The purchase of real estate is often the most significant investment a Filipino family will make. However, financial instability can lead to missed installments, putting the dream of homeownership at risk. To prevent oppressive conditions in real estate sales, the Philippine government enacted Republic Act No. 6552, popularly known as the Maceda Law (or the Realty Installment Buyer Protection Act).
Named after its author, Senator Ernesto Maceda, this law outlines the specific rights of buyers who default on their payments, ensuring they are not left empty-handed after years of investment.
Scope of Application
The Maceda Law applies to all transactions involving the sale or financing of real estate on installment payments, including residential condominiums, apartments, houses, and lots.
Exclusions:
- Industrial lots.
- Commercial buildings.
- Sales to tenants under the Land Reform Code.
- Straight-term sales (where the full balance is paid in one go after a period, rather than installments).
Two Categories of Buyer Rights
The protections offered by the Maceda Law depend on how many years of installments the buyer has paid.
1. Buyers with at least two (2) years of installments
If a buyer has paid at least two years' worth of installments and defaults, they are entitled to the following:
- The Grace Period: The buyer has the right to pay, without additional interest, the unpaid installments due within a total grace period of one month for every one year of installments paid. This right can only be exercised once every five years of the contract's life.
- The Cash Surrender Value (Refund): If the contract is cancelled, the seller must refund the "Cash Surrender Value" to the buyer. This consists of 50% of the total payments made.
- After five years of installments, an additional 5% per year is added to the refund, but the total cannot exceed 90% of the total payments made.
- Note: "Total payments" includes the down payment, options, and deposits.
2. Buyers with less than two (2) years of installments
If the buyer has paid less than two years of installments, the protections are more limited:
- The 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 those who have paid for two years, buyers in this category are not entitled to a refund of their payments.
The Process of Cancellation
For a cancellation to be legally valid under the Maceda Law, the seller must strictly follow a two-step process:
- Notice of Cancellation: The seller must provide a notice of cancellation or a demand for rescission by notarial act (a document signed before a notary public).
- Waiting Period: The actual cancellation of the contract takes effect only 30 days after receipt of the notice by the buyer.
- Payment of Refund: In cases where the buyer is entitled to a refund (2+ years of payments), the cancellation is only effective once the cash surrender value has been fully paid to the buyer.
Additional Rights
Regardless of the number of installments paid, the Maceda Law grants buyers two additional "exit" or "transfer" rights:
- Right to Sell or Assign: The buyer has the right to sell their rights or assign them to another person.
- Right to Reinstatment: The buyer can reinstate the contract by updating the account during the grace period and before the actual cancellation of the contract.
- Right to Advance Payment: The buyer may pay any installment or the full unpaid balance at any time without interest and have such full payment of the price annotated on the Certificate of Title.
Common Misconceptions
| Misconception | Legal Reality |
|---|---|
| "I lost my house, I get nothing back." | If you paid for at least 2 years, the law mandates a minimum 50% refund. |
| "The developer can cancel immediately." | Cancellation requires a notarized notice and a 30-day waiting period. |
| "Interest applies to the grace period." | The Maceda Law specifically states the grace period is "without additional interest." |
Void Stipulations
Any clause in a contract that is contrary to the provisions of the Maceda Law (e.g., a clause stating the buyer waives their right to a refund) is considered null and void. The law is a matter of public policy designed to protect low-to-middle-income earners from losing their life savings due to unforeseen financial hardship.