MACEDA LAW (R.A.

6552) When the buyer is delinquent in his payment

Objective: To protect installment buyers of real estate against onerous and oppressive conditions. Applicability - Applies to sale or financing of residential estate on installment payment covered by contract to sell and not sale with mortgage, but excluding industrial lots, commercial building, and sales to tenants under R.A. 3844. Rights of buyer who has paid two years or more of installments: a) To pay, without additional interest, any installment due within the grace period which is equivalent to one month for every year of installment, provided that such right can only be availed of once every five years. b) To receive a thirty-day notarial notice of cancellation before his contract can be cancelled for delinquency. c) To receive the cash surrender value of his total payments before his contract can be cancelled due to delinquency. The refund is equivalent to fifty percent of total payments and, after the fifth year, an additional five percent per year of installment payment, but not to exceed ninety percent of total payments. d) To transfer or assign his right to the contract e) To register or annotate his contract on the title f) To pay, without additional interest, the full principal balance of the price before the term of the contract. Rights of buyer who has paid less than two years of installment - The buyer has practically the same rights as a buyer who has paid two years or more of instalmments, except for the following differences: a) The grace period to pay without additional interest on any installment due is fixed at sixty days b) For cancellation of contract due to delinquency, the buyer is only entitled to receive a thirtyday notarial notice of cancellation but without right to receive the cash surrender value of his payments. P.D. 957 When the developer fails to complete the development within the required period The refund is 100% of total payments less penalty interest plus legal interest of money.

REPUBLIC ACT No. 6552 AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON INSTALLMENT PAYMENTS. (Rep. Act No. 6552) 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 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 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.lawphi1 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.lawphi1

Section 9. This Act shall take effect upon its approval. Approved: August 26, 1972. Article 1484 of the Civil Code provides for the remedies of a seller in contracts of sale of personal property by installments, and incorporates the provisions of Act No. 4122, known as the Installment Sales Law or the Recto Law, which then amended Article 1454 of the Civil Code of 1889. RATIONALE the object of Recto Law was to remedy the abuses committed in connection with the foreclosure of chattel mortgages and was meant to prevent mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a deficiency judgment. Under Article 1484 of the New Civil Code, 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: 1. Exact fulfillment of the obligation, should the buyer fail to pay any installment; 2. Cancel the sale, should the buyers failure to pay cover two or more installments; 3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the buyers failure to pay cover two or more installments. The remedies have been recognized as alternative, not cumulative, in that the exercise of one would also bar the exercise of the others. They cannot also be pursued simultaneously. If the seller should foreclose on the mortgage constituted on the thing sold, 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. The provisions of Recto Law are applicable to financing transactions derived or arising from sales of movables on installments, even if the underlying contract at issue is a loan because the promissory note has been assigned or negotiated by the original seller. Summary 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 mortgageecreditors 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 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. It also cannot be used by the highest bidder in foreclosure proceedings.