“One cannot enrich himself at the expense of another” – so says the legal precept.
The Maceda Law was enacted on August 26, 1972 “to protect buyers of real estate on installment payments against onerous and oppressive conditions.”
Essentially, it grants installment buyers the following rights:
- 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;
- In case of default, the right to a prescribed grace period within which to liquidate the account before the developer proceeds with contract cancelation; and
- In case of cancelation of the contract for failure to liquidate the account, the right to be refunded the cash surrender value (CSV) of the total installments paid, if the buyer has paid at least two years’ worth of installments.
Since its enactment, there have been numerous litigations between developers and buyers concerning the law. The main cause of disagreement appears to be the requirement to refund to the buyers the installments they have already paid. This is understandable in view of the considerable amount involved. For instance, if the purchase price of the property is P3,000,000 spread across a 10-year installment period, and the buyer has already paid a total of 60%, the CSV would be some P1,350,000. If the developer has 30 defaulting buyers under similar circumstances, he stands to shell out over P40 Million.
The developers contend that they are entitled to offset against the CSV the rentals that should have been charged, in lieu of installments, for the buyer’s use of the property; whereas the buyers contend that they are entitled to the entire CSV.
RA 6552 does not contain a provision allowing a developer to deduct rentals or anything else from the CSV. In effect, this law compels the developer to give up the income he has already received, without alternative compensation.
This prevents the developer from recovering his investment on the property, while giving the impression that the buyer is entitled to use the property free of charge.
Clearly, there is injustice – particularly when we consider that in home mortgage transactions, when a mortgagor repossesses the property, he is not required to refund any amount paid; in other words, the mortgagee forfeits the amounts he has paid.
The injustice becomes clearer when we consider that a substantial percentage of installment buyers are in the upper income range, who acquire real property as investment or simply for purposes of renting them out to others. Under the Maceda Law, they can “have their cake and eat it too.”
Amendment is imperative particularly in the face of the economic devastation being wrought by the COVID pandemic. The housing industry has been reeling from tremendous losses as a consequence. The large number of delinquencies and defaults, aggravated by the requirement to return moneys that the developers have already justly earned, could bring about the industry’s total collapse. The repercussions should be frightening, considering that as the engine of economic growth and social advancement, the industry is looked upon as the catalyst of speedy recovery from the current economic meltdown, even as it provides the only hope for millions of citizens to acquire their own decent homes.
In this regard, we have formulated a legislative proposal carefully designed to provide relief to the industry, without undue prejudice to low-income property buyers who may be truly in need of consideration.
To our mind, it is time for the legislature to revisit this fifty-year-old law. The industry has been patient long enough.