The Maceda Law, officially known as the Realty Installment Buyer Protection Act (Republic Act No. 6552), protects buyers of real estate on installment payments from onerous and oppressive conditions.
Coverage and Exclusions
It covers all transactions involving the sale or financing of real estate on installment payments, including residential condominium apartments. It excludes industrial lots, commercial buildings, sales to tenants under agrarian reform laws, and sales payable in straight terms.
Rights if AT LEAST 2 years of installments are paid
- Grace Period: The buyer earns one (1) month of grace period for every one (1) year of installment payments made, to pay without additional interest. This right can be exercised only once every five (5) years.
- Cash Surrender Value (Refund): If the contract is cancelled, the seller must refund 50% of the total payments made. After 5 years of installments, an additional 5% is added every year, up to a maximum of 90%. Down payments, deposits, and options are included in this computation.
- Mandatory Cancellation Steps: Actual cancellation only takes effect 30 days after the buyer receives a notarized notice of cancellation or demand for rescission, AND upon full payment of the cash surrender value.
Rights if LESS THAN 2 years of installments are paid
- Grace Period: The seller must give a grace period of not less than 60 days from the date the installment became due.
- Mandatory Cancellation Steps: If the buyer fails to pay within the grace period, the seller may cancel the contract 30 days after the buyer receives a notarized notice of cancellation.
Additional Buyer Rights
During the grace period and before actual cancellation, the buyer has the right to:
- Sell or assign their rights to another person through a notarial act.
- Reinstate the contract by updating the account.
- Pay the full unpaid balance in advance at any time without interest, and have this full payment annotated on the property’s certificate of title.
Effect of Invalid Cancellation
The procedures for cancellation under the Maceda Law are strictly mandatory. If the seller fails to comply—such as failing to send a notarized notice or failing to refund the cash surrender value—the cancellation is void and the contract remains valid and subsisting.
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