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.
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 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 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 approva
ear PAO,
I am inclined to invest my money by buying a condominium unit on installment basis. I heard rumors,
however, that buying condominium units is not advisable for investment purposes. My sales agent
advised me that whenever I want to cancel the sale, I can still refund 50 percent of actual payments I
have made. In this connection, can you enlighten me about the differences between the Maceda Law
and the Recto Law. Or are these two laws the same?
Thank you,
Ron

Dear Ron,
The Maceda Law and the Recto Law are not the same. Both laws, however, govern the sale of property
on installment basis. The Recto Law, which forms part of the Civil Code, specifically Article 1484 to
Article 1486, covers sales of personal property on installment basis. The Maceda Law is a special law,
particularly Republic Act (RA) 6552 or the Realty Installment Buyer Act, that governs installment sales of
real property.

The Supreme Court cited in the case of Bachrach Motor vs. Millan (G.R. No. L-42256, April 25, 1935),
penned by former Associate Justice Leonard Goddard, that the principal object of Recto Law is to
prevent abuses in foreclosure of chattel mortgages, especially when the mortgagee-creditors foreclosed
the mortgaged properties and bought them at a much lower price, then continues collecting for
deficiencies against the mortgagor-debtor.
It provides for remedies in case the buyer fails to pay.

“Article 1484. In a contract of sale of personal property the price of which is payable in installments, the
vendor may exercise any of the following remedies:

Exact fulfillment of the obligation, should the vendee fail to pay;

Cancel the sale, should the vendee’s failure to pay cover two or more installments;
Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee’s
failure to pay cover two or more installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void
(1454-A-a)” (Civil Code of the Philippines).

On the other hand, RA 6552 or the Realty Installment Buyer Act, also known as the Maceda Law, is the
real estate equivalent of the Recto Law. Under Section 3, it only applies to residential real estate, as it
excludes other real estates, such as, industrial lots, commercial buildings [and/or commercial lots by
implication] and sale to tenants under agrarian laws. Moreover, Section 2 of this law provides that it was
enacted to protect buyers of real estate on installment payments against onerous and oppressive
conditions.

“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: xxx”

With respect to your concern on the fifty percent (50 percent) refund in case you cancelled the
transaction, pertinent is Section 3 of RA 6552, which states that where the buyer has paid at least two
years of installment, he shall have the rights in case of default in payment of succeeding installments to:
(i) pay without interest the balance within the grace period of one month for every year of installment
payment (The grace period, however, shall be exercised once every five years); or (ii) in case the
contract is cancelled, the buyer shall be entitled to 50 percent of what he has paid plus another five
percent for every year but not exceeding 90 percent of payments made.

“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 30 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.”

We find it necessary to mention that this opinion is solely based on the facts you have narrated and our
appreciation of the same. The opinion may vary when the facts are changed or elaborated. We hope
that we were able to enlighten you on the matter
The Recto and Maceda Laws
Tuesday, September 28, 2010
in Civil, Commercial, Law
Share|
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.