CIVIL LAW > VII. SPECIAL CONTRACTS > A. Contract of Sale > 7. Maceda Law (R.A. No. 6552) > c. Rights Given to the Buyer on Installment
The Maceda Law, or Republic Act No. 6552, is the primary legislation governing the rights of buyers of real estate property in the Philippines who pay through installment. It is officially titled the “Realty Installment Buyer Protection Act.” It aims to protect buyers of residential real estate against onerous and arbitrary forfeiture of payments in cases of default. Below is a comprehensive outline of the rights granted to buyers under this law.
Scope and Coverage
The Maceda Law applies to:
- Sale of residential real property (house, lot, or condominium unit) by installment payment.
- Excludes industrial lots, commercial buildings, and sales to tenants under agrarian reform laws.
Rights of the Buyer Under the Maceda Law
1. Right to a Grace Period (Section 3)
Buyers who have paid at least two (2) years of installments:
- They are entitled to a grace period of one month for every year of installment payments made, to pay the unpaid installments without additional interest.
- The grace period can only be availed once every five years of the contract's life and must not result in the contract's cancellation.
Buyers who have paid less than two (2) years of installments:
- Grace period of 60 days is granted from the date the installment became due.
2. Right to Refund (Section 3)
- Buyers who have paid at least two (2) years of installments and whose contracts are canceled are entitled to:
- A refund of 50% of the total payments made, excluding delinquency interest.
- If payments exceed five (5) years, the buyer is entitled to an additional 5% refund per year beyond the fifth year, but not exceeding 90% of the total payments.
3. Right to Avoid Automatic Cancellation (Section 3)
- Cancellation of the contract is not immediate. Sellers must:
- Notify the buyer of cancellation.
- Allow the buyer to exercise the grace period rights.
- Refund the appropriate amount if applicable.
4. Right to Assign the Contract (Section 5)
- Buyers are allowed to assign their rights to another person before cancellation or actual forfeiture of payments, subject to the seller's approval. This enables the buyer to transfer the financial obligation and property interest to a third party.
5. Right to Reinstatement of the Contract (Section 3)
- Buyers can reinstate the contract by updating all unpaid installments and other charges due during the grace period.
6. Prohibition Against Unconscionable Forfeitures (Section 4)
- For buyers who have paid less than two years’ worth of installments:
- A 60-day grace period is provided for payment of overdue installments.
- Cancellation or forfeiture is only valid after a notarial demand or judicial rescission and after compliance with due process requirements.
Additional Protections
Notice of Cancellation: Before cancellation or rescission of the contract, the seller must issue a written notice of cancellation to the buyer. This notice must be notarized and should clearly inform the buyer of their rights, including any grace period or refund applicable.
Applicability to Subdivisions and Condominiums: The Maceda Law applies specifically to residential lots in subdivisions and residential condominiums sold on installment.
Exclusivity: The law ensures that any stipulation contrary to its provisions, such as a waiver of the buyer's rights under the law, is considered null and void.
Limitations of the Maceda Law
- It does not cover purchases through bank financing or mortgage arrangements unless specifically stipulated.
- It applies only to residential real estate and excludes industrial or commercial properties.
- It grants a refund only to buyers who have completed at least two years of installments.
Key Jurisprudence on the Maceda Law
- Rillo v. Court of Appeals (1997): This case emphasized that the Maceda Law grants buyers the opportunity to recover a portion of their payments to prevent unjust enrichment of the seller.
- Garcia v. Court of Appeals (1995): The Supreme Court clarified the calculation of refunds, stating that penalties and delinquency interest must be excluded from the total amount of payments made.
Practical Implications
- Sellers must exercise caution in drafting contracts to ensure compliance with the Maceda Law’s requirements for cancellation and refunds.
- Buyers must be aware of their rights to avoid unjust forfeiture of payments and potential abuse by unscrupulous sellers.
By mandating due process, fair refunds, and a reasonable grace period, the Maceda Law balances the interests of buyers and sellers in installment sales of residential real estate.