Knowing your rights as purchaser of a real estate property under the

Maceda Law, will mean a huge difference. It can mean losing everything
you have put in for your investment, or getting at least 50% of it back,
when for some reason on your part, you cannot continue with your
installment purchase. So in this post, we will discuss the most important
points in the Maceda Law that are relevant to a distressed real estate
buyer.

WHAT IS THE MACEDA LAW?

The Maceda Law, also known as The Realty Installment Buyer

Act or Republic Act 6552 is the law that lays out a defaulting buyer’s
rights in the Philippines with regards to his purchase of a real estate
property, whether it’s a condominium unit or a house-and-lot unit in a
subdivision development. This was initiated by lawmaker Ernesto Maceda
and has taken into effect on August 26, 1972.

WHO IT APPLIES TO

Today, more and more people in the working class, especially OFW’s are
buying condominiums or house-and-lots in subdivision projects. But
paying them in full in just one payment is just too much.

So practically, they opt to pay the equity by installment since developers’

or contractors’ installment equity payment schemes have become
increasingly affordable. This is through stretching their equity payment or
down payment stage to 20, 30, 40 months or sometimes even longer.
Then they just take out a loan from their bank for the remaining balance
since banks usually have lower interest rates compared to in-house
financing.

If you have taken advantage of this convenience in acquiring your

property, everything is okay as long as you can keep up with your
payments. But times are not always good. There are times when we face
difficult situations and times when we just can’t make the payments
anymore.

If you come into this situation, the Maceda Law was passed to help
protect you. It established the rights of a qualified buyer who can’t
continue with his payments anymore.

Under the Maceda Law, there are two qualification categories of buyers
accorded protection. These buyers are:

1. Under Section 3 of Maceda Law, a buyer with at least 2 years of

installments
2. Under Section 4 of Maceda Law, a buyer with less than 2 years of
installments

RIGHTS OF A BUYER

Section 3

…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 installment 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 cancelled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty percent of
the total payments made… Down payments, deposits or options on the
contract shall be included in the computation of the total number of
installment payments made
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 30 days from the receipt by the buyer of the
notice of cancellation or the demand for rescission of the contract by a notarial act.

In other words, Section 3 of Maceda Law indicates that the buyer has a
right to a refund and grace periods as long as the buyer has paid at least
two years. However, if there’s still less than 2 years of installment
payments made, the buyer is only entitled to 60 days grace period as
indicated in Section 4.

More importantly, there is a section in the Maceda Law that protects the
buyers from the fine prints of contracts imposed by the contractors or
developers. These fines prints are oftentimes neglected by the buyers to
review during the contract signing.

Section 7 of the Maceda Law states that:

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

This section emphasizes the overriding power of the Maceda Law against
the contract made by the developer and the buyer.
FREQUENTLY ASKED QUESTIONS

The following questions have been commonly asked by our readers:

 Does it apply when I’ve been paying to the bank already?

A common practice today is for the developers to require only the

equity to be paid in installments. This equity or also called “down
payment”, varies from 10% to 50% (usually 20%), depending on the
developer or the particular development project. The remaining
balance after the equity, will be shouldered by some financing
scheme.

This financing scheme may be provided by:

o Banks

o HDMF (formerly PAG-IBIG)

o “In-house Financing”, by the developer themselves

o or other financing institutions

If you opt to pay your remaining balance using bank financing, that
means you’ll be taking a housing loan from the bank.

When you start paying to the bank, that means you’ve already taken
out your housing loan from them. When you took a loan from your
bank, you basically borrowed money and then you used that money
to pay the developer in full. But this all happened in the background
and the money did not go through your hands anymore. The bank
gave it straight to the developer. And this is what commonly confuses
people.

So now, your property has been fully paid as far as the

developer/seller is concerned. In fact, as far as the law is concerned,
your property has been fully paid already. But your loan from the
 bank is what’s outstanding. Your debt is now to the bank — the
money you borrowed, to pay the developer.

So the answer to the question on whether this Maceda Law will still
apply, is no, it will not apply anymore. That’s because the
property is technically, already paid in full.

 Does it apply when I’ve been paying to PAG-IBIG already?

Please refer to the answer to the preceding question above.

 My developer/seller is very slow or is already late in

delivering the property, will Maceda Law apply if I back out
from the purchase?

You check first when the developer is supposed to deliver the

property to you — their supposed “deadline”. You may check your
contract. Or you may also call your nearest HLURB office and check
with them when is the deadline given to the developer, as indicated
in their License to Sell for the specific project where your property is
in.

After determining that your developer is at fault, you may file a

complaint for recision of your contract and for total refunds plus
damages, as appropriate, at HLURB.

But as far as Maceda Law is concerned, it is not the appropriate law to

rely on, now. Read carefully the provisions of P.D. 957. This is what
applies in cases like this.

 My developer is for some reason, the one who’s at fault and

I want to back out. Will Maceda Law apply?

The Maceda Law only assures 50% refund on all the payments you’ve
made (or a little more as appropriate). If your developer is at fault,
you should not ask for only 50% refund but for the entire amount
 you’ve already paid. You can even demand for damages as you deem
fit.

If your developer is at fault, the provisions of P.D. 957 may apply;

and/or the appropriate provisions of Book IV of the New Civil Code on
Obligations and Contracts.

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