Can You Ask Refund in Buying House or Condo in Cebu?

Understanding Your Rights Under the Maceda Law

If you've been paying for a property on an installment basis for over two years and missed three months of payments due to the pandemic, you may feel uncertain about your situation. The developer canceled your Contract to Sell, forfeited your payments, and sold the property to someone else. What can you do?

Key Questions:

Can the developer cancel your Contract to Sell?

Yes, but they must follow legal procedures.

Can the developer forfeit your payments?

No, they cannot keep your payments without meeting specific conditions.

Can the developer sell your property to another buyer?

Only after legally canceling the Contract to Sell.

What are your remedies under the law?

You have remedies under the Maceda Law.

I. THE MACEDA LAW (RA 6552)

Law Name: The Maceda Law, officially called the "Realty Installment Buyer Act" (RA 6552).

Purpose: Protects buyers of real estate properties purchased on an installment basis.

Developer Requirements:

• Must follow specific legal procedures before canceling a Contract to Sell.

• Must adhere to guidelines before forfeiting payments or reselling the property.

Goals:

• Prevent unfair practices by developers.

• Ensure that buyers' investments are safeguarded, even during financial difficulties.

Refund of Payments

The Maceda Law stipulates that buyers are entitled to a refund if the developer cancels the contract. This provision is crucial because it prevents developers from unjustly profiting from the payments made by the buyer. The law ensures that buyers are compensated for the money they've invested in the property up to the point of cancellation, reflecting the principle of fairness and protecting the buyer's financial interests.

Legal Procedures

Developers must adhere to strict legal procedures before they can cancel a Contract to Sell or forfeit a buyer's payments. These procedures include providing a notarized notice of cancellation and, in many cases, offering a refund. This requirement prevents developers from acting arbitrarily and ensures that buyers have adequate notice and opportunity to rectify any defaults in payments. It also provides a clear legal framework for resolving disputes, protecting both parties' interests.

Protection for Buyers

The Maceda Law explicitly safeguards buyers from unfair practices by developers. This includes protection against abrupt contract cancellations, forfeiture of payments without due process, and other potentially exploitative actions. The law is designed to balance the power dynamics between developers and buyers, particularly protecting the latter, who may not have the same resources or knowledge of real estate laws.

Specific Rights Under the Maceda Law

For Buyers Who Have Paid for At Least Two Years

1. Grace Period: Buyers are entitled to a grace period of 30 days for every year of payment. This means that if a buyer has been paying for three years, they receive a 90-day grace period. During this time, they can pay missed installments without incurring additional interest. This provision helps buyers who might be facing temporary financial difficulties, giving them time to catch up on payments without being penalized.

2. Right to Refund: If the contract is canceled, buyers who have paid for at least two years are entitled to a refund of up to 90% of the total payments made. The percentage refunded increases with the number of years the buyer has been paying. This ensures that buyers do not lose a significant portion of their investment, providing financial protection and encouraging developers to work with buyers to find solutions rather than opting for cancellation.

3. Cancellation Notice: Developers are required to send a notarized notice of cancellation and refund the cash surrender value of the payments made before they can legally cancel the contract. This notice must clearly outline the buyer's rights and the consequences of failing to rectify any defaults. It serves as a formal warning and ensures transparency in the cancellation process.

For Buyers Who Have Paid for Less Than Two Years

1. Grace Period: Buyers who have paid for less than two years are entitled to a minimum 60-day grace period to pay missed installments. While this grace period is shorter than for those who have paid for longer, it still provides crucial breathing room for buyers to address payment issues.

2. Cancellation Notice: Even if the buyer has paid for less than two years, developers must follow proper cancellation procedures. This includes sending a notarized notice of cancellation. However, in these cases, the buyer is not entitled to a refund of the payments made. This distinction reflects the law's focus on balancing buyer protection with practical considerations for developers, especially in cases where buyers have made relatively few payments.

The Maceda Law is a critical piece of legislation that provides significant protections for real estate buyers on installment plans in the Philippines. It ensures that buyers are treated fairly and have recourse if developers do not follow legal procedures. The law's provisions for refunds, grace periods, and mandatory cancellation notices help to balance the interests of buyers and developers, promoting a fair and transparent real estate market.

Example of Refund Computation

Scenario: Levy has been paying for a residential property on an installment basis. He has made regular payments for 7 years but has now defaulted on his payments.

Details:

• Downpayment: ₱100,000

• Total Amortization (including penalty): ₱400,000

• Penalty: ₱50,000

• Years Paid: 7 years

Refund Calculation:

1. Grace Period Earned: 7 months

2. Rate of Refund: 60%

3. Refund Amount: ₱270,000

Computation:

1. Total Amount Paid:₱100,000 (downpayment) + ₱400,000 (amortization) = ₱500,000

2. Subtract Penalty:₱500,000 - ₱50,000 = ₱450,000

3. Calculate Refund:₱450,000 × 60% = ₱270,000

Total Refund: ₱270,000

Case Outcome:

Despite defaulting on his payments, Juan is entitled to a refund of ₱270,000, which reflects 60% of the adjusted total amount he paid. This refund is calculated after deducting the penalty and applying the refund rate as stipulated by the Maceda Law.

II. SUPREME COURT RULINGS

Supreme Court Ruling: Active Realty v. Daroya

Background of the Case

In the "Active Realty v. Daroya" case, Mrs. Daroya entered into a Contract to Sell for a residential lot with Active Realty. She consistently paid her monthly installments for four years, showing good faith and commitment to the purchase. However, due to unexpected financial difficulties, she missed three consecutive monthly payments.

Developer's Actions

In response to the missed payments, Active Realty chose to cancel the Contract to Sell. The developer proceeded to sell the property to another buyer. However, Active Realty failed to follow the legal procedures required by the Maceda Law, specifically:

1. Notarized Notice of Cancellation: The developer did not send Mrs. Daroya a notarized notice of cancellation, which is a crucial step to inform the buyer of the contract's impending cancellation and the buyer's rights and options.

2. Refund of Cash Surrender Value: Active Realty did not refund the cash surrender value of Mrs. Daroya's payments, which the Maceda Law mandates if a contract is to be canceled.

Supreme Court's Decision

The Supreme Court ruled that Active Realty's actions were illegal. The court emphasized that the Maceda Law provides specific protections for buyers who purchase properties on an installment basis. These protections include the requirement for developers to:

• Provide a notarized notice of cancellation to the buyer.

• Refund the cash surrender value of payments made, ensuring that buyers are not unfairly deprived of their investment.

Since Active Realty did not comply with these requirements, the Supreme Court held that the cancellation of the Contract to Sell was invalid. Consequently, the contract remained in effect, and Mrs. Daroya retained her rights to the property.

Implications of the Ruling

The ruling underscores the Maceda Law's role in safeguarding buyers from potentially exploitative practices by developers. It ensures that buyers receive fair treatment and are not subjected to abrupt and unjust contract cancellations. The case also highlights the importance for developers to adhere strictly to legal protocols, respecting the rights of buyers, and providing them with due process.

This decision serves as a precedent, reinforcing the necessity for developers to follow legal procedures meticulously and ensuring that buyers are protected under the law. It reassures buyers that their investments are secure and that they have recourse if developers do not fulfill their legal obligations.

III. Section 3 of RA 6552: Protection of Buyers

The Maceda Law, officially known as Republic Act No. 6552, is designed to protect buyers of real estate on installment payments from unfair practices and onerous conditions. The Supreme Court case Lagandaon vs. CA, 290 SCRA 330 (1998) illustrates how this protection is applied in practice.

Policy of the Maceda Law

The Supreme Court affirmed the fundamental policy of the Maceda Law as articulated in Section 3. The law's primary aim is to "provide protection to buyers of real estate on installment payments." This protection is crucial for buyers who may find themselves in difficult situations, such as financial hardship, which could lead to missed payments.

The Court emphasized that Section 3 of the Maceda Law clearly states the law’s intent to shield buyers from "onerous and oppressive conditions." This means that the law is focused on ensuring that buyers are not subjected to unfair treatment or severe penalties that could result from defaulting on their installment payments.

Application of the Law

In the Lagandaon vs. CA case, the Supreme Court addressed the application of the Maceda Law in the context of contract cancellations. The case involved petitioners who did not purchase the property on an installment basis, while the private respondents did. The Court noted that the Maceda Law’s protections are specifically designed for buyers who have entered into installment agreements.

The Court found that Section 3(b) of the Maceda Law does not provide a basis for petitioners to cancel contracts to sell, but rather outlines the responsibilities of the seller in the event that a contract is canceled. This means that the Maceda Law prescribes how cancellations should be handled by the seller, ensuring that buyers are treated fairly and their rights are respected.

Legal Ground for Cancellation

The Court affirmed that the Maceda Law does not grant grounds for canceling contracts arbitrarily. Instead, it sets out a structured process that must be followed, which includes proper notice and refunds if applicable. The law is intended to balance the rights and obligations of both parties, preventing unfair practices by requiring developers to adhere to legal standards when dealing with buyers who default on payments.

In short,

Section 3 of the Maceda Law underscores the importance of protecting buyers who purchase property on an installment basis. The Supreme Court's interpretation reinforces that the law’s protections are meant to shield buyers from harsh penalties and ensure fair treatment throughout the process. It highlights that the law’s provisions must be followed precisely to maintain fairness and uphold buyers' rights in real estate transactions.

IV. CONCLUSION

Understanding your rights under the Maceda Law is crucial to protecting yourself from unfair practices. If you face issues, visit the HLURB (DHSUD) for assistance or consult a lawyer for legal advice. Developers must adhere to strict procedures before canceling contracts or forfeiting payments. You have the right to reinstate the contract or even sell or assign your interest in the property.

I hope this information helps you understand your rights and remedies under the Maceda Law.

This guide is for educational purposes only. Consult a lawyer for advice on your specific situation. If you have any questions or need personalized assistance, contact us at 0920 207 5035 or email cebuhousefinder@yahoo.com. We're here to guide you every step of the way, ensuring a smooth and confident buying experience.