms: the developer cannot validly “cancel and forfeit” without both notarial due process and paying the statutory refund.

4) Computing the refund: “Cash Surrender Value” explained

A. What “total payments made” usually means

Maceda uses the concept of total payments made as the base for computing the cash surrender value.

In pre-selling condos, payments may include:

Monthly downpayment installments
In-house amortization (if any)
Other amounts credited to the purchase price

Reservation fees are tricky:

If the reservation fee is clearly credited to the purchase price, buyers often argue it should form part of “total payments made.”
If the reservation fee is treated as a separate consideration (and not applied to the price), developers often claim it is non-refundable and not part of the Maceda base.

Because contracts vary, treatment can be fact-dependent.

B. The statutory minimum formula

Let TP = total payments made.

If paid 2 to 5 years: Refund = 50% × TP
If paid more than 5 years: Refund = (50% + 5% × [number of years beyond 5]) × TP, capped at 90% × TP

Examples (illustrative):

Paid 3 years, TP = ₱1,200,000 → refund = 50% = ₱600,000
Paid 7 years, TP = ₱1,200,000 → refund = 60% (50% + 10%) = ₱720,000
Paid 14 years, TP = ₱1,200,000 → computed 95% but capped at 90% → ₱1,080,000

C. Partial years and counting “years paid”

The statute speaks in “years,” and in practice disputes arise as to:

Whether “years” means full years only,
Whether partial years are prorated,
Whether the relevant measure is the duration of paying versus the equivalent of yearly installment cycles.

This is often resolved by the contract’s structure and the forum’s approach to counting.

5) The required cancellation process: what developers must do

Maceda imposes formalities that developers must follow. These are not “technicalities”—they are the buyer’s statutory due process.

A. Notarial notice is central

Maceda repeatedly requires a notice of cancellation or demand for rescission by notarial act. This generally means:

A notice prepared and served with notarial formalities, and
Proof of receipt matters because statutory periods run from receipt.

A developer that merely sends emails, text messages, or ordinary letters—without the required notarial notice—may not have effected a Maceda-compliant cancellation.

B. 30-day period from receipt

Both in <2 data-preserve-html-node="true" years and ≥2 years scenarios, Maceda contemplates that cancellation occurs only after a period—commonly treated as 30 days from receipt of the notarial notice—has elapsed.

C. For 2+ years paid: refund must be paid as part of cancellation

For installment buyers with 2+ years paid, the law links the effectiveness of cancellation to the payment of the cash surrender value. In principle, this prevents a developer from:

Declaring cancellation,
Keeping the unit,
Keeping all payments,
Then “discussing refund later.”

6) Contract to Sell vs Deed of Sale: does Maceda still apply?

In pre-selling condos, developers frequently use a Contract to Sell:

The buyer pays installments.
The developer promises to transfer title only upon full payment (and satisfaction of conditions, such as loan takeout).

Developers sometimes argue that because a Contract to Sell is “not yet a sale,” Maceda should not apply. However, Maceda is a buyer-protection statute aimed at installment transactions involving residential real estate, and it is widely invoked in practice against forfeiture/cancellation even in Contract to Sell arrangements.

Practical takeaway: The label of the document is not the end of the analysis. What matters is the nature of the transaction—residential real estate + installment payments + cancellation due to nonpayment.

7) Common pre-selling condo scenarios (and how Maceda plays out)

Scenario 1: Default during downpayment installment period (first 18 months)

If total paid installments are < 2 years → 60-day grace + notarial notice + 30 days; usually no guaranteed refund under Maceda.

Scenario 2: Default after paying 24–36 months of downpayment installments

Often hits ≥ 2 years → grace period (1 month/year paid) + cash surrender value refund if cancelled.

Scenario 3: Buyer fails to pay a “balloon” due at turnover

If the obligation missed is structured as a lump sum, Maceda applicability can be disputed.
If the contract breaks the balance into installments (in-house financing), Maceda fits more naturally.

Scenario 4: Bank financing stage (“loan takeout”) fails

Some contracts require bank approval; failure may lead to cancellation.
Whether Maceda applies depends on how the payment obligations are framed (installment vs lump-sum) and whether the cancellation is treated as due to buyer default on installment obligations.

Scenario 5: Buyer wants to “cancel” voluntarily

Maceda is most directly triggered by seller cancellation for default, but in practice:

Buyers who “cancel” usually do so by negotiating mutual termination or by ceasing payments and then invoking Maceda protections once the developer initiates cancellation.
Mutual rescission agreements should not be used to strip buyers of Maceda minimum protections where the law applies.

8) Assignment or sale of rights: an alternative to cancellation

Maceda recognizes that a buyer who has built up equity through installments should be able to avoid forfeiture by:

Assigning/selling rights to another person, or
Reinstating the contract by updating the account within the grace period (before actual cancellation).

In pre-selling condos, assignment is common (sometimes called “pasalo”). Developers often require:

Approval of the assignee,
Payment of transfer/assignment fees,
Execution of new documentation.

While reasonable administrative requirements may be imposed, Maceda’s policy is to prevent oppressive forfeiture and to preserve the buyer’s accumulated value where possible.

9) Non-waiver: why contract clauses can’t erase Maceda rights

Maceda is a protective law. As a rule of thumb:

Contract provisions that remove or reduce Maceda minimum rights (grace periods, notarial notice, cash surrender value) are vulnerable to being treated as void for being contrary to law and public policy.
Developers may provide terms more favorable than Maceda (higher refunds, longer grace), but not worse.

This matters because many standard-form pre-selling contracts contain forfeiture language. Maceda functions as a statutory floor that can override oppressive forfeiture clauses when applicable.

10) Interaction with other Philippine laws affecting pre-selling condo refunds

Maceda is not the only relevant legal framework. In condo pre-selling disputes, other rules may be invoked depending on the facts:

Condominium and subdivision buyer protection regulations: licensing to sell, compliance obligations, and administrative oversight.
Civil Code principles (e.g., obligations, rescission concepts), though Maceda is a special law that can control installment cancellations.
Consumer-oriented and regulatory remedies where representations, delivery delays, or project compliance issues exist.

Key distinction:

Maceda focuses on buyer protections in installment default/cancellation situations.
Other laws may govern developer fault, misrepresentation, delays, non-delivery, or regulatory violations.

11) Practical issues that frequently cause disputes

A. “Refund processing” delays

Maceda’s framework is meant to prevent cancellation without timely refund (for 2+ years paid). Disputes often involve:

Developers treating refund as discretionary,
Long “processing times,” or
Attempts to convert refunds into credits or transfers without the buyer’s agreement.

B. Deductions, penalties, and “charges”

Maceda sets a minimum refund percentage but does not provide a blank check for arbitrary deductions. Disputes commonly arise over:

Marketing/admin fees,
“Liquidated damages” clauses,
Unpaid interest/penalties,
Charges not clearly part of the purchase price.

The validity and extent of offsets/deductions are often fact-intensive.

C. What counts toward “2 years”

If the buyer paid for 24 months but payments were irregular, or if the schedule includes lump sums, parties may disagree whether the statutory threshold has been met.

D. Proper service of notarial notice

Cancellation periods run from receipt. If the buyer changed address or the developer served an old address, disputes arise over whether cancellation ever became effective.

12) Quick reference guide (Maceda minimums)

If buyer paid < 2 years

Grace period: at least 60 days
To cancel: notarial notice + wait 30 days from receipt
Refund: no statutory cash surrender value under Maceda

If buyer paid ≥ 2 years

Grace period: 1 month per year paid (commonly subject to “once every 5 years” limitation)
Refund upon cancellation (cash surrender value):
- 50% of total payments made, plus
- 5% per year after 5 years, capped at 90%
To cancel: notarial notice + waiting period, and cancellation is tied to full payment of the cash surrender value

13) Conclusion

For pre-selling residential condominium purchases on installment, the Maceda Law is the Philippines’ core statutory safeguard against harsh forfeiture. Its protections hinge on the length of installment payments made: buyers under two years receive minimum grace and due process; buyers with two years or more gain both stronger grace rights and a statutory refund (cash surrender value), and developers must observe notarial notice requirements and refund-related conditions before cancellation can validly take effect.