These two laws are relevant and are very often the issue of many court cases.
Both laws Depending on when the buyer defaults, there are two (2) possible scenarios: if the buyer paid
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
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.
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 Section 7. Any stipulation in any contract hereafter entered into contrary to the provisions of
hundred forty-four, as amended by Republic Act Numbered Sixty-three hundred eighty-nine, Sections 3, 4, 5 and 6, shall be null and void.
where the buyer has paid at least two years of installments, the buyer is entitled to the Section 8. If any provision of this Act is held invalid or unconstitutional, no other provision
following rights in case he defaults in the payment of succeeding installments: shall be affected thereby.
(a) To pay, without additional interest, the unpaid installments due within the total grace Section 9. This Act shall take effect upon its approval.
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.