The Maceda Law, officially known as Republic Act No. 6552 (the Realty Service Buyer Protection Act), is the primary legislation in the Philippines that protects buyers of real estate on installment plans. It specifically addresses the rights of a buyer who has defaulted on payments after a certain period.
1. Scope and Applicability
The law applies to all transactions involving the sale of real estate on installment payments, including:
- Residential condominiums
- House and lots
- Residential subdivisions
Exclusions:
- Industrial lots
- Commercial buildings
- Sales to tenants under agrarian reform laws
- Straight cash sales (not installment)
2. The "Two-Year" Threshold
The rights of the buyer depend heavily on whether they have paid at least two years of installments.
Category A: Buyers who have paid at least 2 years of installments
If a buyer has paid at least 24 months of installments, they are entitled to the following:
Grace Period: A 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.
The Refund (Cash Surrender Value): If the contract is cancelled, the buyer is entitled to a refund of the Cash Surrender Value (CSV).
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, options, and deposits added to the installments.
Category B: Buyers who have paid less than 2 years of installments
If the buyer has paid less than 24 months, the protections are more limited:
- Grace Period: 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.
- Refund: Under the strict letter of the Maceda Law, buyers with less than two years of payments are not entitled to a cash refund. They only have the right to the grace period.
3. The Mandatory Cancellation Process
For a cancellation to be legally valid under the Maceda Law, the seller must follow a specific procedure. Failure to do so means the contract remains technically "active."
- Notarial Notice: The seller must send a Notice of Cancellation or a demand for rescission by Notarial Act. A simple letter or email is generally insufficient to satisfy the legal requirement for cancellation.
- 30-Day Waiting Period: The actual cancellation of the contract takes place only 30 days after the buyer receives the Notarial Notice and (if applicable) the full payment of the Cash Surrender Value.
4. Other Significant Rights
- Right to Assign/Sell: The buyer has the right to sell or assign their rights to the property to another person before the actual cancellation of the contract.
- Advanced Payments: The buyer can pay any installment or the full unpaid balance at any time without interest, and have such full payment of the price annotated in the Certificate of Title.
- No Forfeiture Clauses: Any stipulation in a contract that contradicts the protections of the Maceda Law (such as a clause saying all payments are forfeited upon default) is considered null and void.
Summary Table: Refund and Grace Periods
| Years of Installments Paid | Grace Period | Refund Amount (CSV) |
|---|---|---|
| Less than 2 years | At least 60 days | 0% (No refund) |
| 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 limit) |