Here’s a practitioner-style explainer on Installment Buyer Default Remedies under the Maceda Law (Realty Installment Buyer Act, R.A. 6552)—written for buyers, developers, brokers, and counsel. Philippine context. General information only, not legal advice.

The big picture

The Maceda Law protects buyers of real property sold on installment (typically subdivision lots and condominium units) who fall into payment default. It sets grace periods, restricts cancellation/forfeiture, and (for sufficiently paid-up buyers) requires a cash surrender value (CSV) refund when a sale is cancelled. It co-exists with other housing/consumer laws (e.g., PD 957 for subdivision/condo projects; DHSUD/HLURB rules).

Core idea: You can’t be cut off and stripped of all payments at the first sign of default. Sellers must honor statutory grace and refund rules and follow notarial cancellation steps.

Who is covered (and typical scope limits)

Covered: Buyers of real estate on installments (house-and-lot, lot-only, condo units) under contracts to sell or similar arrangements (including many “rent-to-own” or deferred-cash plans that are, in substance, installment sales).
Generally not covered: Pure commercial/industrial investments or purely financing arrangements disconnected from a real-estate sale; cash sales (no installments).
Condo buyers: In practice treated as covered by Maceda on the installment sale aspect; PD 957 may add remedies if the developer violates project obligations.

When in doubt, tribunals look at substance (installment purchase of real property) over labels.

Default roadmap: rights and remedies by paid-up time

Maceda draws a line at “two years of installments paid.” Count total time and amount actually paid on the contract (downpayment + installment amortizations). Penalties and interest are usually excluded from CSV computations; the safest practice is to compute on principal amounts paid unless the contract and controlling guidance provide otherwise.

A) Buyer has paid less than 2 years

1) Statutory grace period:

At least 60 days from due date of the most recent unpaid installment.
Within this window, buyer may pay the unpaid installments without additional interest (beyond what the contract lawfully imposes), and the contract cannot be cancelled.

2) Cancellation requires a notarial notice and a waiting time:

If the buyer still fails to pay within the 60-day grace, seller may cancel only after the buyer receives a notarial notice of cancellation or rescission and 30 days more have passed.
Without that notarial notice (and the 30-day lapse), cancellation is ineffective.

3) Refund (CSV):

No statutory CSV is mandated when the paid period is under 2 years (developers sometimes offer goodwill refunds—purely contractual).

B) Buyer has paid 2 years or more

1) Longer grace period (“one month per paid year”):

The buyer is entitled to a grace period of at least one month for every year of installments paid (e.g., 6 years paid = 6 months grace).
During grace, the buyer may update the account by paying due installments (and contract-lawful interest) without additional penalties, and the contract remains in force.

2) Cash Surrender Value (CSV) upon cancellation:

If the seller cancels after grace, the buyer is entitled to a CSV of:
- 50% of total payments made; plus 5% of total payments for every year beyond five years, capped at 90%.
CSV is based on actual payments (downpayment + principal installments). Penalties and pure interest are normally excluded.

3) Notarial cancellation still required:

Even for 2+ year buyers, the seller must serve a notarial notice of cancellation and wait 30 days from receipt to make the cancellation effective.

4) Other statutory rights (commonly invoked):

Advance payment without interest: Buyer may prepay to reduce or settle the balance without extra interest; if fully paid, buyer may demand conveyance.
Assignment/transfer: Buyer may assign/sell rights subject to reasonable fees and developer consent not being unreasonably withheld (often paired with substitution of buyer).
Reinstatement within 5 years from default: Buyers who have paid at least two years are typically allowed to reinstate by updating the account within the grace periods (practice: within 5 years from default, and before a valid cancellation takes effect). Once validly cancelled with CSV paid, reinstatement depends on developer consent.

How cancellation must legally happen (seller checklist)

Track the right grace period (60 days if <2 data-preserve-html-node="true" years; 1 month per paid year if ≥2 years).
Wait out the grace without harassing or prematurely terminating utilities/access.
Serve a notarial notice of cancellation or rescission to the buyer’s last known address (personal service or registered mail; keep proofs).
Wait 30 more days from buyer’s receipt.
For 2+ year buyers, compute CSV correctly; tendering CSV is part of clean termination.
Annotate/record the cancellation and settle consequential matters (vacation/turnover, HOA dues accounting, tax declarations, etc.).

If any step is skipped (e.g., no notarial notice), the cancellation can be attacked as ineffective, allowing the buyer to reinstate upon tendering arrears.

Computing the CSV: worked examples

Assume downpayment and monthly amortizations totaling the “payments made” exclusive of interest/penalties.

Example 1: 6 years paid; total payments ₱1,200,000

Base CSV = 50% × ₱1,200,000 = ₱600,000
Years beyond 5 = 1 → add 5% × ₱1,200,000 = ₱60,000
CSV = ₱660,000 (well below 90% cap)

Example 2: 12 years paid; total payments ₱2,000,000

Base 50% = ₱1,000,000
Years beyond 5 = 7 → add 35% × ₱2,000,000 = ₱700,000
Tentative CSV = ₱1,700,000 but cap at 90% → ₱1,800,000 max
CSV = ₱1,700,000 (since 85% < 90% cap)

Practical tip: keep a running ledger separating principal vs interest/penalties to avoid disputes on the CSV base.

What each side can (and cannot) do after default

Buyer (in default)

Use statutory grace to update without losing the contract.
Reject early/summary cancellation: insist on notarial notice + 30 days.
If 2+ years paid and cancellation proceeds, demand CSV (timely and correct).
Assign the contract (before valid cancellation) to recover value, if allowed.
Negotiate restructuring (catch-up plan, term extension, interest relief), especially within grace periods.

Seller/Developer

May cancel only after grace and notarial steps.
May forfeit payments only as allowed by Maceda (i.e., subject to CSV for 2+ year buyers).
May resell the unit after valid cancellation; ensure CSV and notices were properly handled to avoid later challenges.
May charge reasonable administrative/processing fees (assignment, reinstatement) if contractual and reasonable.

Interaction with other laws and typical overlays

PD 957 (Subdivision & Condominium Buyers’ Protective Decree): Adds project-level protections (licenses to sell, escrow, timelines, amenities). If a developer breaches PD 957 duties (e.g., fails to deliver/complete), buyers may pursue rescission or refunds independent of Maceda default rules.
DHSUD/HLURB adjudication: Many installment disputes (CSV computation, notice defects, unlawful forfeiture) are handled via the housing regulator’s adjudicatory bodies, apart from ordinary courts.
Civil Code rescission vs. Maceda: Sellers cannot sidestep Maceda’s grace/CSV by labeling a default as simple rescission under the Civil Code; Maceda is a special protective statute for installment buyers.
Tax/dues: HOA dues, RPT, and utility arrears are normally buyer’s obligation while in possession; clarify settlement upon cancellation or reinstatement.

Common mistakes (and how to avoid them)

By sellers

Cancelling without a notarial notice (ordinary letters/texts won’t do).
Miscomputing CSV by excluding downpayment or including interest as a deduction from the base.
Treating the first missed installment as an automatic forfeiture.
Refusing reinstatement within grace even when the buyer tenders the correct arrears.

By buyers

Ignoring demand letters and missing the grace window.
Not keeping receipts and a principal vs interest summary for accurate CSV.
Vacating voluntarily before a clean cancellation/CSV tender.
Waiting too long to assign the contract when salvage value is still high.

Practical playbooks

If you’re the buyer in default

Determine your bracket (<2 data-preserve-html-node="true" years vs ≥2 years paid).
Calendar your grace (60 days vs 1 month per paid year).
Ask for a statement of account (principal/interest split).
Within grace, tender the arrears (document your offer).
If cancellation is looming and ≥2 years paid, demand CSV in writing.
Consider assignment or restructuring before cancellation becomes effective.

If you’re the developer/seller

Audit payments and compute the correct grace and CSV (if any).
Serve notarial cancellation properly and track receipt + 30 days.
For ≥2 years paid, prepare CSV for prompt payment upon cancellation.
Keep a clear paper trail (SOAs, notices, registry receipts/affidavits of service).
When allowing reinstatement, issue a written catch-up plan and reset dates.

FAQ (quick answers)

Is interest/penalty included in CSV? CSV is computed on total payments made on the price (commonly principal + downpayment). Interest/penalties are generally not counted toward the base; check your contract and prevailing guidance.
Can the seller refuse CSV because “forfeiture” is in the contract? No. Maceda overrides contrary stipulations for covered installment sales.
What if my paid period is 1 year 11 months? You’re in the <2 data-preserve-html-node="true" years bracket: 60-day grace, no statutory CSV.
After valid cancellation and CSV, can I get the unit back? Only if the seller agrees to reinstate or resell to you; the law doesn’t force reinstatement after a valid cancellation has taken effect.
Can I prepay to avoid interest? Yes—advance payment without interest is a statutory right; ask for a recomputed payoff.

Bottom line

Under the Maceda Law, buyers get time to cure and (if sufficiently paid-up) a statutory refund upon cancellation—and sellers must use notarial processes. The safest course on both sides is to calendar the grace, compute CSV correctly, and document tenders and notices. Most disputes turn on (i) whether cancellation was validly perfected and (ii) whether CSV was properly computed and paid.

If you share your facts (dates, total paid, downpayment, contract type, notices received), I can draft a CSV computation sheet, a reinstatement or demand letter, and a notice/cancellation checklist tailored to your case.