Buying on installment

“THERE’S no place like home,” Dorothy said to herself after tapping her heels together. She then wakes up to find herself in bed at her house in Kansas.

Unfortunately for us, finding our own house is more complicated than Dorothy’s predicament. It is an investment of your efforts, finances, and time. After all, according to financial advisor Suze Orman, owning a home is a keystone of wealth—both financial affluence and emotional security.

While hopeful owners may opt to buy their dream home on an installment plan, some default in paying one or more installments. In an effort to assist persons who would fail to pay said installments, former Sen. Ernesto “Ernie” Maceda introduced what was subsequently enacted as Republic Act (R.A.) No. 6552, or more popularly known as the “Maceda Law.”

In enacting and implementing the Maceda Law, the government seeks to protect buyers of real estate on installment payments against onerous and oppressive conditions.

Note, however, that the Maceda Law only protects the transactions and contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments, and not industrial lots, commercial buildings, and sales to tenants under R.A. No. 3844, as amended.

Buyers who have paid the at least two years of installments are entitled to pay, without additional interest, the unpaid installments due within the total grace period earned by him, which option may only be exercised once every five years of the life of the contract and its extensions.

The grace period shall be fixed at the rate of one-month grace period for every year of installment payments made.

Likewise, if the contract were cancelled, the buyer may seek reimbursement from the seller the cash surrender value of the payments of the property equivalent to 50 percent of the total payments made, after five years of installments, an additional 5 percent per year but not to exceed 90 percent of the total payments made.

The actual cancellation of the contract shall take place after 30 days from receipt by the buyer of the notice of cancellation or the demand for the notarial act of rescission and upon full payment of the cash surrender value to the buyer.

In this regard, in Pagtalunan v. Dela Cruz, the Supreme Court held that the buyer may continue to occupy the property because of the seller’s failure to comply with the requirements in the event the contract is cancelled.

Moreover, in Gatchalian Realty, Inc. v. Angeles, the Supreme Court went as far as declaring that the contract to sell between the parties is valid and subsisting, absent its valid cancellation.

Down payments, deposits, or options on the contract shall be included in computing for the total number of installment payments made.

Meanwhile, buyers who paid less than two years of installments are entitled to a grace period of not less than 60 days from the date the installment became due.

In case of these buyers’ failure to pay the installments due after the expiration of the grace period, the seller may: (a) cancel the contract after 30 days from notice to the buyer; or (b) demand for the notarial act of rescission of the contract.

Buyers who paid either less than or at least two years of installments are entitled to: (a) sell their rights; (b) assign their rights; or (c) reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The deed of sale shall be done by notarial act.

Said buyers shall also 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. Any stipulation in any contract contrary to the provisions on the buyers’ rights under the Maceda Law shall be null and void.

Sara Mae D. Mawis is an Associate at Esguerra & Blanco Law, and a Lecturer at the College of Law, Adamson University