RA 6552: Realty Installment Buyer Protection Act (Maceda Law)
Approved on August 26, 1972, this law protects buyers of residential real estate who pay in installments. I’m answering from memory, so please verify the details against the full text on Lawphil.
Meaning
The Maceda Law gives buyers of real property on installment certain rights if they default on payments. It prevents sellers or developers from cancelling a contract and forfeiting everything the buyer has already paid.
Key Details
- Coverage: sales or financing of residential real estate (lots, houses, condominium units) on installment payments, including residential lots and house-and-lot packages. Down payments, deposits, and options money count as installment payments.
- Exclusions: industrial lots, commercial buildings, and sales to tenants under agrarian reform laws. Bank loans or mortgage financing are also generally not covered, because the law applies to contracts directly between buyer and seller.
If the buyer has paid at least two years of installments (Sec. 3):
- Grace period of one month for every year of installments paid. This right may be exercised only once every five years of the contract’s life, and the buyer pays no additional interest.
- If the contract is cancelled, the buyer gets a refund of the cash surrender value, which is 50% of total payments made. After five years of installments, it increases by 5% per year, up to a maximum of 90% of total payments.
- Cancellation takes effect only 30 days after the buyer receives a notarized notice of cancellation or demand for rescission and the seller has paid the full cash surrender value.
If the buyer has paid less than two years (Sec. 4):
- The buyer gets a grace period of at least 60 days from the due date of the unpaid installment.
- If the buyer still fails to pay, the seller may cancel 30 days after the buyer receives a notarized notice of cancellation or demand for rescission. No cash surrender value is required.
Other rights:
- Sale or assignment (Sec. 5): before cancellation, the buyer may sell or assign rights to another person, or reinstate the contract by updating the account during the grace period.
- Advance payment (Sec. 6): the buyer may pay any installment, or the full unpaid balance, at any time without interest. The payment should be annotated in the certificate of title.
- Waivers void (Sec. 7): any stipulation waiving these rights is null and void.
Importance
- Buyer protection: it protects mostly middle- and low-income buyers from losing their investment because of default.
- Fair treatment: it limits abusive forfeiture clauses in contracts to sell.
- Industry standard: it is a core reference for real estate brokers, salespersons, and developers.
Additional Info
- It is commonly paired with PD 957 (the Subdivision and Condominium Buyers’ Protective Decree), which also protects buyers.
- It is named after its author, then Senator Macario Maceda.
