Maceda and Recto Law

These two laws are relevant and are very frequently the issue of many court cases. Both laws govern the sale of property by installations. The Recto Law, which forms part of the Civil Code, covers installment sales of personal effects while the Maceda Law governs installment sales of real estate.

The Recto Law

The Recto Law comprises Articles 1484 to 1486 of the Civil Code. It was included to the Civil Code to avoid abuses in the foreclosure of goods home mortgages, such as when mortgagee-creditors foreclosed mortgaged home, bought them at a low cost (on purpose,) then prosecuted the mortgagor-debtors to recuperate the deficiencies.

In the event a purchaser of individual home defaults by failing to pay 2 or more of the agreed installments, the seller can do any of the following:

1.) Demand that the buyer pay (a.k.a. particular performance).

2.) Cancel or rescind the sale.

3.) Foreclose the home loan on the residential or commercial property bought (if there ever was a goods home mortgage).

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Concerning no. 3, this occurs when an individual takes a loan to buy something and he home loans the important things he purchased to make sure the financial institution that he will pay the loan. Keep in mind: If you select one remedy, you can't select the others. These remedies, think it or not, are also available to the purchaser. You likewise can't use all or any of them at the exact same time. The Recto Law likewise won't apply to a straight sale (i.e. a sale where there is a downpayment and the balance is payable in the future in a single payment only.

) The seller can likewise appoint his credit to another person, making that individual the brand-new lender.

If the buyer refuses to give up the items to the seller, he ends up being a perverse buyer-mortgagor. When that happens, the seller can recover costs and attorney's costs.

The Recto Law likewise covers leases with the choice to acquire.

The Maceda Law

The Maceda Law, RA 6552, is the real estate equivalent of the Recto Law. Like the Recto Law, it also covers financing of sales of real property (which is why mortgages also come in.) It doesn't apply,however, to the following sales:

1.) Industrial lots

2.) Commercial buildings and lots

3.) Lands under the CARP Law

Depending on when the buyer defaults, there are two (2) possible scenarios: if the buyer paid at least two (2) years' installments and if the buyer paid less than 2 years' installments.

If the buyer paid less than 2 years' installments and defaults, he is given a grace period of sixty (60) days starting from the date of his last installment to resume paying. This period can be increased by the seller. If after the grace period the buyer still can't pay, the seller must make a notarial demand to cancel the sale. The cancellation becomes effective thirty (30) days after the buyer was notified. So it's possible that the buyer could be notified two months after the 60-day period and then the 30-day period will begin.

If the buyer paid at least two years' installments, the buyer can pay the unpaid balance without interest. The grace period is computed at one (1) month per year of installment payments. It also begins from the time the buyer paid his last installment.

The grace period can be used only once every five (5) years of the sales contract's life -including its extensions. So it's possible to have a grace period of a year if the buyer had been paying his installments faithfully for 12 years. Once the buyer chooses to use the grace period, he can't get it again until another five years are over.

If the seller wants to cancel the sale, he has to refund the buyer of 50% of the actual payments. If the buyer paid more than five years' installments another 5% for every year is to be added to the refund, but only up to 90% of the total payments made. The payments mentioned here include the downpayment, options and deposits. The refund is made in this way: if the buyer paid more 2 to 5 years' installments, he can get back 50% of the cash surrender value. If he paid for more than 5 years, he can get the 50% plus 5% per year up to 90%.

The buyer is also allowed to make advanced payments, or even the full price, without interest. He can also assign his rights to another person, making that person the new buyer, but he can only do that with a notarial deed of sale assignment.

The Maceda Law cannot be used by a real estate developer (see here.) It also cannot be used by the highest bidder in foreclosure proceedings.

REPUBLIC ACT NO. 6552
REALTY INSTALLMENT BUYER PROTECTION ACT
AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON INSTALLMENT PAYMENTS Section 1. This Act shall be known as the “Realty Installment Buyer Act.” Sec. 2. It is hereby declared a public policy to protect buyers of real estate on installment payments against onerous and oppressive conditions. Sec. 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.

(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 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.

Sec. 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 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.

Sec.  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.

Sec. 6. The buyer shall 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. Sec.

7. Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and void.

Sec. 8. If any provision of this Act is held invalid or unconstitutional, no other provision shall be affected thereby.

Sec. 9. This Act shall take effect upon its approval.

Approved: August 26, 1972

Source: http://www.foreclosurephilippines.com/2011/04/maceda-law-full-text-ra-6552.html#ixzz2WU4VzLe8