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Failed to Pay Your Monthly Equity? Know Your Rights Under Maceda Law

Maceda Law

Maceda Law (R.A. 6552)

The Realty Installment Buyer Protection Act

Filipino property buyers usually avail of the installment options offered by the developers covered by a contract to sell. In a case of default payment, can the seller automatically cancel the contract to sell? Can the buyer ask for a refund of the amount he already paid for the property? What are the rights of the buyer who failed to pay his installment in its due date?

PD 957 (Subdivision and Condominium Buyers Protective Decree) is the law that protects the buyers of subdivision and condominium. Under PD 957, however, RA 6552 or the Maceda Law is the law that protect the buyers of installment sale against onerous and oppressive conditions.

Let us discuss the salient features of this law.

Coverage of the Maceda Law

Coverage of the law: Applicable to contract to sell of residential lot, house-and-lot, and condominium on installment basis. The important terms: (1) installment sales, (2) of residential subdivision and condominium, and (3) covered by contract to sell.

Non-coverage: Sale of commercial buildings and industrial lots, and sale to tenants under RA 3844.

Grace Period, Refund and Cancellation of Contract

When the buyer has paid at least two years, he is entitled to:

(a) Grace Period. 30 days grace period. He pay, without additional interest, the unpaid installments due within the total grace period for every one year of installment payments made.  He can avail of this 30-day grace period once every 5 years.

(b) Right of refund. The seller must refund the cash surrender value to the buyer before the contract to sell can be cancelled.

Rate of refund: 50% from 2nd year to 5th year plus 5% per year in excess of 5 years, however, aggregate rate should not exceed 90% of the total payments made.

Note: Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made. Penalties are not included in the computation.

(c) Requirements for the cancellation of contract. The seller can cancel the contract only after notarial notice and payment of the refund.

When the buyer has paid less than 2 years, he is entitled to:

(a) Grace Period: Not less than 60 days from the date the installment is due.

(b) Refund: No Refund.

(c) Requirements for the cancellation of contract. The seller can cancel the contract to sell only upon the end of grace period and notarial notice (30-days upon receipt).

Assignment and reinstatement

(a) Buyer has the right to sell or to assign the same to other people.

(b) Buyer has the right to reinstate the contract by updating the account during the grace period and before the cancelllation of the contract.

Example of refund computation:

Downpayment: 100,000
Total amortization inclusive of penalty: 400,000
Penalty: 50,000
Years paid: 7 years

How do you compute the refund?
Grace period earned: 7 months
Rate of refund: 60%
Amount of refund: 270,000

Computation:
(100,000 + 400,000) less 50,000 = 450,000
multiply it by 60%
Total refund is 270,000