Maceda Law during pandemic

Published in Daily Tribune on November 13, 2020
by: Miko Jim Paulo V. Panganiban

The general decline of the Philippine economy has not spared the real estate industry. In this time of pandemic, real estate buyers on installment who have lost income due maybe job cuts or business losses find it more and more difficult to make installment payments. The tendency for these buyers is to stop payment, cancel their contracts and let it go to cut their losses. At least they won’t have to make any further payments. What these buyers should know is that they have rights under the law.

Republic Act 6552, or the Realty Installment Buyer Act also known as the Maceda Law, protects the rights of buyers of real estate on installment basis. However, only buyers of residential spaces are protected under this law. Those involved in sales of industrial lots, commercial buildings, lands covered by agrarian reforms are excluded.

Simply put, the Maceda Law entitles buyers who default on installment payments to a grace period of one month for every year of payment they have already made to pay the installments due without interest provided that they have already paid at least two years of installment. This may right be availed once every five years of the contract. If the buyer decides to cancel the sale, the buyer is entitled to the cash surrender value (CSV) of the payments equivalent to 50 percent of the total payments made. An additional 5 percent for every year shall be added to the CSV, but not to exceed 90 percent of the total payments made, in case the buyer has already paid for at least five years. The cancellation of the contract shall be effective upon the lapse of 30 days from the notice of termination of the buyer, or the notarized demand to rescind the contract, or the full payment of the CSV. Total payments made shall include the downpayments.

But what if you have not paid at least two years of installment? The Maceda Law provides that a buyer who has paid less than two years of installment is also entitled to a grace period. This time, however, the grace period shall be not less than 60 days from the date the installment is due. Should the buyer default even after the grace period, the seller may cancel the contract 30 days upon notice or receipt of the notarized demand to rescind the contract.

In any case, should the buyer still wish to, he/she may still settle the unpaid installments due provided payment is made before actual cancellation of the contract. The buyer may also assign his/her rights over the contract.

Should the buyer have sufficient money to pay any installment in advance or fully pay the unpaid balance of the purchase price, he/she may do so without interest, and such payment may be annotated on the certificate of title of the property.

Does this apply if the buyer avails of loans from banks or other financial institution? Unfortunately, these loans are not covered by the Maceda Law. This is because the loans thus secured have already been used to pay the purchase price in full. The monthly installments paid here are now made pursuant to the contract of loan between the buyer and the banks or financial institutions, and not contract of sale of residential property. Hence, rights under the Maceda Law cannot be availed of.

It is important to consult your lawyer in these kinds of transactions to apprise yourself of all your rights and the remedies available in case of any legal troubles.