REPUBLIC ACT NO.

6552
REALTY INSTALLMENT BUYER PROTECTION
ACT
AN 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.

Sec. 2. It is hereby declared a public policy to protect buyers of real estate

on installment payments against onerous and oppressive conditions.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 8. If any provision of this Act is held invalid or unconstitutional, no

other provision shall be affected thereby.

Sec. 9. This Act shall take effect upon its approval.

Approved: August 26, 1972

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.

Sec. 2. It is hereby declared a public policy to protect buyers of real estate on installment
payments against onerous and oppressive conditions.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 8. If any provision of this Act is held invalid or unconstitutional, no other provision shall be
affected thereby.

Sec. 9. This Act shall take effect upon its approval.

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 first scenario you have paid less than two years of installments: In this case, the seller
should give the buyer a grace period of at least 60 days to pay the amount due via written
notice. If the buyer still fails to pay after the expiration of the grace period, the seller can cancel
the contract through a notarial demand for cancellation. Actual cancellation of the contract takes
place after 30 days from buyers receipt of notice. The buyer can: (a) assign the contract to a
third person via notarial act before it is cancelled; or (b) update the account by paying the due
installments during the grace period. There is no refund.

The second scenario you have paid at least two years of installments: In this case, the
buyer is entitled to a grace period of one month for every year of installment made. He has the
right to pay, without additional interest, the unpaid installments due within the total grace period.
This right can only be exercised once every five years of the contract.

If the buyer still fails to pay the unpaid installments due during the grace period, the seller may
cancel the contract in the same way as the first scenario, via notarial demand for cancellation.
Actual cancellation takes place after 30 days from: (a) receipt of notice or demand; and (b) full
payment of refund.

REFUND

If the buyer paid two to five years of installments, he is entitled to a refund of the cash
surrender value of the payments on the property (including down payments, deposits or
options) equivalent to fifty per cent (50%) of the total payments made.

For every year of installments made in excess of five years, the buyer is entitled to an additional
five per cent (5%), but not to exceed ninety percent (90%) of the total payments made.

So if the buyer paid 6 years of installments, he is entitled to 55% refund of the total payments
made. If he made 7 years of installments, he is entitled to 60% refund, and so on. However, his
refund cannot exceed 90% of the total amount paid.

For an accurate computation of your refund, please ask the HLURBs help. Dont forget that you
can research all this information from the internet.
EXCEPTION

By the way, the Maceda law does not cover industrial lots, commercial buildings , and sales to
tenants under RAs 3844 & 6389 (Code of Agrarian Reforms of the Philippines).