I received several letters on the question on the Maceda Law, particularly during the pandemic where they have some issues with the developer or seller.
In this blog, let us discuss your rights as buyer of real estate for residential use on installment payments. You can also read our blog on the Maceda Law.
CASE: AFFORDABLE TOWNHOUSE
Let us take an actual subdivision project in Mactan Island, Cebu.
Type: Townhouse
Total Contract Price: Php 3,012,800
Reservation Fee: Php 15,000
Equity/Down payment: Php 837,800 payable for 48 months or
Php 17,454/month
Loanable Amount: Php 2,160,000 or Php 12,095/month for 30 years
(Note: For more details about the property, contact us.)
Both the down payment/equity and the home loan are paid in installment basis, which of the two are covered by the Maceda law? Down payment of equity: Php 17,474 per month for 48 months <---- covered by Maceda law
Home loan: Php 12,095 per month for 30 years <---- not covered by Maceda law
Consideration:
You buy the townhouse from the developer on installment (not spot cash).
You paid the reservation fee, submitted the requirements, and started paying the monthly equity for the down payment.
You signed the Contract to Sell.
In whatever reason, after months of paying, you cannot continue paying the monthly equity.
What are your options?
I. The Maceda Law
Maceda law or the "Realty Installment Buyer Protection Act" protects the buyers of real property for residential use (subdivision or condominium unit) on installment payments against onerous and oppressive conditions.
Maceda law also describes the rights of a buyer defaulting in payments for such purchases. Thus, it is also called the Rights of Installment Buyers.
Maceda law only protects the transactions and contracts involving the sale of real estate on installment payments, including residential condominium apartments. It does not include industrial lots, commercial buildings [and/or commercial lots by implication] and sale to tenants under agrarian laws.
Since you are paying for the down payment on installment basis, you are covered by the Maceda law.
A. Buyer has paid at least two years, he is entitled to:
(a) Grace Period: 30 days. He pay, without additional interest, the unpaid installments due within the total grace period for every one year of installment payments made. This 30-day grace period can be availed once every 5 years.
(b) Right of refund. If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property. Rate of refund: 50% from 2nd year to 5th year plus 5% per year in excess of 5 years, however, aggregate rate should not exceed 90% of the total payments made.
(c) Cancellation of contract. The seller can cancel the contract only after notarial notice and payment of the refund.
(d) Right to sell or to assign. The buyer has the right to sell or assign the property to other people. The deed of sale or deed of assignment shall be done by notarial act.
(e) Right to reinstate the contract , The buyer has the right to reinstate the contract by updating the account during the grace period and before the cancellation of the contract.
B. Buyer has paid less than 2 years, he is entitled to:
a) Grace Period: Not less than 60 days from the date the installment is due.
(b) Refund. No Refund.
(c) Cancellation of contract. Cancellation of contract can be done only upon consummation of grace period and notarial notice.
(d) Right to sell or to assign. The buyer has the right to sell or assign the property to other people. The deed of sale or deed of assignment shall be done by notarial act.
(e) Right to reinstate the contract , The buyer has the right to reinstate the contract by updating the account during the grace period and before the cancellation of the contract.
II. Bank/Pag-IBIG Housing Loan
If you already paid the down payment or equity, you are no longer covered by the Maceda law even if you are paying for the monthly amortization of your housing loan.
Since the bank or Pag-IBIG has no refund policy, you can sell your rights over the property.
If you cannot sell your rights over the property, you can settle your home mortgage thru "Dacion en pago" (dacion in payment).
Note: Dacion en pago is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of an existing obligation. It is a special mode of payment where the debtor offers another thing to the creditor who accepts it as equivalent to the payment of an outstanding debt. Simply put, returning the property to the bank and when accepted, the bank dismisses your mortgage debt. This is better than not paying and running from the bank. For dacion en pago to exist, the following elements must concur: (a) existence of a money obligation; (b) the alienation to the creditor of a property by the debtor with the consent of the former; and (c) satisfaction of the money obligation of the debtor.
III. Real Right and Absolute Ownership
Let us discuss real rights and absolute ownership as these two concepts are often misunderstood by property buyers.
Once you signed the Contract to Sell or started paying for monthly equity of your down payment, you rights over the property begins. If the reservation fee is required, your rights over the property begins.
However, you are not yet the owner of the property.
What is a right? A right is the power or privilege given to a person demandable from another person. It may also refer to an interest or title in an object or property.
A right can be personal or real.
Personal rights are those enforceable against a specific person or persons.
Real rights are those enforceable against the whole world.
For example, you buy a house-and-lot (block # and lot #) from the developer. After signing the Contract to Sell (or after paying the reservation fee), you have the right to possess (real right) the house-and-lot (block # and lot #) even if you have not yet paid in full. It means that all persons in the world are bound to respect your right of possession over the specific house-and-lot. This is why a developer cannot just sell your reserved unit to another buyer.
Your monetary obligation to fully paid the payment for the house-and-lot is between you and the developer. The developer has the right to payment (personal right) against you and nobody else.
You have rights (e.g. to possess) over the said property but you have no absolute ownership over it. It means that you have the right to sell your rights over the property to other buyer through a Deed of Assignment (duly notarized). This is commonly called as "for assume" or assumption of rights over the property, including all obligations.
In a subdivision sale, you only have absolute ownership over the house-and-lot once you signed the Deed of Absolute Sale with the developer even if the property is not yet registered under your name in the Registry of Deeds. This requires that you fully paid the 20% down payment and the miscellaneous fees (e.g. transfer charges) and the 80% is financed by the bank/Pag-Ibig. IV. Why You Must Register the Title Under Your Name
Why do you need to register the title under your name? It a legal notice to the whole world that you are the absolute owner of the said property. Meaning, the sale between you and the seller is now binding to the third party.
Is it okay if you will not register the property under your name? I think you are not legally obliged to do so and you can register the property later on (with penalties, of course). However, there is a risk that the seller will sell the said property to another buyer. And when the other buyer register the said property under his name, the other buyer becomes now the registered owner of the said property. It means that he has has a better right to own the property because he is the first to register the property.
In case of double sale, the person will be considered as owner of the property will be based on the order of priority:
the first person to register the sale on good faith;
the first person to possess the property in good faith;
the buyer to present the oldest title in good faith.
When you are the first possessor of the property but the other claimant was the first registrant (therefore, he has a better right to own the property), what is your proper course of action? Inquire into his knowledge about the property. Is he in good faith? If he had full knowledge that the said property was previously sold to you and still he continued to buy the property and register it, you are entitled to prove that you have a better right to own the property.
The registration of property under your name as new owner is to protect your interest over the property. If the seller know that he remains the registered owner of the property, he can simply declare the title as lost and ask for the reconstitution. Bingo! he can sell the property to another buyer. The buyer, in good faith, after doing due diligence that the seller is the registered owner of the property, will buy and register the property under his name.