Maceda Law vs. Recto Law

Maceda Law and Recto Law
Maceda Law (R.A. No. 6552) Recto Law (Article 1484 of the Civil Code)
“Sale of Real Properties in Installments” “Sale of Personal Property in Installments”
It’s objective is to protect buyers of real estate on installment payments It’s objective is to protect those who acquire personal property on
against onerous and oppressive conditions. installment rather than real property.
Transactions Covered: Sale or financing of real estate on installment
Transactions Covered: Sale of movables payable in installments and
payments, including residential condominium apartments, but
limiting the right of the seller, in case of default by the buyer.
excluding industrial lots, commercial buildings, and sales to tenants.
Rights and Benefits of a Buyer: Remedies of a Seller:
 If the buyer has paid for less than 2 years of installments: 1. Exact fulfillment of the obligation, should the vendee fail to pay.
1. The buyer shall be given a grace period of not less than sixty (60) days -This remedy applies regardless of the number of installments
from the date the installment became due to pay. defaulted.
2. If the buyer fails to pay the installment due upon expiration of the 2. Cancel the sale, should the vendee’s failure to pay cover two or more
grace period, the buyer is entitled to a notarial notice of cancellation or installments.
rescission. -The vendor shall return to the vendee the sums received minus
3. Thirty (30) days shall be observed from the receipt of the notarial reasonable rent.
notice of cancellation or rescission before the contract is terminated. 3. Foreclose the chattel mortgage on the thing sold, if one has been
The seller may cancel the sale after the thirty days. constituted, should the vendee’s failure to pay cover two or more
 If the buyer has paid for more than 2 years of installments: installments.
1. The buyer shall be given a grace period of thirty (30) days, to pay -In this case, the seller shall have no further action against the
without additional interest, the unpaid installments, which is fixed at purchaser to recover any unpaid balance of the price. Any agreement
the rate of one (1) month grace period for every one (1) year of contrary shall be void.
installments paid. This right shall be exercised by the buyer only once in
every five (5) years of the life of the contract and its extensions, if any. The above remedies are alternative, not cumulative. The availment by
2. If the buyer fails to pay the installment due upon expiration of the the vendor of one remedy will not entitle him to make use of the
grace period, the buyer is entitled to a notarial notice of cancellation or others.
rescission.
3. If the contract is cancelled, the buyer shall be entitled to the refund
of the cash surrender value of the payments on the property equivalent
to fifty percent (50%) of the total payments made. After five (5) years of
installments, an additional five percent (5%) every year but not to
exceed ninety percent (90%) of the total payments made.
4. The actual cancellation shall take place after thirty (30) days from
receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by notarial act by full payment of the cash
surrender value to the buyer.
Maceda Law does not apply when: Recto Law does not apply to:
1. The sale is an absolute sale; the Maceda Law being applicable only to 1. Sale of real property
contracts to sell. 2. Sale of personal property when the price is payable in full.
2. The property was purchased after a housing loan was obtained and
the installments are repayments of the loan.
3. Sale to industrial lots, commercial buildings and sale to tenants of
agricultural lands.
4. The reason why the buyer defaulted in his payments is the breach of
the seller of its obligations, for example failure to deliver the property
or violation of warranties.
Option Money and Earnest Money

Option Money Earnest Money
The consideration paid for the purpose of holding one to his promise to The money given as part of the purchase price as proof of the
buy or sell a determinate thing for a certain period of time, which perfection of the contract.
consideration is separate and distinct from the purchase price.
The consideration for an option contract is not always monetary but The consideration of earnest money is not always monetary. While
could consist of other things or undertakings. earnest money is often in the form of a monetary deposit to
demonstrate a buyer's commitment in a real estate transaction, it can
take other forms.
Option money is paid for a sale that is yet to be perfected. Earnest money is paid upon the perfection of a contract of sale.
The purpose of option money is to give assurance to the seller in The purpose of earnest money is to tell the seller or to demonstrate
exchange for the exclusive right to purchase the property within a their seriousness and good faith in purchasing the property.
certain period. This is commonly used in "option periods" where the
buyer has the right, but not the obligation, to buy the property.
Option money is generally non-refundable, the seller retains the option Earnest money isn’t always refundable, the good news for buyers is in
money as payment for providing the option period, even in the unlikely most situations, as long as a buyer acts in good faith, earnest money is
scenario that the buyer decides not to proceed through with the sale. refundable. If the buyer defaults, the seller may be entitled to keep the
earnest money.

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