1) The problem Maceda Law addresses

Buying a condominium in the Philippines is commonly structured as a sale on installment: you pay a reservation fee, then monthly “equity” or down payment installments during construction, and later the balance through bank financing or in-house financing. When buyers miss payments and “default,” many developers treat prior payments as automatically forfeited.

Republic Act No. 6552 (the “Maceda Law” or “Realty Installment Buyer Protection Act”) limits that outcome. It sets minimum rights for buyers who default in the purchase of residential real property on installment, including condominiums.

It is a buyer-protection statute: contract terms that reduce the statutory minimums are generally ineffective.

2) When Maceda Law applies (and when it usually doesn’t)

A. Covered transactions

Maceda Law generally applies when all of these are present:

Residential real property (condo units, residential lots, houses, townhouses), and
Sale on installment (payments are spread over time to the seller/developer), and
The buyer is paying under a Contract to Sell / Conditional Sale or similar installment arrangement.

For condos, it typically covers the developer installment stage (reservation + equity/downpayment installments) and may cover in-house financing installments to the developer.

B. Transactions commonly not covered (or only partly covered)

Maceda Law issues often arise in mixed arrangements. Some parts may be covered while others are not:

Bank loan stage (after take-out) Once the purchase is “taken out” by a bank and the buyer’s obligation becomes primarily a loan to the bank, Maceda Law usually does not govern the bank-borrower relationship. Default there is governed by the loan documents, mortgage, and banking/foreclosure rules, not Maceda’s refund scheme.
Pure cash sales (not installment) If the sale is not structured as an installment sale, Maceda protections may not apply in the same way.
Non-residential / commercial property Generally outside the intended scope.
Lease with option to buy / rent-to-own Some structures are designed to look like leases until certain conditions are met. Whether Maceda applies depends on the true nature of the contract (substance over labels). Many disputes turn on whether it is functionally a sale on installment.

Practical takeaway: If your default happened while you were still paying the developer on installment, Maceda Law is usually central. If default happened after you were paying a bank loan, Maceda Law is usually not your main remedy.

3) Key Maceda Law concepts you must know

A. Default: what triggers Maceda rights

A “default” generally means failure to pay an installment when due (or within contractual grace/allowances). Maceda Law overlays its own mandatory grace period rules and cancellation requirements that developers must follow before they can validly cancel.

B. Two buyer categories: “below 2 years” vs “2 years or more”

Maceda Law divides protections depending on how much you have paid in installments to the seller:

If you have paid less than 2 years of installments You get:
- A grace period of at least 60 days from the due date of the missed installment to pay without cancellation.
- If you still fail, the seller may cancel only after complying with a notarial notice requirement and waiting period (explained below).
- Refund rights are minimal in this category; many payments may be forfeited, subject to the law’s cancellation process and other applicable rules.
If you have paid at least 2 years of installments You get stronger rights:
- A grace period of one month for every year of installments paid (e.g., 3 years paid → 3 months grace).
- A right to a refund (“cash surrender value”) if the contract is cancelled.
- Additional refund increments after 5 years (explained below).
- Limits on how and when the seller can cancel.

The “2 years” measure is typically understood in terms of installment payments actually made (not merely calendar time since reservation), but disputes can arise depending on how the payment schedule is written.

4) Grace periods: your built-in time to cure the default

A. If you paid < 2 years of installments

You must get a grace period of at least 60 days from the due date of the missed installment.
During this period, you can pay the arrears and continue the contract.

B. If you paid ≥ 2 years of installments

Grace period = 1 month per year of installments paid.
This grace period is typically available only once every 5 years of the life of the contract (important for repeated delinquencies).
During the grace period, you can:
- Pay without additional interest (as a statutory baseline concept), and
- Reinstate the contract by updating payments.

Developer “internal grace periods” cannot reduce these minimums. They can be more generous, but not less.

5) Cancellation is not automatic: the notarial notice rule

A developer cannot validly cancel just because you missed a payment. Maceda Law requires formal steps.

A. Notarial notice requirement

Cancellation (or demand for rescission/cancellation) must be made through:

A notice of cancellation or demand for rescission sent to the buyer by a notarial act (commonly, a notarized notice served to you and/or sent through a method that shows receipt).

B. The 30-day waiting period

Cancellation becomes effective only after 30 days from the buyer’s receipt of the notarial notice (the statute’s protective waiting period).

C. Extra rule when you’re entitled to a refund (≥ 2 years paid)

For buyers who have paid at least 2 years, cancellation is not just notice + 30 days. The law also ties cancellation to the refund:

The seller must pay the cash surrender value and cancellation becomes effective only after compliance with the statutory process (commonly understood as cancellation being ineffective if the seller does not tender the required refund as required by law).

What this means in practice: If a developer declares your contract “cancelled” without proper notarial notice (and, where applicable, without tendering the refund), you may have defenses to the cancellation and grounds to contest forfeiture.

6) The refund right: “Cash Surrender Value” (CSV)

A. Who gets a statutory refund?

Generally, you have a Maceda Law refund right if you have paid at least 2 years of installments and the seller cancels due to your default.

B. How much is the refund?

Base rule (≥ 2 years paid):

Refund = at least 50% of the total payments made.

Enhanced rule (after 5 years of installments):

After 5 years, the buyer is entitled to an additional 5% per year of payments,
But the total refund is capped at 90% of total payments made.

So the statutory minimum refund scale commonly works like this (illustrative):

2–5 years paid: 50% of total payments made
6 years paid: 55%
7 years paid: 60%
…
Up to a maximum of 90%

C. What counts as “total payments made”?

This is one of the biggest dispute areas. Contracts often break payments into categories such as:

Reservation fee
Monthly down payment/equity installments
Lump-sum/downpayment “milestones”
Miscellaneous fees (documentation, move-in fees, utility connection, association dues, etc.)

Maceda Law speaks in terms of payments on the purchase price under an installment sale. In practice:

Amounts that are truly part of the purchase price installments are typically the core of “total payments made.”
Fees that are not part of the price (some “miscellaneous” charges) are frequently treated differently, and developers often argue they are non-refundable service or administrative charges.

Because documentation varies widely, the refund computation often turns on:

The contract’s definitions of “purchase price,” “installments,” and “other charges,” and
Whether a charge is genuinely a service fee or is effectively disguised purchase-price collection.

7) Common developer deductions and withholdings (and which are most contestable)

Developers frequently reduce the amount they return by labeling items “non-refundable,” “forfeited,” or “chargeable.” Some of these are legitimate in concept; others can be legally vulnerable depending on how they’re imposed.

Below are the most common items and the typical legal pressure points.

A. Reservation fee

Typical developer position: Non-refundable; not part of installment payments. Why it’s disputed: In many projects, the reservation fee functions as part of the buyer’s total outlay toward acquiring the unit, and sometimes is later credited to the price. If it is credited to the purchase price, the buyer has a stronger argument it should be included in the “total payments made.”

Practical reading: If the reservation fee is expressly applied to/credited as part of the price or down payment, it is more defensible to treat it as part of the refund base. If it is truly a separate consideration for holding the unit and not credited, developers fight harder to exclude it.

B. “Forfeiture” of prior payments (especially for < 2 years paid)

For buyers who paid less than 2 years, developers often forfeit everything after the grace period and proper notice.

Even then, common issues include:

No valid notarial notice (cancellation defective)
Improper computation of grace period
Unconscionable penalties stacked on top of forfeiture (particularly if the contract adds excessive liquidated damages)

Maceda Law is strict on process; many forfeitures collapse when the process is wrong.

C. Administrative charges, processing fees, “documentation fees”

These are often claimed as non-refundable. Their defensibility depends on:

Whether the fee corresponds to an actual service already rendered,
Whether the amount is reasonable,
Whether it is being used to defeat the statutory minimum refund.

A developer generally cannot use “fees” to reduce your return below the minimum cash surrender value if those fees are effectively part of the installment payments or function as disguised penalties.

D. Marketing/brokerage commissions

Contracts sometimes allow developers to charge buyers for broker commissions upon cancellation. These are highly contestable when used as blanket deductions, because commissions are typically the developer’s selling cost, not necessarily a buyer-obligation—unless clearly agreed and reasonable. Even when agreed, it should not nullify Maceda’s minimum protections.

E. Penalty interest, late charges, and “delinquency fees”

Developers may:

Add late-payment penalties during delinquency, then
Treat those as deductible or as additional payable obligations.

Two common pressure points:

Penalties during the statutory grace period For ≥2-year buyers, the grace period is meant as a statutory protection. Charging penalties that effectively punish use of the grace period is often disputed.
Unconscionability / excessive liquidated damages Even if a contract provides penalties, very high rates can be challenged as excessive.

F. “Liquidated damages” upon cancellation

Many CTS forms provide liquidated damages (e.g., a percentage of payments or price). Under Maceda Law, liquidated damages cannot be used to defeat the minimum refund due to the buyer who has paid ≥ 2 years. Developers may still attempt to net out damages; buyers often challenge this if it reduces the refund below Maceda’s floor or is otherwise unreasonable.

G. Deductions for unpaid utilities, association dues, real property tax

If the buyer has taken possession or incurred charges, developers may deduct:

Unpaid utilities (water/electricity)
Condo dues/association dues (if the buyer is already liable under the condo regime/turnover documents)
Real property tax allocations (depending on contract stage and possession)

These are more defensible when:

There is a clear accounting and proof of actual liabilities, and
The buyer was already in possession or contractually responsible.

H. Charges for repairs/restoration (if unit was turned over and used)

If the buyer had possession and the unit has damage beyond ordinary wear, repair deductions are more likely to stand—again requiring documentation and reasonableness.

8) How developers structure condo transactions—and how that affects Maceda refunds

A. Pre-selling stage (developer installment)

This is where Maceda Law most often applies:

Monthly downpayment/equity installments
Lump-sum equity payments
Installments under CTS before take-out

Default here squarely triggers Maceda’s grace period + cancellation requirements and (if ≥2 years paid) refund scheme.

B. Take-out to bank (financing stage)

Once the bank pays the developer and the buyer begins paying the bank:

Default consequences typically shift to the loan and mortgage terms (collection, foreclosure, restructuring).
Refund computations under Maceda are usually no longer the central remedy.

C. In-house financing

If the developer itself remains the financing source (installment payment of balance price directly to developer), Maceda Law is commonly still relevant.

9) Step-by-step: what usually happens when a buyer defaults (and where rights get lost)

Step 1: Missed installment

The developer issues reminders, statements, and collection calls.

Your key right: statutory grace period starts counting.

Step 2: Accrued arrears / potential penalties

The account is tagged delinquent. Developers may compute penalties.

Watch for: whether penalties are being charged in a way that undermines the statutory grace period.

Step 3: Notarial notice of cancellation/demand for rescission

To cancel validly, the developer must serve a compliant notarial notice.

Watch for: proof of receipt and the exact date received (this anchors the 30-day rule).

Step 4: Refund/tender (if ≥ 2 years paid)

If you’re in the ≥2-year category and cancellation proceeds, the developer must compute and tender the cash surrender value (subject to the minimum standards).

Watch for: the refund base (what “total payments” includes), and deductions that try to drive the return below the statutory floor.

Step 5: Re-selling of unit

Developers often re-list and resell quickly. Resale does not automatically extinguish buyer rights if cancellation was defective; disputes can become complicated once third-party rights arise.

10) Computation examples (illustrative only)

Example 1: Buyer paid 30 months of equity (≥ 2 years)

Total equity installments paid (counted as purchase-price payments): PHP 600,000
Years of installments paid: 2.5 years → refund bracket is at least 50%
Minimum CSV refund: 50% × 600,000 = PHP 300,000

Developer attempts deductions:

“Admin fee” PHP 80,000
“Marketing cost” PHP 60,000
“Reservation fee non-refundable” PHP 20,000 (excluded from base)

If those deductions reduce what is returned below PHP 300,000 (and those fees are effectively part of installment payments), that conflicts with Maceda’s minimum floor in many disputes.

Example 2: Buyer paid 8 years of installments

Total paid (purchase-price installments): PHP 2,000,000
Base: 50%
Add-on: years after 5 = 3 years × 5% = 15%
Refund rate: 65%
Minimum CSV: 65% × 2,000,000 = PHP 1,300,000

11) Common buyer misconceptions that cost money

“The developer can cancel immediately after one missed payment.” Not under Maceda. Grace period + notarial notice + 30-day rule matter.
“Once I receive any cancellation letter, it’s automatically valid.” The form (notarial act), proof of receipt, and waiting period are critical. A mere email or ordinary letter may be challenged depending on facts.
“If I paid less than 2 years, I have no rights.” You still have the minimum 60-day grace period and the seller must still comply with the notarial notice and waiting period for cancellation. Process defects are meaningful.
“All payments are always refundable once I reach 2 years.” The statute guarantees a minimum percentage of total payments, but disputes remain over what counts as “total payments” and which charges are separate.
“The developer can deduct anything it wants as ‘damages.’” Deductions that effectively defeat Maceda’s minimum refund are often contested, especially if the deductions are not tied to actual obligations or are unconscionable.

12) Interaction with other housing/condo rules (why it still matters)

Condo sales are also influenced by other laws and regulations (e.g., rules on subdivision/condo development, buyer protection policies, condominium governance, licensing, and consumer-type standards). While Maceda Law specifically targets installment buyer protection upon default, other rules may matter depending on:

Whether the developer delivered late or deviated from plans,
Whether there are licensing/registration issues,
Whether the dispute is purely default-based or involves developer breach.

Even in a default scenario, these frameworks can affect remedies, forum, and enforceability of certain contract provisions.

13) Practical checklist: documents and facts that determine refund outcomes

In disputes, outcomes frequently turn on the paper trail:

Contract type: Contract to Sell / Conditional Sale / Deed of Sale
Payment schedule and whether amounts are labeled as installments vs fees
Official receipts, statements of account, buyer ledger
Exact date of first default and how many installments were actually paid
Copy of the notarial notice of cancellation/demand
Proof and date of receipt
Developer’s refund computation worksheet and deduction basis
Whether unit was turned over / possession given (affects dues/utilities/damages)

14) Summary of the core Maceda protections for condo buyers who default

Grace period is mandatory:
- ≥60 days if you paid <2 data-preserve-html-node="true" years
- 1 month per year paid if you paid ≥2 years (generally usable once every 5 years)
Cancellation is not automatic: it requires notarial notice and a 30-day period after receipt.
Refund (cash surrender value) is mandatory if you paid ≥2 years:
- At least 50% of total payments
- +5% per year after 5 years, up to 90%
Common developer deductions (reservation fees, admin charges, marketing costs, penalties, liquidated damages) are frequently disputed—especially when they reduce the return below the statutory minimum or lack factual basis.
Bank-loan default is a different world: once take-out happens, remedies usually follow loan/mortgage law rather than Maceda’s refund scheme.