Anything You Should Know About Maceda Law

Do you have a transaction involving the sale or financing real estate on installment payments or intend to enter this transaction sooner?  Then, this post is for you to be at least to have a grasp of what are your rights or how you would be protected against onerous and oppressive conditions.

This post focuses on Maceda Law or the Republic Act Number 6552 or otherwise known as the "Realty Installment Buyer Act".

Maceda Law got its moniker from the main proponent lawmaker himself, Senator Ernesto M. Maceda.

What is the purpose of this Act?

It is basically to protect buyers of real estate on installment payments against onerous and oppressive contracts.

What is the coverage of this Act?

It covers all transactions or contracts INVOLVING the sale or financing of real estate on installment payments, INCLUDING residential condominium apartments, where the buyer has paid at least two years installments.

What are not covered by this Act?

It does not cover the transactions involving industrial lots, commercial buildings and sales to tenants under R.A. Bo. 3844, as amended by R.A. No. 6389.

What is the situation to invoke this Act?

The buyer must have paid at least two years installment.

What are the rights of the buyer should he default in the payment of succeeding installments?

The buyer is entitled to the following rights?

1.  To pay, without additional interest, the unpaid installments due within the total grace period earned by him which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer once in every five years of the life of the contract and its extensions, if any.

2.  If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to 50% of the total payments made, and, after five years of installments, an additional 5% every year but not to exceed 90% of the total payments made:  Provided, That the actual cancellation of the contract shall take place after 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.

What is the treatment of the down payments, deposits or option payments?

They shall be included in the computation of the total number of installment payments made.

What is the grace period given to the buyer to pay the unpaid installments due without additional interest?

The grace period is hereby fixed at the rate of 1 month for every one year of installment payments made.

Can the buyer avail of the grace period anytime?

No.  It shall be exercised by the buyer only once in every  5 years of the life of the contracts and its extensions, if any.

What is the right of the buyer should the seller cancel the contract?

The buyer is entitled to the cash surrender value of the payments on the property which is equivalent to 50% of the total payments made, and, after 5 years of installments, an additional 5% every year but not to exceed 90% of the total payments made.

When is the actual cancellation of the contract take effect?

The actual cancellation of the contract shall take effect:

1.  After 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act; and

2.  Upon full payment of the cash surrender value to the buyer.

What is the requirement of the notice of cancellation or the demand for rescission of the contract?

It shall be notarized.

What will happen if there is no full payment of the cash surrender value to the buyer?

The cancellation or the rescission of the contract is invalid.

In case where less than 2 years of installment were paid, what will happen?

The seller shall give the buyer a grace period of not less than 60 days from the date the installment became due.

What will happen if the buyer fails to pay the installment after the grace period (in less than 2 years of installments)?

The seller may cancel the contract after 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.

Is the buyer entitled to a refund if he just paid installments in less than 2 years?

No.  The law only mentions the refund if the buyer has paid at least 2 years in installments.

Can the buyer assign or sell his rights to another person or to reinstate the contract by updating the account?

Yes, the buyer has the right to sell or his assign his rights to another person or to reinstate the contract during the grace period and before the actual cancellation of the contract.  The deed of sale or assignment shall be done by notarial act.

Can the buyer pay in advance any installment or the full unpaid balance of the purchase price any time without interest?

Yes, the buyer has the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property.

Note: Any stipulation in the contract contrary to this Act shall be NULL AND VOID.

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