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 cant choose the others. These remedies, believe it or not,
are also available to the buyer. You also cant use all or any of them at
the same time. The Recto Law also wont 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 attorneys 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 doesnt
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.
FULL TEXT OF MACEDA LAW:
REPUBLIC ACT NO. 6552REALTY INSTALLMENT BUYER PROTECTION
ACTAN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON
INSTALLMENT PAYMENTS
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 Thirtyeight hundred forty-four, as amended by Republic Act Numbered Sixtythree 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 cancelled, 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.
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.
Section 9. This Act shall take effect upon its approval.

The Recto and Maceda Laws

Tuesday, September 28, 2010
in Civil, Commercial, Law

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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 mortgageecreditors 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 periodof 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