FUNDAMENTALS OF R.A.

6552
AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON
INSTALLMENT PAYMENTS

PART 1. INTRODUCTION TO R.A. NO. 6552

1) Background
Republic Act No. 6552, otherwise known as the Realty Installment Buyer Protection
Act, or often referred to as the Maceda Law, was first approved on August 26 1972,
and was authored by former Senator Ernesto Maceda. The law was intended for the
protection of property owners or buyers from inequitable conditions imposed on sales of
real property purchased on an installment basis, the conditions often imposed
unilaterally by the seller or developer.

2) Definition

3) Distinctions
The Maceda Law is often mistaken for the Recto Law and vice versa. But they are
obviously not the same. The Recto Law stems from Act No. 4122 (otherwise known as
the Installment Sales Law), which provides for the possible remedies that a seller could
take in the event that a buyer defaults on his payment. In amending the Civil Code into
what it is today, the provisions of Act 4122 were incorporated into Article 1484 of the Civil
Code. Unlike the Maceda Law, the Recto Law is concerned with movable or personal
property, also paid in installments. The subject article reads:

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 vendee fail to

pay;
(2) Cancel the sale, should the vendee's failure to pay cover two
or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has
been constituted, should the vendee's failure to pay cover two or
more installments. In this case, 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 remedies provided in this article are alternative and not cumulative. In other words,
only one option can be exercised to the exclusion of the others. And once an option is
exercised, simultaneous usage of another remedy is disallowed.
4) Interpretation and Construction

PART 2. SCOPE OF THE LAW

1) Covered transactions
The Maceda law is only concerned with the sale of real property paid in
installments. However, not all real properties are protected by the law. Only
properties used for residential purposes are covered.

2) Excluded transactions
Under RA 6552, there are three kinds of properties that are expressly excluded.
These are:
a. Industrial lots
b. Commercial buildings (which includes commercial lots) and
c. Properties for sale to tenants under agrarian laws.

PART 3. REMEDIES
1) Grace period
The law was intended to protect the buyer of real property from the selfish whims of
some property developers or sellers from mercilessly cancelling the contract and
forfeiting the buyers hard earned installment payments. RA 6552 provides:
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.
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(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.

Based on the foregoing provision, it is clear that the diligent buyer is favored by the law,
especially if he/she has paid at least two years installments. In case the buyer fails to
pay succeeding installments for whatever reason, he/she is entitled to a grace period of
one month for every one year of installment payments already made in order to pay the
remaining balance.
However, the seller may cause the contract to be cancelled and in this case, the buyer
shall be entitled to a refund of the cash surrender value of payments already made. The
refund would be equivalent to at least fifty per cent of payments already made. But if the
buyer has been paying in installment for at least five years already, the percentage of
the amount refunded would be increased to an additional five per cent every year, but
not to exceed ninety per cent of the total payments made.
But what about those who have not paid installment payments for at least two years?
Are they protected as well? The law states that indeed, they are. In the event that the
buyer has paid less than two years of installments, the seller shall give the buyer a sixty
day grace period from the date the installment payment became due.

2) Refund
It is very important though that the seller must comply with the twin requirements
of 1) giving the buyer a notice of cancellation or the demand for rescission of the
contract by a notarial act, and 2) refunding the buyer of his/her cash surrender
value in full. These requirements cannot be dispensed with and the contract
simply cannot be cancelled unilaterally by the seller. Jurisprudence will tell us
that without satisfying these requirements, there is no valid cancellation of the
contract and thus, the contract is still valid and subsisting.

In Spouses Bonrostro v. Spouses Luna, 1 Spouses Luna purchased property with

Bliss Development Corporation under a Contract to Sell. The same property was
sold to the Spouses Bonrostro less than a year. However, the Spouses Luna
filed a complaint for rescission of the contract and damages against the
Bonrostros for rescission of the contract, delivery of possession of the property,
payment for the unpaid obligation and damages. Here, the Court held that the
non-payment of two months worth of amortizations could not give rise to an
action for rescission of the contract since it was made within the sixty (60) day
grace period under the Maceda law and the notice of cancellation was not
notarized. Thus, for failure to comply with the provisions of RA 6552, the
contract was considered as still valid and still subsisting. What is interesting
here is that the Court held that there was only delay in the payment of two
installments. Just because the defendant failed to pay the two installments when
it fell due, the failure was not substantial to warrant rescission of the contract. In
fact, there were efforts on the part of the defendant to request for an extension
to pay and when the money was ready for pick up as promised, the plaintiffs did
not bother to pick up the payment for no valid reason.

Spouses Bonrostro vs. Spouses Luna. G.R. No. 172346. July 24 2013.

Likewise, in Gatchalian Realty Inc. versus Angeles, Angeles also purchased a house
and lot under a Contract to sell. Angeles failed to pay the monthly installments and was
sent twelve notices for payment in a span of three years. A notice for notarial rescission
was thus sent due to failure to satisfy the said obligation. However, because there was a
failure to refund the cash surrender value as required by law, the Court again held that
there was no valid an effective cancellation of the contract pursuant to RA 6552.

contract can only be considered to be cancelled upon the expiry of a 30 day period after
the buyer received the notice of cancellation or demand for rescission by notarial act
and after paying the cash surrender value in full.

Similarly, in Moldex Realty Inc v. Saberon, Saberon purchased a lot located in

Dasmarias, Cavite. Between the years 1992 to 1996, Saberon had made periodical
payments. However for three months after March 1996, the payments stopped and
Moldex would send Saberon notices to update her account. Moldex also suggested to
Saberon to execute a written authorization for the sale of the subject lot to a new buyer
and a written request for a refund so half the total payments made would be refunded.
But Saberon did no such thing. She alleged that the contract between her and Moldex
was void from the start because Moldex failed to register the contract to sell/ document
of conveyance with the Register of Deeds, violating PD 957. However, the Supreme
Court held that the non-registration of the contract to sell or deed of conveyance does
not necessarily affect the validity of the contract to sell. Registration merely serves as a
constructive notice to the whole world to bind third parties. More importantly, Saberon is
entitled to a fifty (50) per cent refund under the Maceda Law because she had made
installment payments for more than two years. However, since she did not respond to
Moldexs notices, she can no longer avail of the remedy provided in Section 3 (a) of the
Maceda Law, allowing her to pay the remaining balance of the purchase price within the
grace period. The only remedy left is the refund of fifty (50) percent of the cash surrender
value of the total payments made. 4
2

Gatchalian Realty Inc. vs. Angeles. G.R. No. 202358. November 27 2013.
Olympia Housing Inc. v. Panasiatic Travel Corp. G.R. No. 140468. January 16 2003.
4
Moldex Realty v. Flora Saberon. G.R. 176289. April 8 2013.
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It is worth mentioning that to be entitled to a refund at all, the buyer must have paid
installment payments for at least two years, Otherwise, a refund should not be expected.
In the case of Rillo v. Court of Appeals and Corb Realty Investment Corporation,

the

Court was not as forgiving to the defaulting buyer. In said case, Rillo signed a Contract to
sell of a Condominium Unit with Corb Realty. Since Rillo failed to pay at least two years
of installment, the Court applied Section 4 of the Maceda Law, which reads:

Section 4. . . . 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.

Rillo here was therefore held to only a grace period of sixty (60) days to make his
installment payment. On the other hand, Corb Realty had the right to cancel the contract
after thirty (30) days from receipt by Rillo of the notice of cancellation. It was held by the
Court of Appeals that Corb Realty had to refund 50 percent of the downpayments made.
The Supreme Court on the other hand did not agree. Since Rillo failed to pay at least
two years of installment payments, he was not entitled to such a refund. 5

3) Assignment
Section 5 of the Maceda law reads:

Rillo vs. Court ot Appeals and Corb Realty Investment Corp. G.R. No. 125347. June 19 1997.

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.

In Section 5 of RA 6552, the buyer is provided with the right to sell or assign his rights
over the property purchased. He/ she may also reinstate the contract by updating the
account during the grace period as provided by law and before the contract is actually
cancelled by the seller. Just like the cancellation of the contract, the deed of sale or
assignment shall also be done by a notarial act. An example of an assignment can be
illustrated by the following case.

In Spouses Noynay versus Citihomes Builder and Development Inc., a Contract to sell
of a property located in Malolos, Bulacan was executed between the spouses and the
developer. However, this case is quite unique since it involves another contract- a Deed
of Assignment. After a year, Citihomes executed a Deed of Assignment of Claims and
Accounts in favor of United Coconut Planters Bank (UCPB). Under the agreement,
UCPB agreed to purchase from Citihomes various accounts, including the account of
Spouses Noynay for a consideration of PHP 100,000.000.00. In return, Citihomes
assigned its rights, titles, interests and participation in various contracts to sell with its
buyers to UCPB. Obviously, the Spouses defaulted in their payments and a case for
unlawful detainer was filed against them by the developer. According to the Metropolitan
Trial Court for Cities, the right to demand the eviction of the spouses was already
transferred to the UCPB from the moment that the Assignment was executed by
Citihomes. Thus, based on the evidence, Citihomes did not have a cause of action
based against the spouses. Since the assignment only covered credit dues, the
relationship between the spouses as the purchaser and Citihomes as the seller under
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the Contract to sell still existed. However, if the assignment covered all of the
developers rights, obligations and benefits in favor of UCPB, the conclusion would not
be the same.

PART 4. PROCEDURE
1) Outline of Procedure
2) Demand to Pay
3) Notarial Cancellation
4) Cash Surrender Value

PART 5. RELATED RULINGS OF THE SUPREME COURT