MACEDA LAW

REPUBLIC ACT No. 6552

AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON

INSTALLMENT PAYMENTS. (Rep. Act No. 6552)

Section 1. This Act shall be known as the "Realty Installment Buyer Act."

Section 2. It is hereby declared a public policy to protect buyers of real estate on installment
payments against onerous and oppressive conditions.

Section 3. In all transactions or contracts involving the sale or financing of real estate on
installment payments, including residential condominium apartments but excluding industrial
lots, commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight
hundred forty-four, as amended by Republic Act Numbered Sixty-three hundred eighty-nine,
where the buyer has paid at least two years of installments, the buyer is entitled to the following
rights in case he defaults in the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace
period earned by him which is hereby fixed at the rate of one month grace period for
every one year of installment payments made: Provided, That this right shall be exercised
by the buyer only once in every five years of the life of the contract and its extensions, if
any.

(b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value
of the payments on the property equivalent to fifty per cent of the total payments made,
and, after five years of installments, an additional five per cent every year but not to
exceed ninety per cent of the total payments made: Provided, That the actual cancellation
of the contract shall take place after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act and upon full
payment of the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the
total number of installment payments made.lawphi1™

Section 4. In case where less than two years of installments were paid, the seller shall give the
buyer a grace period of not less than sixty days from the date the installment became due.

If the buyer fails to pay the installments due at the expiration of the grace period, the seller may
cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act.

Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the
same to another person or to reinstate the contract by updating the account during the grace
period and before actual cancellation of the contract. The deed of sale or assignment shall be
done by notarial act.

Section 6. The buyer shall have the right to pay in advance any installment or the full unpaid
balance of the purchase price any time without interest and to have such full payment of the
purchase price annotated in the certificate of title covering the property.

Section 7. Any stipulation in any contract hereafter entered into contrary to the provisions of
Sections 3, 4, 5 and 6, shall be null and void.

Section 8. If any provision of this Act is held invalid or unconstitutional, no other provision shall
be affected thereby.lawphi1™

Section 9. This Act shall take effect upon its approval.

Approved: August 26, 1972.

RECTO LAW

People who purchase personal property, as opposed to real property, on installment are protected by
the Recto Law. Authored in 1933 by the “Great Academician,” Senator Claro M. Recto, the statute was
called Act No. 4122, otherwise known as the Installment Sales Law. Its main purpose is to prevent
potential abuses by the seller in the event that the buyer is unable to make further installments for a
property.

It was passed by the Philippine Legislature on December 9, 1933. The law amended a certain
portion of the Civil Code of 1889 (Código Civil) through the insertion of Section 1454-A.

The Civil Code of 1889 itself was repealed by Republic Act No. 386 which took effect in 1950.
It became known as the Civil Code of the Philippines. This expanded Section 1454-A into what
are now Articles 1484 to 1486 of the Civil Code. These are the provisions that currently contain
the precepts of the Recto Law.

DIFFERENCE

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 available to the
buyer. You also can’t use 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, Ra 6552

Do you want to know your rights as a real estate investor, or simply as a real estate buyer who
is making installment payments? The first logical step would be to know what law applies and
what that particular law contains, which in this case would be the full text of Republic Act No.
6552. More popularly known as the Maceda Law, the RA 6552 follows.

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

MACEDA LAW (RA6552) Maceda Law in the Philippines applies to the purchaser of real
property by installment payments when the purchase becomes cancelled by a delinquency in
payment. It provides the buyer with a right to a refund as a requisite for cancellation of contract
due to delinquency when the buyer has paid at least two years. The refund is 50% of total
payments; additional 5% per year after 5th year.

To qualify for the Maceda Law, the buyer must have already paid at least 2 years of installment
payments.
 1. The buyer has the right to continue the unpaid installments due without additional interest
provided that the buyer must pay within the grace period. The grace period provided is
one month for every one year of installments paid.
2. The buyer has the right to opt for a refund of the installment payments being made (This
includes the down payments, deposits or options on the contract). The buyer is entitled to
50% refund from his total payments made. An additional of 5% refund per year for every
5 years.

If the buyer has paid less than two years installment:

The buyer has the right to continue his payments within a grace period of 60 days.

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 available to the
buyer. You also can't use 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
increased by the seller. If after the grace 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 person the new buyer, but he can
only do that with a notarial deed of sale assignment.

The Maceda Law cannot be used by a real estate developer (see here.) It also cannot be used by
the highest bidder in foreclosure proceedings.