Dear PAO,

I entered into a contract with a subdivision developer for the purchase of a house and lot. I started paying my monthly amortizations about six years ago, but I decided to withhold payment last year because the developer is taking too long to construct and finish my house. I have also grown exasperated by the constant need to follow up with the developer who has been unresponsive to my emails and requests for updates. I have read that there is a Subdivision Buyers’ Protection law, while a friend suggested that I look into the Maceda Law. Can you please enlighten me? Thank you and best regards.

Tita

Dear Tita,

Both Presidential Decree (PD) 957 and Republic Act (RA) 6552 are laws which are aimed to protect real estate buyers. PD 957, aptly known as the “Subdivision and Condominium Buyers’ Protective Decree,” was particularly enacted in order to safeguard buyers of lots or units in subdivision or condominium projects from owners, developers and sellers who engage in fraudulent practices, unauthorized projects or those who leave incomplete projects to the detriment of the buyers. On the other hand, RA 6552, otherwise known as the “Realty Installment Buyer Act,” or more popularly known as the “Maceda Law,” having been authored by the late esteemed lawmaker and former Senate president Ernesto Maceda Sr., was enacted to provide protection for buyers of residential real estate on installment who have defaulted on their payments.

Under Section 23 of PD 957, a subdivision lot or condominium unit buyer may be reimbursed the total amount which he or she has paid, including amortization interests but excluding delinquency interests, if he or she decides to discontinue paying amortizations on account of the failure of the owner or developer to develop the project according to the approved plans and within the time limit for its compliance. It is, however, necessary for the buyer to give a prior notice of his or her desire to discontinue such payments. To be certain, the law provides:

“Section 23. Non-Forfeiture of Payments. No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate.”

Under Section 3 of the Maceda Law, a buyer on installment who has paid at least two years but has defaulted on his or her succeeding amortizations shall be allowed to: (1) continue payment within the grace period and without being required to pay additional interest; or (2) be refunded the cash surrender value of his or her payments that is equivalent to 50 percent of the payments already made if the contract is canceled. If the buyer has already paid more than five years of installments, he or she shall be given an additional refund of 5 percent for every year paid but not exceeding 90 percent of the total payments made. The law specifically 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.

“(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 percent of the total payments made, and, after five years of installments, an additional five percent every year but not to exceed ninety percent 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.”

To better address your concern and to determine the most fitting remedy available to you, we advise you to visit any of our PAO district offices and present all pertinent documents relating to your legal concern so that our public attorneys can properly assess the same, consistent with existing PAO rules and regulations as well as to pertinent laws and jurisprudence. Our district offices are usually located at or near the municipal hall, city hall, provincial hall or hall of justice of each respective municipality, city or province in the Philippines.

We hope that we are able to answer your queries. This advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.

Thank you for your continued trust and support.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to [email protected].