The Republic Act No. 6552, popularly known as the Maceda Law or the Realty Installment Buyer Act, is a landmark piece of social legislation in the Philippines. It was designed to protect buyers of real estate on installment payments against onerous and oppressive conditions, specifically concerning the forfeiture of payments in the event of default.
Scope and Applicability
The Maceda Law applies specifically to transactions involving the sale or financing of real estate on installment payments.
- Included Properties: Residential condominiums, apartments, houses and lots, and all other residential dwellings.
- Excluded Properties: Industrial lots, commercial buildings, and sales to tenants under the agrarian reform laws.
Rights Based on Payment History
The law distinguishes between two categories of buyers based on how many years of installments they have paid at the time of default.
1. Buyers with at Least Two Years of Installments
If a buyer has paid at least two years of installments, they are entitled to the following protections:
Grace Period: The buyer has the right to pay, without additional interest, any unpaid installments within a total grace period of one month for every year of installments paid. This right can only be exercised once every five years of the contract's life.
Cash Surrender Value (Refund): If the contract is cancelled, the seller must refund the "Cash Surrender Value."
The refund is equivalent to 50% of the total payments made.
After five years of installments, an additional 5% is added every year, but the total refund cannot exceed 90% of the total payments made.
Definition of Total Payments: This includes the down payment, deposits, or options on the contract, in addition to the monthly installments.
2. Buyers with Less Than Two Years of Installments
For those who have paid less than two years of installments, the protections are more limited:
- Grace Period: The buyer is entitled to a grace period of not less than 60 days from the date the installment became due.
- Cancellation: If the buyer fails to pay within the 60-day grace period, the seller may cancel the contract. However, unlike buyers who have paid for two years, these buyers are not entitled to a refund of their payments.
The Process of Cancellation
For a cancellation of a contract to be legally valid under the Maceda Law, the seller must comply with a strict two-step process:
- Notice of Cancellation: The seller must provide a notice of cancellation or a demand for rescission by notarial act.
- Waiting Period: The actual cancellation takes effect only 30 days after the buyer receives the notice of cancellation or the demand for rescission by notarial act.
- Payment of Refund: For buyers with at least two years of payments, the cancellation is only effective upon the full payment of the cash surrender value.
Important Note: Failure to comply with the notarial notice requirement or the payment of the refund (when applicable) renders the cancellation of the contract void and ineffective.
Additional Rights of the Buyer
Beyond refunds and grace periods, the buyer retains the following rights during the grace period and before actual cancellation:
- Right to Assign/Sell: The buyer may sell their rights or assign the same to another person.
- Right to Reinstate: The buyer may reinstate the contract by updating the account during the grace period and before actual cancellation.
- Advance Payments: The buyer has the right to pay any installment or the full unpaid balance of the purchase price at any time without interest and to have such full payment of the purchase price annotated in the Certificate of Title.
Summary Table: Refund and Grace Periods
| Years of Installments Paid | Grace Period | Refund (Cash Surrender Value) |
|---|---|---|
| Less than 2 Years | At least 60 days | None |
| 2 to 5 Years | 1 month per year paid | 50% of total payments |
| 6 Years | 1 month per year paid | 55% of total payments |
| 10 Years | 1 month per year paid | 75% of total payments |
| 13 Years or more | 1 month per year paid | 90% (Maximum Cap) |