20/10/2016
Are you planning to buy your own house or condominium? If paying the full purchase price is just too much for you, then you are better off paying in installments. If this is the case, then you should know that there is a law that protects homebuyers who decide to purchase their homes on an installment basis.
Republic Act No. 6552, or more commonly known as the Maceda Law or the Realty Installment Buyer Protection Act, 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. This law was authored by former senator Ernesto Maceda, hence its name, and took effect on August 26, 1972.
Let’s say you plan to buy that dream condominium unit in Makati, and being the posh, new building it is, the developers have offered it at a price with a lot of commas and zeroes in it. Unfortunately, your salary does not have as many commas or zeroes to match the property’s price, so you have availed yourself of the initial installment plan they offered, thinking that you could get a loan for it after two or three years of building equity.
But then after waiting, you ultimately did not get approved for a housing loan, and ended up defaulting. Now, you are in a pinch, and you do not know what to do or what your rights are. Well, keep reading and find out what the Maceda Law can offer you in your current situation.
1. How do I know that the state would protect my rights?
Section 2 of RA 6552 states that the protection of buyers of real estate on installment plans against oppressive conditions shall be declared a public policy.
2. Who is covered by the Maceda Law?
There are two categories of qualified buyers who are afforded protection. Under Section 3 of RA 6552, a qualified buyer is one who has paid at least two 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 exclude industrial lots, commercial buildings, and sales of properties to existing tenants.
Under Section 4, on the other hand, a qualified buyer is also one who has purchased any of the properties enumerated above, but who has paid less than two years of installments.
3. What rights do I have under Section 3 of the Maceda Law?
Under Section 3 of RA 6552, 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 one-month grace period for every one 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.
If the contract is cancelled, 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 the above paragraph 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.
In a nutshell, buyers are entitled to a refund, as well as grace periods, so long as they have paid for at least two years.
4. What rights do I have under Section 4 of the Maceda Law?
In contrast with Section 3 , Section 4 of RA 6552 deals with cases where less than two years of installments have been paid by the buyer. In this case, 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?
Section 5 of RA 6552 stipulates 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, as provided for in Section 4. 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. What if I won the lottery or got a big break, and decide that I want to pay off my balance ahead of the due date? Will I be allowed to do so without incurring the corresponding interests?
Section 6 of RA 6552 grants you the right to do so. It stipulates 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 clashes with the law? Which would prevail?
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 are 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 have been stipulated by real estate contractors or developers.
8. Does the Maceda Law apply when I pay through a bank?
Transactions today are often done through financing schemes. 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, the Pag-IBIG Fund, by the developer’s themselves through their in-house financing schemes, or by other financing institutions.
Opting for the first option—that is, taking a housing loan from a bank—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.
