Zion purchased a condominium unit from Hammered Homes Realty (HHR) for PHP 10,000,000.00. Zion paid a down payment of PHP 2,000,000.00, while the balance of PHP 8,000,000.00 is payable for a period of 80 months at PHP 100,000.00 monthly installments. Zion started paying the monthly installments on April 15, 2022. Due to financial difficulties, Zion started to default on his payments from June 15, 2024. Zion paid PHP 1,800,000.00 total monthly installments. On August 15, 2024, Zion received a notarized letter cancelling the contract to sell. Zion then went to the office of HHR to claim the cash surrender value of his payments pursuant to Republic Act No. 6552 entitled “Realty Installment Buyer Act” or the Maceda Law. Is Zion entitled to cash surrender value? Explain.
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Yes, Zion is entitled to a cash surrender value under the Maceda Law. Under Section 3 of Republic Act No. 6552 (Maceda Law), a buyer who has paid at least two years of installments is entitled
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Quick check
Under Section 3 of Republic Act No. 6552, what minimum period of installment payments entitles a buyer to a cash surrender value?
Section 3 of the Maceda Law requires at least two years of installment payments to qualify for a cash surrender value.
How are down payments treated when computing the total installment payments made under Section 3 of the Maceda Law?
Section 3 explicitly provides that down payments shall be included in computing the total installment payments made.
What percentage of total payments constitutes the cash surrender value for a buyer who has paid at least two years of installments under Section 3 of RA 6552?
Section 3 provides that the cash surrender value is equivalent to fifty percent of the total payments made.
What mandatory requirement must a seller satisfy for the cancellation of a contract to sell to take full effect under the Maceda Law?
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Why was Zion entitled to a cash surrender value despite paying only 18 regular monthly installments?
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Learn more about these topics
1. Maceda Law Coverage
Under Republic Act No. 6552, also known as the Maceda Law, real estate buyers on installment payments are granted statutory rights and protection against onerous conditions of cancellation. The law applies to all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium units. When a buyer defaults after paying at least two years of installments, Section 3 of the Maceda Law guarantees the buyer's right to a cash surrender value upon the valid cancellation of the contract to sell by the seller.
2. Down Payment Computation
In determining whether a buyer has paid at least two years of installments under the Maceda Law, Section 3 explicitly mandates that down payments, deposits, or option money paid by the buyer shall be included in computing the total number of installment payments made. A down payment represents an advance payment on the purchase price and is treated as equivalent monthly installments based on the stipulated amortization rate. Adding down payments to regular monthly amortizations ensures an accurate calculation of the buyer's total accumulated installment payments.
3. Cash Surrender Value
Under Section 3 of Republic Act No. 6552, if the contract to sell is cancelled, the seller must refund to the buyer the cash surrender value of the payments on the property. For buyers who have paid at least two years of installments, the cash surrender value is equivalent to fifty percent (50%) of the total payments made. The actual cancellation of the contract takes effect only after thirty days from receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act and upon full payment of the cash surrender value.