Below is a self-contained primer on penalties and eviction when a buyer defaults on the installment price of a subdivision lot in the Philippines. It brings together all the relevant statutes, administrative rules and leading Supreme Court decisions so you can see the full picture in one place.

1. Key Statutes and Why There Are Two of Them

Law	Scope	Core protection against forfeiture/eviction
Presidential Decree No. 957 (1976) – Subdivision & Condominium Buyers’ Protective Decree	All sales of residential subdivision lots or condominium units, whether cash or installment, whether developer-financed or bank-financed	§ 23 bars any “fine, penalty or forfeiture” that is “unconscionable,” and channels disputes to HLURB/DHSUD; § 24 requires notice and administrative clearance before ejectment
Republic Act No. 6552 (1972) – Realty Installment Buyer Protection Act (“Maceda Law”)	Only installment sales of real property (subdivision lots, condo units, house-and-lot packages); does not apply to purely commercial or industrial land	Gives the buyer a grace period, the right to reinstate the contract, and, if cancellation pushes through, a cash refund (50 %–90 %); sets due process steps before the seller can rescind and evict

Quick test • If the buyer paid in full, PD 957 still applies (quality of title, warranties, etc.). • If the buyer is on installments, both PD 957 and the Maceda Law apply; you must satisfy the stricter rule at every point.

2. What Counts as “Default”?

Default is defined by the contract (usually one month missed) and by Art. 1169 Civil Code (“mora” after demand). For subdivision projects, PD 957 requires the developer to formally demand payment before treating the buyer as in default.

3. Grace Periods, Reinstatement & Catch-Up Payments (Maceda Law)

Total payments already made	Statutory grace period	Buyer may do during grace period	Effect if caught up
Less than 2 years	60 days (counted from due date of first unpaid installment)	Pay all unpaid installments without interest	Contract continues as if no default
At least 2 years	1 month for every full year of paid installments but not < 60 days	Pay all unpaid installments plus penalty interest (if stipulated)	Contract continues; no new down-payment or re-documenting

Example: Buyer has paid for 40 months. Grace period = 40 ÷ 12 ≈ 3 months (but Maceda floors it at actual month count), so 3 months to cure default.

4. Penalties & Interest on Late Installments

Statutory rule – The Maceda Law itself does not fix a rate; it merely says the buyer may settle “without additional interest” within the grace period.
PD 957 & DHSUD rules – Any penalty or surcharge must be reasonable; as guidance, Board Res. No. 659 series of 1999 says not more than 1 % per month penalty on unpaid balance is generally acceptable, but HLURB/DHSUD may strike down higher or “unconscionable” rates.
Usury is now deregulated (CB Circular 905-82), yet courts still void iniquitous rates (> 24 % p.a. typical benchmark).

Tip: If the contract imposes, say, a “5 % per month” penalty, the buyer can file a complaint with DHSUD to have it reduced, rescinded or refunded.

5. Lawful Cancellation (Rescission) Process

Even after the grace period lapses, the seller cannot simply padlock or eject. They must perform both steps below:

Notarized Notice of Cancellation – Served personally or by registered mail.
30-day waiting period – Starts after buyer receives it. During these 30 days the buyer may still reinstate by tendering the total unpaid amount.

Only after the 30 days AND if the buyer still fails to pay can the seller consider the contract rescinded. At that point:

If buyer had paid ≥ 2 years, the seller must refund at least 50 % of total payments (plus +5 % per additional full year starting year 6, capped at 90 %).
If buyer had paid < 2 years, there is no refund entitlement, but the seller must still follow due process.

6. Eviction (Physical Possession)

Voluntary surrender – Seller and buyer execute a quitclaim; buyer receives any Maceda refund.
Refusal to vacate – Seller must file unlawful detainer (Rule 70) or replevin if improvements are to be recovered. DHSUD clearance is a condition precedent; many ejectment suits have been dismissed for lack of it (e.g., Francel Realty v. Sycip, G.R. 171391, Aug 5 2020).
Sheriff execution – Only after a final ejectment judgment and Maceda refund (if applicable) is deposited with the court may a writ of demolition issue.

Good-faith builder rule (Art. 448 Civil Code) can give the buyer reimbursement for useful improvements if eviction occurs.

7. Common Contract Clauses and How the Law Overrides Them

Typical clause developers insert	Why/when it is unenforceable
“All payments shall be forfeited in favor of the seller upon one missed installment.”	Violates §§ 3–4 Maceda Law; forfeiture only after notice + 30 days and after refund is given (if ≥ 2 yrs payments)
“Buyer waives the benefits of R.A. 6552 and PD 957.”	Public-policy statutes; waivers are null and void
“Penalty for late payment: 4 % per month compounded.”	Usually deemed unconscionable; DHSUD/Housing adjudicator will reduce to reasonable rate (often 1 % simple)
“Seller may enter and take possession without court action.”	Self-help eviction is illegal; PD 957 § 24 requires administrative clearance and, if contested, a court writ

8. How HLURB ↔ DHSUD Proceedings Tie In

Jurisdiction – Disputes on subdivision contracts, including forfeiture, cancellation, refund and penalties, start before the Regional Adjudication Branch of DHSUD (formerly HLURB).
Reliefs available – Buyer can ask for: declaration of nullity of cancellation, computation of refund, or specific performance compelling the developer to accept catch-up payment.
Execution – Adjudicator’s decision is enforceable like a regional-trial-court judgment; refusal of a sheriff’s levy can ground an administrative sanction on the developer.

9. Leading Supreme Court Doctrines

Case	Gist
Spouses Abella v. Court of Appeals, G.R. 164471 (7 Nov 2012)	Seller who fails to comply with Maceda notice & refund cannot claim forfeiture; buyer still entitled to occupy.
Francel Realty v. Sycip, G.R. 171391 (5 Aug 2020)	Ejectment dismissed for lack of DHSUD clearance; statutory due process is jurisdictional.
Subdiv. & Housing Dev. Ass’n v. HLURB, G.R. 177061 (15 Feb 2022)	Confirms HLURB (now DHSUD) power to set ceilings on penalties and interest.
Luzon Dev. Bank v. Enriquez, G.R. 168646 (29 Jan 2013)	Maceda Law applies even where the seller assigned receivables to a bank; buyer’s rights follow the credit.

10. Practical Checklist for Sellers

Send demand letter — establish default.
Observe grace period — no interest within grace.
After lapse, issue notarized cancellation notice.
Wait 30 days from buyer’s receipt.
Compute refund (if ≥ 2 yrs payments) and tender/consign.
Secure DHSUD clearance.
File ejectment if buyer refuses to vacate.

11. Practical Checklist for Buyers in Default

Count your paid months — see if you cross the 2-year threshold.
Use the grace period to catch up interest-free (≤ 2 yrs) or with contractual interest (≥ 2 yrs).
Document all payments (receipts, bank proof).
If cancellation notice arrives, pay within 30 days or demand refund.
If forcibly ejected without compliance, file a DHSUD complaint for reconveyance, damages and penalty refund.

12. Frequently Misunderstood Points

Bank-financed take-out – Once the developer assigns the contract to a bank, the Maceda rights travel with the buyer; the bank must still honor refunds and notices.
“Rent-to-own” schemes – If the contract is really a sale on installments disguised as a lease, courts still apply Maceda.
Death of buyer – Heirs inherit Maceda rights and cannot be summarily evicted; they may designate who continues payments.
Commercial lots – Purely commercial or industrial land is outside Maceda but inside PD 957 if part of a mixed-use subdivision; DHSUD still polices unconscionable penalties.

Bottom line

In the Philippines, a developer cannot simply declare “you missed a payment, you’re out.” The tandem of PD 957 and the Maceda Law strikes a balance:

it disciplines buyers to pay on time (limited grace, reasonable penalties),
but also shields families from losing years of payments overnight by requiring clear notice, substantial grace periods, cash refunds, and—if necessary—court-supervised eviction.

Knowing these rules lets both sides manage risk, price installment terms fairly, and avoid the lengthy litigation that erupts when the statutory safeguards are ignored.