Republic act No. 6552, the Realty Installment Buyer Act, was enacted ‘to protect buyers of real estate on installment payments against onerous and oppressive conditions‘ (Sec. 2).
It protects lot buyers, especially the low-income earners, who often fall prey to one-sided contract stipulations because of their eagerness to own a house they can call their home.
The Supreme Court has this to say:
“The law seeks to address the acute housing shortage problem in our country that has prompted thousands of middle and lower class buyers of houses, lots and condominium units to enter into all sorts of contracts with private housing developers involving installment schemes. Lot buyers, mostly low income earners eager to acquire a lot upon which to build their homes, readily affix their signatures on these contracts, without an opportunity to question the onerous provisions therein as the contract is offered to them on a “take it or leave it” basis. Most of these contracts of adhesion, drawn exclusively by the developers, entrap innocent buyers by requiring cash deposits for reservation agreements which oftentimes include, in fine print, onerous default clauses where all the installment payments made will be forfeited upon failure to pay any installment due even if the buyers had made payments for several years.” (ACTIVE REALTY & DEVELOPMENT CORPORATION versus NECITA G. DAROYA, G.R. No. 141205 – May 9, 2002; citing the cases of Angeles vs. Calsanz, 135 SCRA 323, and Realty Exchange Venture Corporation vs. Sendino, 233 SCRA 665)
“Real estate developers thus enjoy an unnecessary advantage over lot buyers who they often exploit with iniquitous results. They get to forfeit all the installment payments of defaulting buyers and resell the same lot to another buyer with the same exigent conditions. To help especially the low income lot buyers, the legislature enacted R.A. No. 6552 delineating the rights and remedies of lot buyers and protect them from one-sided and pernicious contract stipulations.” The Supreme Court adds.
What transactions are covered by R.A. No. 6552?
The law covers all transactions involving sale on installment of residential real estate.
The law does not cover transactions involving other classes of real estate such as commercial and industrial. Moreover, the law does not apply to sales to tenants pursuant to agrarian reform.
What are the rights of buyers?
A. Under Section 3 in relation to Section 5, when the following conditions are present:
⇒ the buyer has paid at least two years of installments
⇒ the buyer defaults in the payment of succeeding installments
the buyer has the following rights:
1. To be given a grace period equivalent to one month for every one year of installment payments made 2. To pay the unpaid installments due, without interest, within the grace period 3. In case the contract is cancelled: a. To be notified of the cancellation or rescission b. To be refunded of the cash surrender value of payments made 4. To sell or assign his rights to another person; in which case, the deed of sale or assignment must be duly notarized 5. To reinstate the contract by updating his account before the actual cancellation of the contract
B. Under Section 4 in relation to Section 5, where the buyer has paid less than 2 years of installments:
1. To be given a grace period of not less than 60 days 2. In case of cancellation or rescission, to be notified of the cancellation or rescission 3. To reinstate the contract by updating his account before the actual cancellation 4. To sell or assign his rights to another person. The deed of sale or assignment must be duly notarized.
As may be observed, R.A. 6552 grants common rights to buyers falling under Section 3 and Section 4 as follows:
1. In case of cancellation, to be notified of the cancellation or rescission
2. To reinstate the contract by updating the account before actual cancellation
3. To sell or assign their rights by notarial act.
In addition, Section 6 entitles the buyer (regardless of the number of installments paid) to pay any installment in advance or the full unpaid balance anytime without interest.
When may the seller cancel the contract?
The seller may cancel the contract when the following conditions are met:
1. The grace period has expired; 2. The buyer fails to pay the installment due
What are the requisites for the validity of the cancellation or rescission of the contract?
When the buyer has paid at least 2 years of installments, for the cancellation or rescission to be valid, the following requirements must be satisfied:
1. The buyer must be given a duly notarized notice of cancellation or demand for rescission
2. The seller must refund to the buyer the cash surrender value of payments made
When the buyer has paid less than 2 years of installments, he must be given a duly notarized notice of cancellation or demand for rescission, but he is not entitled to cash surrender value.