Last Updated on March 4, 2019

Whether you have experienced buying your own house or just planning for your humble abode,
it is best to be well-rounded with the laws protecting your rights as a homebuyer.

Whether you are ready to finally buy that dream house or condominium but would like to be
extra secured with your allotments or would already want to settle in a place that you can call
home but still lack a few more funds to suffice the big purchase, you are better off exploring
payments via installment basis.

This payment option in the Philippines is governed by the Republic Act No. 6552 or the Realty
Installment Buyer Protection Act. This is more commonly known as the Maceda Law, named
after the main author of this 1972 law, former senator Ernesto Maceda.

This law deals primarily with one’s rights as a real estate investor or a real estate buyer paying in
installments. It also describes the rights of a buyer defaulting in payments for such purchases.

In a sample scenario, let’s say you have opted to avail of the initial installment plan offered by a
developer and a location of your choice, thinking that you could get a favored house loan for it
after two or three years of building equity. Given that the odds were not mostly in your favor and
your loan was not approved, you may end up defaulting (meaning, you fail to meet the legal
obligations, or conditions, of a loan). This situation is one of the many where Maceda Law can
protect your rights, and so you can also be able to stand up and dust yourself off from this
dilemma. The following entails more elaboration on the scope of the law.

1. How do I know if this law would truly protect my rights in real estate installment
purchases?

 
 It is clearly stipulated in Section 2 of the Maceda Law that the protection of buyers of real
estate on installment payments against onerous and oppressive conditions is declared a
public policy. The law is on the side of the homebuyers should there be any misdemeanor
committed on the side of the developer or seller.

2. Who is covered by the Maceda Law?

As termed in the law, 2 types of “qualified buyers” are afforded protection:

 one who has paid at least 2 years of installments in all transactions or contracts
involving the sale or financing of real estate on installment payments. Properties
covered include residential condominiums, apartments, houses, townhouses, and
house and lots, among others, but excluding industrial lots, commercial buildings, and
sales of properties to existing tenants. (under Section 3)
 one who has purchased any of the properties enumerated above, but who has
paid less than two years of installments. (under Section 4)

3. What guarantees do I have should I fall behind in making payments or should

the contract be canceled?

In simple terms, as it is stated in Section 3, buyers are entitled to a refund, as well as grace
periods, so long as they have paid for at least two years.

On defaulting

 buyers who default on their payments of installments are entitled to pay, without
additional interest, the unpaid installments due within the total grace period they
have earned. This total grace period has been fixed at the rate of a one-month grace
period for every one (1) year of installment payments made. However, this right
can only be exercised by the buyer once in every five years of the life of the contract
and its extensions.

On contract cancellation

 If the contract is canceled, the seller shall refund to the buyer the cash surrender
value of the payments on the property, which is equivalent to 50 percent of the
total payments made. After five years of installments, an additional five percent
for every year of payments will be added, but not to exceed 90 percent of the total
payments made. For this to apply, the actual cancellation of the contract must take
place 30 days after receipt by the buyer of the notice of cancellation. This notice of
 cancellation or a demand for rescission at that must be by a notarial act and upon the
full payment of the aforementioned cash surrender value to the buyer.

4. What guarantees do I have if I have just paid less than two years of installments?

You are still primarily given the upper hand in this scenario since grace periods and notarized
notices should be given to you.

In Section 4, it is highlighted that the buyer is entitled to a grace period of not less than 60
days. This is counted from the date the installment became due.

The seller, on the other hand, is entitled to the cancellation of the contract, if the buyer fails to
pay the installments due at the end of the grace period. The seller, however, must first notify the
buyer of the cancellation, or of the demand for rescission of the contract. This notice or
demand must be by a notarial act and shall only render the cancellation or rescission effective 30
days after such notice or demand has been made.

5. Can I sell or assign my rights to the property to another person?

Yes, since this is clearly explained in Section 5 – that those buyers covered by Sections 3 and
4 have the right to sell or assign their rights over the property to another person. They may
also reinstate the contract if they so choose by updating the account during the given grace
period. This transaction, however, must be made prior to the actual cancellation of the contract.
The corresponding deed of sale or assignment must be done by notarial act.

6. Can I opt to pay off my balance ahead of the due date? Will I be allowed to do so
without incurring the corresponding interests?

Yes, it stipulated in Section 6 that buyers shall have the right to pay in advance any of the
installments or the full unpaid balance of the property’s purchase price. This can be done
any time without incurring interest. This full payment may also be annotated in the certificate
of title over the property.
 7. What if the contract I entered into are inconsistent with existing laws? Which
will have more bearing?

Ordinarily, the Constitution would tell us that no law impairing the obligations of contracts shall
be passed, but in this case, the Maceda Law, under Section 7, provides that any stipulation in
any contract that is contrary to Sections 3, 4, 5, and 6 are to be deemed null and void. This
particular provision serves to protect those who may have overlooked the fine prints of contracts
during signing that has been required by real estate contractors or developers.

In relation to this, should the developers be, in any possible way, at fault – in terms of delays,
damages, among others – the provisions of the Presidential Decree No. 957 or the Revised Rules
and Regulations Implementing the Subdivision and Condominium Buyer’s Protective Decree
may instead be explored and applied.

8. Does the Maceda Law apply when I pay through a housing loan from a bank?

This is where the common misconception usually lies in terms of the coverage of the Maceda
Law.

To provide a quick background, developers nowadays merely require that the buyer pay a down
payment, which constitutes a percentage of the purchase price. The remaining balance would
then often be shouldered by a financing scheme (usually a housing loan) that may be provided by
commercial banks, Pag-IBIG Fund, by the developers themselves through their in-house
financing schemes, or by other financing institutions.

If you are taking a housing loan from a bank like most people, this means that the balance that
you have to pay the real estate developer has already been paid for in full by the bank
through the loan. In other words, you, in essence, have already paid the purchase price in full
by availing of the loan. The subsequent monthly payments you now make to the bank are not to
pay for the balance of the purchase price, but for the loan itself, the interests accruing on the
principal loan, and the charges that may be or may have been incurred.
Hence, having been fully paid insofar as the purchase price is concerned, the only balance you
are liable for is that of the loan, and since you are not exactly paying in installments anymore,
considering that the property is technically fully paid for, RA 6552 or the Maceda Law would
no longer apply.