I. Overview

The Maceda Law—Republic Act No. 6552, also known as the Realty Installment Buyer Protection Act—is a special law that protects buyers of real property in the Philippines who pay on an installment basis.

Its core idea is simple:

If you’ve been faithfully paying installments for a property, you should not lose everything just because you default later.

So the law creates minimum rights for buyers and sets mandatory procedures that sellers must follow before they can validly cancel a contract, evict the buyer, or forfeit payments.

II. Scope and Coverage

1. What transactions are covered?

The Maceda Law applies to transactions involving the sale or financing of real estate on installment, including:

Residential lots
House-and-lot packages
(Under prevailing interpretation) residential condominium units

The key elements are:

The property is real estate; and
The price is paid on installment (usually under a Contract to Sell, Installment Purchase Agreement, or similar).

2. What transactions are excluded?

The law does not apply to:

Industrial lots
Commercial buildings or commercial real estate
Sales to tenants under agrarian reform laws

Also, it generally does not cover:

Pure bank mortgage loans where the buyer already owns the property and just mortgages it to a bank; here, the relationship is debtor–creditor, and foreclosure rules apply.
Pure rentals/leases without a sale component (though a “lease with option to buy” can sometimes be treated as covered, depending on how it’s structured and what courts see as the true nature of the transaction).

3. Maceda Law vs. PD 957 (Subdivision and Condominium Buyers’ Protective Decree)

For subdivision lots and condominium projects:

PD 957 governs developer obligations, licenses, registration, etc.
RA 6552 (Maceda Law) governs installment buyers’ rights in case of default and cancellation of contracts.

In practice, both can apply, and buyers often invoke them together.

III. Nature of Installment Sales and Why Maceda Law Matters

Prior to the Maceda Law, developers typically used Contracts to Sell where:

Ownership remains with the developer until full payment.
Default could allow the developer to cancel and keep all payments.

This left buyers extremely vulnerable, especially after years of payments.

The Maceda Law changed that by:

Giving buyers grace periods to catch up on missed payments.
Entitling buyers to a refund (cash surrender value) after a certain number of years.
Requiring a formal process before cancellation becomes effective.

Any contract clause that gives the buyer less than what the Maceda Law provides is void. Anything more favorable to the buyer is allowed.

IV. Two Main Groups of Buyers Under the Maceda Law

The buyer’s rights depend mainly on how long they’ve been paying.

A. Buyers Who Have Paid At Least 2 Years of Installments

These are the most protected class of buyers.

1. Right to a Grace Period (Section 3)

If you have paid at least two (2) years of installments, and then you default on later installments:

You are entitled to a grace period of one (1) month for every one (1) year of installment payments made.
During this grace period, you may pay the unpaid installments due without additional interest, penalties, or surcharges.

Example:

You’ve paid installments for 5 years.
You miss some installments.
You are entitled to a 5-month grace period within which you can update your account without additional interest on the overdue installments covered by the grace period.

Important limitation: This right to use the grace period under Section 3 may be exercised only once every five (5) years of the life of the contract (including extensions).

2. Right to Cash Surrender Value / Refund (Section 3)

If, despite the grace period, the contract is eventually cancelled, the seller cannot just keep everything you paid.

For buyers who have paid at least 2 years of installments:

The seller must refund the cash surrender value (CSV) of the payments made, computed as:
- 50% of total payments made for the first 5 years; plus
- An additional 5% per year of installment after the 5th year; but
- Capped at 90% of total payments made.

“Total payments made” generally includes:

Down payments
Monthly installments/amortizations
Deposits or options on the contract

(Contract terms or jurisprudence may differ on whether penalties and interest are counted; often, the focus is on actual amounts paid toward the purchase price.)

Example:

Total installments + down payment paid over 7 years: ₱1,000,000
First 5 years → 50% of ₱1,000,000 = ₱500,000
Extra 2 years beyond 5 → 2 × 5% = 10% more = ₱100,000
Total CSV = ₱600,000 (60% of total payments)

The seller can cancel the contract, but must refund ₱600,000 (in this example), not just keep everything.

3. When Does Cancellation Become Effective? (Very Important)

For buyers with at least 2 years of payments, cancellation is not automatic. The law requires:

Grace period has been given and allowed to lapse unused.
Buyer receives a notice of cancellation or demand for rescission by notarial act (i.e., notarized demand).
30 days must pass from the buyer’s receipt of the notarized notice.
The seller must pay the cash surrender value to the buyer.

Only when these steps are complied with does “actual cancellation” take place.

If any of these is missing or defective:

The cancellation is invalid or ineffective.
The buyer’s rights under the contract may still subsist.

Courts have repeatedly invalidated cancellations where:

Notices were not notarized; or
The buyer never actually received the notice; or
The CSV was not paid.

4. Right to Sell or Assign Rights Before Cancellation

Before the contract is actually cancelled, the buyer has the right to:

Sell his rights or
Assign his rights to another person.

This can be a way to recover some value from the contract rather than just walking away.

Usually:

The buyer finds an interested new buyer.
The developer consents to the assignment (often with processing fees, following project policies).
The new buyer assumes the remaining installments and obligations.

5. Right to Reinstate the Contract by Updating the Account

As long as the contract has not yet been actually cancelled (i.e., after the full process, including CSV payment and 30 days after notice), the buyer may:

Reinstate the contract by paying the arrears and bringing the account current, often within the grace period and before actual cancellation.

Developers sometimes refuse late payments and attempt unilateral cancellation without following Maceda procedures; courts typically look at actual conduct and the law’s protective nature, often siding with buyers who tender payment within the legally allowed period.

B. Buyers Who Have Paid Less Than 2 Years of Installments

Buyers paying for less than 2 years are still protected, but to a lesser extent.

1. Right to a 60-Day Grace Period (Section 4)

If the buyer has paid less than 2 years of installments and defaults:

The buyer is entitled to a grace period of not less than 60 days from the due date of the installment.
Within those 60 days, the buyer may pay the unpaid installments and stop the cancellation.

Unlike the 2-year group:

There is no CSV/refund guaranteed to those who have paid for less than 2 years.
But the grace period and formal notice requirements still apply.

2. Cancellation Procedure

If the buyer still fails to pay within the 60-day grace period:

The seller may cancel the contract, but only after:
1. Sending a notice of cancellation or demand for rescission by notarial act; and
2. Allowing 30 days to pass from receipt of that notice.

Again, no automatic cancellation. The same issues about validity of notice and proof of receipt arise here.

V. Other Key Rights of Buyers Under the Maceda Law

Beyond grace periods and refunds, the Maceda Law grants other important rights.

1. Right to Pay in Full at Any Time and Get Title (Section 6)

The buyer has the right to:

Pay in full the unpaid balance at any time before the end of the term; and
Demand the transfer of title and delivery of the appropriate documents (e.g., Transfer Certificate of Title or Condominium Certificate of Title), subject to:
- Payment of legitimate taxes and fees (documentary stamp tax, transfer tax, registration fees, etc.).
- Compliance with contract terms consistent with law.

Some developers resist early full payment because they prefer continuing interest income; the Maceda Law allows early full payment, so contractual provisions denying this right would generally be void if less favorable to the buyer.

2. Right Against Waiver of Protection (Section 7)

Any stipulation that gives the buyer less than what the Maceda Law provides is:

Null and void.

Examples of void provisions:

“All payments made by the buyer shall be automatically forfeited in favor of the seller upon default, without notice and without any refund.”
“Buyer waives his rights under RA 6552.”
“Seller may cancel the contract immediately after one missed installment, without grace period.”

However, terms more favorable to the buyer are allowed, such as:

Longer grace periods
Higher percentages for refunds
Multiple chances to reinstate
Lower penalties

3. Right to More Favorable Contract Terms

Because the Maceda Law sets minimum standards, developers are free to provide:

Flexible restructuring options
Extended grace periods
Refunds even for buyers with less than 2 years of payments

Once written into the contract, those more favorable terms become binding on the seller.

4. Right to Due Process in Eviction or Ejectment

Even after cancellation, actual ejectment (removal of the buyer from possession) often requires proper court or quasi-judicial action, especially in:

Long-term possession cases
Where cancellation is contested

If the seller hasn’t complied with the Maceda Law’s requirements, an ejectment suit may be dismissed or the buyer reinstated.

VI. Practical Computations & Scenarios

Let’s look at some simplified examples to clarify how rights operate.

Example 1: Buyer with 3 Years of Payments

Property: Subdivision lot
Contract: 10-year installment
Payments made: 36 months (3 years), total ₱360,000
Buyer defaults in year 4.

Rights:

Buyer is in the 2 years and above category.
Grace period: 1 month per year paid → 3 months grace period.
During grace period:
- Buyer may pay overdue installments without additional interest (on the installments covered by the grace period).
If still unpaid after the grace period, the seller may initiate cancellation, but must:
- Send a notarized notice of cancellation.
- Wait 30 days from buyer’s receipt.
- Refund 50% of total payments (since under 5 years of payments):
  - CSV = 50% × ₱360,000 = ₱180,000.
- Only after CSV payment and the 30-day period does cancellation become effective.

Example 2: Buyer with 1.5 Years of Payments

Payments made: 18 months, ₱180,000
Buyer defaults.

Rights:

Buyer has paid less than 2 years, so:
Buyer is entitled to a 60-day grace period from due date of the installment.
If buyer still fails to pay:
- Seller may cancel but must:
  - Send notarized notice of cancellation.
  - Wait 30 days from buyer’s receipt.
Buyer gets no statutory CSV/refund under the Maceda Law (unless the contract grants one).

Example 3: Buyer Paid 10 Years of Installments

Total paid: ₱2,000,000 over 10 years
Buyer defaults in year 11.

Rights:

Grace period: 10 months (1 month per year)
CSV:
- First 5 years: 50%
- Next 5 years: +5% each → 25%
- Total: 75% of total payments
- CSV = 75% × ₱2,000,000 = ₱1,500,000
Seller must:
- Give 10-month grace period (if invoked, and subject to the rule that grace period right is only once every 5 contract years).
- If cancellation proceeds, pay ₱1,500,000 as CSV and give proper notarized notice with a 30-day period before cancellation becomes effective.

VII. Interplay with Civil Code Remedies and Other Laws

1. Rescission and Resolution Under the Civil Code

The Civil Code allows sellers to:

Rescind or resolve contracts for substantial breach.

However:

For installment sales of real estate, the Maceda Law governs the method and consequences of cancellation and defaults.
Courts usually regard the Maceda Law as special legislation that tailors Civil Code principles to this specific scenario.

2. Mortgages and Bank Foreclosure

If a property is already titled to the buyer and then mortgaged to a bank:

The relationship shifts to borrower–mortgagee, and foreclosure rules (Civil Code, special foreclosure laws) apply—not Maceda Law.
But if the “installment” arrangement is effectively between buyer and developer, Maceda Law typically remains applicable.

3. PD 957 & Buyer Protection in Subdivision/Condo Projects

PD 957 adds:

Licensing requirements for developers
Sanctions for non-compliance
Rights related to project completion and quality

In disputes with developers of subdivision lots or condo units sold on installment:

Buyers often invoke both RA 6552 (Maceda Law) and PD 957, along with the Civil Code.

VIII. Common Issues and Pitfalls in Practice

Non-notarized notices Developers send ordinary letters of cancellation (or SMS/email) without notarization. Under RA 6552, cancellation requires a notarized notice.
No proof of receipt Sellers must prove that the buyer actually received the notice. Without proof (e.g., registered mail card, personal service with acknowledgment), cancellation is vulnerable.
Failure to refund CSV For buyers with 2+ years of payments, failure to pay the CSV means no valid cancellation, and attempts to evict or resell can be challenged.
“Automatic cancellation” clauses Many contracts say the contract is deemed cancelled upon a certain number of missed payments. These provisions are generally ineffective if they contradict the Maceda Law requirements.
Misclassification of property Some sellers claim that property is “commercial” to avoid Maceda Law. But if actual use and zoning, or contract terms, reflect residential use, courts may treat it as covered.
Multiple restructurings and extensions Where contracts are extended, the “life of the contract” (for computing grace periods and frequency of their use) includes extensions. The buyer may still get grace periods and refunds based on the total years paid.

IX. Practical Takeaways for Buyers

Check how long you’ve been paying. Your rights change substantially once you cross the 2-year mark.
Keep proof of all payments. Official receipts, bank slips, and statements help compute your cash surrender value and refute understatements by the seller.
Insist on proper process. No valid cancellation without:
- Grace period
- Notarized notice
- 30-day period from receipt
- CSV refund (if 2+ years)
Do not sign blanket waivers. Any waiver of Maceda Law protections is void if it gives you less than what the law mandates.
If you can, negotiate better terms. Developers may agree to:
- Restructuring
- Extended grace periods
- Partial refunds even for less than 2 years of payment
Seek legal advice for disputes. The Maceda Law sets minimum rights, but actual disputes often involve details: dates, evidence of notice, precise computations, and interplay with other laws (Civil Code, PD 957, etc.). A Philippine lawyer can analyze your specific documents and facts.

X. Conclusion

The Maceda Law is a cornerstone of real estate consumer protection in the Philippines.

For buyers paying on installment, it ensures that:

Default is not the end of the world.
You get time to catch up, and if cancellation is inevitable, you may recover a substantial portion of what you paid.
Sellers must follow clear, formal procedures before they can validly cancel contracts and resell the property.

In every installment sale of residential real estate, understanding the Maceda Law is essential. It transforms what might otherwise be a one-sided arrangement into a more balanced relationship, giving buyers concrete, enforceable rights when things don’t go as planned.