Rights of a Defaulting Buyer under RA 6552, Realty Installment Buyers Protection Act (MACEDA LAW)
A.) Right to update payments without additional additional interest or in the alternative a refund of cash surrender value.
There are two categories of buyers accorded protection under this law:
1. a buyer with at least 2 years of installments under Section 3 RA 6552, and
2. a buyer with less than 2 years of installments under Section 4 RA 6552.
I.) Buyer with at least two two (2) years of installment Section 3 RA 6552
If the buyer in this category categ ory defaults in the payment of his succeeding installments, he is entitled to the following rights:
a. to pay without additional interest interest the unpaid installments due within the total grace period earned by him. Said grace period is equal to one (1) month for every year of installment payments he has made. Here the buyer has at least two (2) months grace period for he should have paid at least two (2) years of installments to avail of the rights under this section.
This right can be exercised by the buyer only once in every five years of the life of the contract.
b. to be refunded of the cash surrender value of his payments equal to 50% of his total payments if the contract is cancelled. But if he has paid five years or more, he is entitled to an increase of 5% every year and so on but the cash surrender value shall not exceed 90% of his to tal payments.
The actual cancellation of the contract referred t o above shall take place only:
1. after 30 days from receipt by the buyer of the notice of cancellation or demand for rescission, AND
2. upon full payment to the buyer of the cash surrender value.
In the computation of the total number of installme nt payments the following are included:
1. down payment and 2. deposit or option money
Section 3 of RA 6552 provides, thus:
SECTION 3. In all transactions or contracts, involving the sale or financing of real estate on installment payments, including residential condominium apartments 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 cancelled, 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 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.
II.) Buyer with less than 2 years of installments Section 4 RA 6552
If he has paid less than two (2) ye ars of installments, he still has the rig ht to
pay within a grace period of not less than sixty (60) days from the date the installment became due.
If the buyer fails to pay the installment due at the expiration of the gr ace period, i.e. 60 days, the seller m ay cancel the contract after 30 days fr om receipt by the buyer of the notice of cancellation or demand for rescission of the contract by a notarial act.
Here the buyer is not entitled to any refund.
Section 4 of RA 6552 provides, thus:
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 become 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 cance llation or the demand for rescission of the contract by a notarial act.
B.) Right to Assign/Reinstate Contract The buyer has a right to sell or assign his rights over the lot or unit to another person or reinstate the contract by updating the account provided this is done during the grace period and before actual cancellation
of the contract.
Section 5 of RA 6552 states:
SECTION 5. Under Sections 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 upgrading 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.
C.) Right to Advance Payment without Interest and Annotation of Full Payment in the Title Subject of the Sale The buyer has the right to pay in advance any installments or the full unpaid balance without interest any time and have such full payment annotated in the title.
Section 6 of RA 6552 states:
SECTION 6. The buyer shall have the right to pay in advance any installments 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.
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 buyer¶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 buyer¶s 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.
