8 Things You Need

to Know about the

Maceda Law
November 28, 2018

Whether you have experienced buying your own house or

just planning for your humble abode, it is best to be well-
rounded with the laws protecting your rights as a
homebuyer.

Whether you are ready to finally buy that dream house or

condominium but would like to be extra secured with
your allotments or would already want to settle in a place
that you can call home but still lack a few more funds to
suffice the big purchase, 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. This is more commonly known as
the Maceda Law, named after the main author of this
1972 law, former senator Ernesto Maceda.

This law deals primarily with one’s rights as a real estate

investor or a real estate buyer paying in installments. It
also describes the rights of a buyer defaulting in payments
for such purchases.

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). This situation is one
of the many where Maceda Law can protect your rights,
and so you can also be able to stand up and dust yourself
off from this dilemma. The following entails more
elaboration on the scope of the law.

1. How do I know if this law would truly protect

my rights in real estate installment purchases?

Photo via DepositPhotos

It is clearly stipulated in Section 2 of the Maceda Law
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.

2. Who is covered by the Maceda Law?

Photo via DepositPhotos

As termed in the law, 2 types of “qualified buyers” are
afforded protection:

 one who has paid at least 2 years of

installments in all transactions or contracts
involving the sale or financing of real estate on
installment payments. Properties covered
include residential condominiums, apartments,
 houses, townhouses, and house and lots, among
others, but excluding industrial lots, commercial
buildings, and sales of properties to existing
tenants. (under Section 3)
 one who has purchased any of the properties
enumerated above, but who has paid less than
two years of installments. (under Section 4)

3. What guarantees do I have should I fall

behind in making payments or should the
contract be canceled?

Photo via DepositPhotos

In simple terms, as it is stated in Section 3, buyers are
entitled to a refund, as well as grace periods, so long as
they have paid for at least two years.

On defaulting

 buyers who default on their payments of

installments are entitled to pay, without
additional interest, the unpaid installments
due within the total grace period they have
earned. This total grace period has been fixed at
the rate of a one-month grace period for every
one (1) year of installment payments made.
However, this right can only be exercised by the
buyer once in every five years of the life of the
contract and its extensions.

On contract cancellation

 If the contract is canceled, the seller shall

refund to the buyer the cash surrender value
of the payments on the property, which is
equivalent to 50 percent of the total payments
made. After five years of installments, an
 additional five percent for every year of
payments will be added, but not to exceed 90
percent of the total payments made. For this to
apply, the actual cancellation of the contract must
take place 30 days after receipt by the buyer of
the notice of cancellation. This notice of
cancellation or a demand for rescission at that
must be by a notarial act and upon the full
payment of the aforementioned cash surrender
value to the buyer.

4. What guarantees do I have if I have just paid

less than two years of installments?

Photo via DepositPhotos

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.

5. Can I sell or assign my rights to the property

to another person?
Photo via DepositPhotos
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.

6. Can I opt to pay off my balance ahead of the

due date? Will I be allowed to do so without
incurring the corresponding interests?
Photo via DepositPhotos
Yes, it stipulated in Section 6 that buyers shall have the
right to pay in advance any of the installments or the
full unpaid balance of the property’s purchase price.
This can be done any time without incurring interest.
This full payment may also be annotated in the certificate
of title over the property.

7. What if the contract I entered into are

inconsistent with existing laws? Which will
have more bearing?
Photo via DepositPhotos
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
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, 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.

8. Does the Maceda Law apply when I pay

through a housing loan from a bank?

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 like most

people, 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.