A real estate purchase is a complex transaction and long-term investment. That’s why it’s important for you to do your homework and understand your rights and obligations when buying a property. Legal documents like the Reservation Agreement (RA) and Contract-to-Sell (CTS) contain the obligations of both the buyer and developer. So make sure to read the specific provisions of these contracts before signing them.
You can’t just refund the reservation fee because you suddenly changed your mind. However, there is a remedy for some installment buyers who may decide not to push thru with the purchase due to unforeseen circumstances.
RA 6552 or Maceda Law
RA 6552 entitled “Realty Installment Buyer Act”, or more popularly known as Maceda Law, protects real estate buyers in an installment purchase. Non-installment buyers are obviously not entitled to avail of the refund provision of this law.
How does this law work? There are two situations that you must remember.
You have already paid at least 2 years’ worth of installments
According to Maceda Law, you can refund 50% of payments that you’ve already made. With an additional refund equivalent to 5% per year after 5 years, but not exceeding 90% of payments made.
As matter of practice, developers deduct cost from the refundable amount leaving the buyer with only a small portion of the original amount of payments. Senate Bill 2071 filed by Senator Nancy Binay last January 2020, seeks to correct that by amending RA 6552. If passed into law, buyers can refund without any deduction.
You have already paid less than 2 years’ worth of installments.
In case installments haven’t reached the mandatory 2 years, refund will not be an option. But you may avail of the following legal rights and alternatives:
- The developer must give you a grace period of not less than 60 days from the day that your account become due.
- Should you still fail to settle after the 60-day grace period, the developer may only cancel the account after another 30 days after you receive a notice of cancellation.
- You have the right to update your account or sell your rights to another person before the cancellation of your account.
There are cases when home buyers think that their monthly amortizations on their housing loan with Pag-IBIG or with a financing bank are part of their installments.
Buyers must understand that Pag-IBIG or the financing bank had fully paid-off the purchase through the housing loan. So monthly amortizations are not meant to pay-off the purchase price of your property, but to pay-off your loan.