The Recto and Maceda Laws available to the buyer. You also can't use increased by the seller.
increased by the seller. If after the grace
These two laws are relevant and are very
often the issue of many court cases. Both
laws govern the sale of property by
installments. The Recto Law, which forms
part of the Civil Code, covers installment
sales of personal property while the
Maceda Law governs installment sales of
real property.
The Recto Law
The Recto Law comprises Articles 1484 to
1486 of the Civil Code. It was added to the
Civil Code to prevent abuses in the
foreclosure of chattel mortgages, such as
when mortgagee-creditors foreclosed
mortgaged property, bought them at a low
price (on purpose,) then prosecuted the
mortgagor-debtors to recover the
deficiencies.
In the event a buyer of personal property
defaults by failing to pay two or more of
the agreed installments, the seller can do
any of the following:
1.) Demand that the buyer pay (a.k.a.
specific performance)
2.) Cancel or rescind the sale
3.) Foreclose the mortgage on the
property bought (if there ever was a
chattel mortgage)
Regarding no. 3, this happens when a
person takes a loan to buy something and
he mortgages the thing he bought to
ensure the creditor that he will pay the
loan. Remember: If you choose one
remedy, you can't choose the others.
These remedies, believe it or not, are also
all or any of them at the same time. The
Recto Law also won't apply to a straight
sale (i.e. a sale where there is a
downpayment and the balance is payable
in the future in a single payment only.) The
seller can also assign his credit to another
person, making that person the new
creditor.
If the buyer refuses to surrender the items
to the seller, he becomes a perverse
buyer-mortgagor. When that happens, the
seller can recover expenses and attorney's
fees.
The Recto Law also covers leases with the
option to purchase.
The Maceda Law
The Maceda Law, RA 6552, is the real
estate equivalent of the Recto Law. Like
the Recto Law, it also covers financing of
sales of real property (which is why
mortgages also come in.) It doesn't
apply,however, to the following sales:
1.) Industrial lots
2.) Commercial buildings and lots
3.) Lands under the CARP Law
Depending on when the buyer defaults,
there are two (2) possible scenarios: if the
buyer paid at least two (2) years'
installments and if the buyer paid less
than 2 years' installments.
If the buyer paid less than 2 years'
installments and defaults, he is given a
grace period of sixty (60) days starting
from the date of his last installment to
resume paying. This period can be
period the buyer still can't pay, the seller
must make a notarial demand to cancel
the sale. The cancellation becomes
effective thirty (30) days after the buyer
was notified. So it's possible that the
buyer could be notified two months after
the 60-day period and then the 30-day
period will begin.
If the buyer paid at least two years'
installments, the buyer can pay the unpaid
balance without interest. The grace period
is computed at one (1) month per year of
installment payments. It also begins from
the time the buyer paid his last
installment. The grace period can be used
only once every five (5) years of the sales
contract's life -including its extensions. So
it's possible to have a grace period of a
year if the buyer had been paying his
installments faithfully for 12 years. Once
the buyer chooses to use the grace period,
he can't get it again until another five
years are over.
If the seller wants to cancel the sale, he
has to refund the buyer of 50% of the
actual payments. If the buyer paid more
than five years' installments another 5%
for every year is to be added to the
refund, but only up to 90% of the total
payments made. The payments
mentioned here include the
downpayment, options and deposits. The
refund is made in this way: if the buyer
paid more 2 to 5 years' installments, he
can get back 50% of the cash surrender
value. If he paid for more than 5 years, he
can get the 50% plus 5% per year up to
90%.
The buyer is also allowed to make
advanced payments, or even the full price,
without interest. He can also assign his
rights to another person, making that be used by the highest bidder in
person the new buyer, but he can only do The Maceda Law cannot be used by a real foreclosure proceedings.
that with a notarial deed of sale estate developer (see here.) It also cannot
assignment.