Every now and then we find ourselves submitting to an idea of investment. For property purchases, this is a major decision and does not come easy like shopping goods in the malls. Even with pure intentions, there are situations that few of us face the inevitable, letting go of the purchase.
It has been three years since “Cassie” had bought a condo property on installment and will not be turned over until the fifth year. Everything seemed perfect until one day when she had major life events, and personal circumstances one after the other. Confronted with hard decisions and upon thinking of her distress, giving up the said purchase became an option. “Cassie” has since paid the reservation, down payment and had consistently paid the monthly installments; however, after the third year, she has decided to not pursue the investment, had a change of heart, consequently defaulted her purchase.
Just like any investments, buying a property is not risk averse. Your payments could be forfeited if it is beyond the allowances provided in the contract agreement. However, there are protections to your investments taking into consideration the timing, history of non-payment and change of ownership options.
Under the Realty Installment Buyer Protection Act also known as the Maceda Law (authored by Senator Ernesto Maceda), Republic Act No. 6552, a public policy for the protection of buyers of real estate on installment payments against onerous and oppressive conditions, “Cassie” is entitled to a refund. All payments made by her merit a calculation for refund if record shows that she has been paying at least two years. She could also use an assignee of the contract if she opts to continue with the payments, reinstate her account before the contract is expired.
At the time of its introduction in 1972, the bill sought to emphasize the importance of buyer protection from the seller against outright forfeiture, in understanding the situations of buyers paying on installment. This public policy provided protection to the buyers who have been able to show payments and could not continue the payments or continue the payment but assign rights to another owner.
“Developers and sellers are ought to strictly comply with Maceda Law which took effect into law on Aug 26, 1972 providing protection to buyers paying installment.”
The law covers sale of financing of real estate on installment payments, including residential condominium apartments, where the buyer has paid at least two years of installments. However, it excludes industrial lots, commercial buildings, and sales to tenants under Republic Act No. 3844, as amended by Republic Act No. 6389.
Developers and sellers are ought to strictly comply with Maceda Law which took effect into law on Aug 26, 1972 providing protection to buyers paying installment. In the past, before Maceda Law, the seller can cancel the contract and forfeit all payments made by the installment buyer. Automatic cancellation or rescission of the contract is tolerated if it was a Contract to Sell. In case of Contract of Sale, the vendor must resort to juridical or notarial act to rescind the contract. Under the Maceda Law however, a buyer who has paid at least two (2) years of installments is entitled to the rights.
In this example, the right for “Cassie’s” claim falls on the provision for having had at least two years of installment payment, entitling to the following rights:
(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.
Additionally, “Cassie” shall have the additional right to: transfer or assign her rights in the contract; pay in full the purchase price before the expiration of the contract term without interest and have the contract annotated on the title as aptly mentioned on 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.
I have several instances when buyers had to claim for a refund defaulting the purchase. There are no guarantees to our investment decisions but the rights are deserved in protecting your hard-earned money, which makes investing via installment considerably a “win-win.” Working with developers, I have also seen accommodations by the developers in saving the accounts and waiving penalties as approvable.
“As an empowered buyer, you have certain rights to a claim specific to your case. . .
Receiving about half of what “Cassie” had paid is still helpful than not having any refund at all. I have met a few “Cassies” in many transactions and always there are choices to make: refund, cancellation or reinstatement and assignment which follow the acceptable course of the contract agreement.
As an empowered buyer, you have certain rights to a claim specific to your case, no refund for less than two years of payment history except for extensions of payment but for two years and more, fifty percent refund at its minimum.
Knowing your right to refund if applicable, your contract’s ‘cash surrender value’ and contract fine prints are important elements of Maceda Law.
(Stevenson’s experience in Philippine Real Estate spans more than 15 years. He has been involved in horizontal, vertical, vacation and commercial properties. He has worked as an International Property Specialist to markets in Asia, Europe and North America with Ayala Land, Federal Land and Century Properties. Through PhilHouseHunters, he offers real estate investment opportunities, marketing, and consultancy with a key focus to Metro Manila and Mega Cebu areas. Visit www.philhousehunters.com. Email at email@example.com.)