The Maceda Law jurisprudence protects property owners from unfair conditions that could arise from sale transactions funded by an installment arrangement.
It covers real estate buying transactions or financing for residential properties such as houses, lots, and condominiums under installment payment terms.
Maceda Law Philippines covers buyers in all transactions or contracts involving the sale or financing of real estate installment payments and has made at least two years' worth of installment payments.
November 28, 2018
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Perhaps you’re ready to finally buy that dream house or condominium, but you’d like to be extra cautious when it comes to your budget. Or maybe, you already want to settle in a place that you can call home, but still lack a few more funds to suffice the big purchase. In these cases, 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. Named after the main author, former senator Ernesto Maceda , the Maceda Law jurisprudence protects property owners from unfair conditions that could arise from sale transactions funded by an installment arrangement. It describes the rights of a buyer defaulting in payments for such purchases. Qualified buyers are entitled to a refund and grace periods.
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). In this situation, Maceda Law can protect your rights, and so you can also stand up and dust yourself off from this dilemma. The following entails more elaboration on the scope of the law.
It is clearly stipulated in Section 2 of the Maceda Law of the Philippines 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.
It covers real estate buying transactions or financing for residential properties such as houses, lots, and condominiums under installment payment terms. Purchase transactions on industrial lots, commercial lots, sales on tenants, and mortgage sales are not included. The Maceda Law aims to protect buyers from unfair installment terms and conditions. Maceda Law serves as a remedy to low-income and middle-class buyers who wish to own a property.
As termed in the law, 2 types of “qualified buyers” are afforded protection:
A lot of people are confused with the Recto and Maceda Law . Both regulate the sale of property on installment basis. The former however, forms part of the Civil Code, governing the sales of personal property, while the latter is a special law ruling over sales of real property.
Personal property is anything you can move and is subject to ownership (except land). Real property, on the other hand, cannot be moved, which includes land and anything attached to it.
In simple terms, as it is stated in Section 3 of Maceda Law , buyers are entitled to a refund, as well as grace periods, so long as they have paid for at least two years.
On contract cancellation:
On grace periods:
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.
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.
Yes. Stipulated in Section 6 of the Maceda Law , the rights of the buyer include paying in advance any of the installments or the full unpaid balance of the property’s purchase price. This can be done at any time without incurring interest. This full payment may also be annotated in the certificate of title over the property.
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 the 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 and 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.
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, 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.
Rescission refers to the legal cancellation of the contract for a purchase transaction. Under the Maceda Law , the seller is given the right to demand rescission of the contract to sell when the buyer fails to comply with the payment terms. However, before a contract to sell can be rescinded, the buyer must first be given a grace period. For those who have been paying installments for more than two years, the grace period is equivalent to one month for every one year installment payments made. For buyers paying less than two years, the grace period is not more than 60 days. This right can only be used by the buyers once every five years.
A contract to sell has a unique characteristic that distinguishes it from the other forms of contract. In a contract to sell, a deed of sale is only executed upon full payment of the property’s purchase price. Thus, the seller retains full ownership of the property until the payment is completed. When the buyer fails to complete the payment or pay for the interests after the grace period, the buyer will be given a 30-day notice of delinquency and cancellation. When the 30 days starting from the buyer’s receipt of the notice lapse and the buyer fails to settle the payment, including interests incurred, only then will the seller be able to demand rescission for the contract to sell.
Upon cancellation of the contract to sell, the seller must pay the appropriate Maceda Law refund, which is 50% of the total payments made. For those who have paid installments for five years or more, an additional 5% for every one year will be added. However, the total amount refundable is only limited to 90%.
The refund of the down payment is only applicable to those who have paid at least two years of installment on the transactions covered by the Maceda Law .
According to Article 1458 of the New Civil Code, a contract of sale is a form of agreement where the seller obliges himself to transfer the property’s ownership upon payment equivalent to its value. It is a legitimate contract that explicitly implies property title transfer after the buyer fulfills its obligation to pay.
The crucial elements of a valid contract of sale are consent, where both parties agree to fulfill their obligations; subject matter, which pertains to the property and its value discussed; and cause of obligation that indicates the nature of the contract.
A contract of sale may be absolute or conditional. Absolute means there is no other condition aside from the payment of the purchase price and the transfer of title, and conditional where certain conditions need to be fulfilled before the property’s delivery.
It is important to note that a contract of sale is different from a contract to sell. In a contract of sale, the property ownership is transferred upon the property’s turnover after full or constructive payment. In contrast, in a contract to sell, the seller retains property ownership until the buyer fulfills all obligations and pays the total purchase price.
Although a contract to sell remains valid even without notarization, it is necessary to notarize the contract to sell to register it in public records. Under Sec 112 of the Property Registration Decree, any form of document that affects registered and unregistered land shall be made available to public records and registered to the Register of Deeds for accurate documentation.
Both rules govern the sale of property through a payment plan. However, Recto Law, which regulates the sales of personal property, is a section of the Civil Code. Anything that can be moved and owned can be referred to as personal property, except real estate.
Maceda Law, on the other hand, is a unique law that governs real estate transactions or the sale of anything that cannot be moved, including land and all of its fixtures.
Maceda Law Philippines covers buyers in all transactions or contracts involving the sale or financing of real estate installment payments and has made at least two years’ worth of installment payments. Houses, apartments, residential condominiums, and townhouses are all included in the coverage. Industrial lands, commercial structures, and sales to tenants of rental properties are not included in Maceda Law.
The buyer’s rights include the duty to pay any advance payments or the total remaining balance of the property’s purchase price. No interest fees are associated with doing this, and it is possible to do so at any time. The property’s certificate of title may also reflect the full amount of this payment.
The option to sell or assign one’s property rights to another is available to buyers. If the buyer wants to do so, they may decide to reinstate a new contract by making changes to the account during the grace period. However, the transaction must be finished before the contract is officially canceled. A notarial act shall also execute the necessary sale or assignment deed.
