Requisites for a Valid Cancellation under the Maceda Law (R.A. No. 6552)

The Maceda Law, officially known as Republic Act No. 6552, provides protections to buyers of residential real property under installment payment schemes. For a valid cancellation of a contract to sell or deed of conditional sale under the Maceda Law, the following requisites must be strictly complied with:

1. Applicability of the Maceda Law

Before proceeding to cancellation, ensure that the Maceda Law applies:

The property must be residential real property, which includes houses, lots, and condominiums.
The transaction must involve a sale on installment basis.
It does not cover industrial lots, commercial buildings, or sales made through a full cash payment or bank financing.

2. Grounds for Cancellation

The buyer must have failed to meet installment payments as agreed in the contract. Non-payment or failure to pay within the grace periods specified in the law triggers the seller's right to cancel.

3. Compliance with the Buyer's Rights Under the Maceda Law

The seller must uphold the following rights of the buyer before initiating a valid cancellation:

a. 2-Year Rule for Refunds

If the buyer has paid at least two years of installments, they are entitled to a grace period of one month for every year of installments paid.
Additionally, they are entitled to a refund of 50% of the total payments made, less penalties. For payments exceeding five years, an additional 5% per year beyond five years shall be refunded, but the refund cannot exceed 90% of total payments.

b. Grace Period

The grace period is one month per year of installment payments made.
The seller cannot cancel the contract immediately upon default; the buyer must first be given this grace period to pay the overdue amount without additional interest.

c. Written Notice

After the lapse of the grace period, the seller must serve a notarized written notice of cancellation or rescission to the buyer. The notice must be sent via a method ensuring receipt, such as registered mail or personal delivery.

4. Refund of Payments (If Applicable)

For buyers who have paid two or more years of installments:

The seller must refund the buyer 50% of total payments made. An additional 5% refund applies for each year of installments beyond five years, subject to the 90% maximum cap.
Refunds are computed on total payments made, excluding interest, penalties, and delinquency charges.

5. Formal Cancellation

The cancellation becomes effective only upon compliance with the following:

Expiry of the grace period without the buyer rectifying their default.
Proper service of the notarized written notice of cancellation.
Fulfillment of any applicable refund obligation.

6. Resale of the Property

The seller cannot resell the property until the cancellation is effective. Any attempt to resell prior to valid cancellation could render the action invalid and expose the seller to legal liabilities.

Important Notes:

If the buyer has paid less than two years of installments, the seller only needs to grant a grace period of not less than 60 days from the due date. After the grace period, the seller can cancel the contract upon serving the proper written notice.
Failure to comply with these statutory requirements makes the cancellation invalid, and the seller may face legal action, including specific performance or damages.

Summary

For a valid cancellation under the Maceda Law:

Ensure the transaction qualifies under R.A. No. 6552.
Observe the 2-year rule and calculate the appropriate grace period and refund, if applicable.
Serve a notarized written notice of cancellation.
Comply with refund obligations (if applicable).
Wait for the cancellation to become effective before reselling the property.

Any deviation from these steps could render the cancellation invalid and expose the seller to legal disputes.