The Recto Law, which forms part of the Civil Code, covers installment sales of personal

property while the Maceda Law governs installment sales of real property.

The Recto Law

The Recto Law comprises Articles 1484 to 1486 of the Civil Code. It was added to the
Civil Code to prevent abuses in the foreclosure of chattel mortgages, such as when
mortgagee-creditors foreclosed mortgaged property, bought them at a low price (on
purpose,) then prosecuted the mortgagor-debtors to recover the deficiencies.

In the event a buyer of personal property defaults by failing to pay two or more of the
agreed installments, the seller can do any of the following:

1. Demand that the buyer pay (a.k.a. specific performance)

2. Cancel or rescind the sale
3. Foreclose the mortgage on the property bought (if there ever was a chattel
mortgage)
Regarding no. 3, this happens when a person takes a loan to buy something and he
mortgages the thing he bought to ensure the creditor that he will pay the loan.
Remember: If you choose one remedy, you can’t choose the others. These remedies,
believe it or not, are also available to the buyer. You also can’t use all or any of them at
the same time. The Recto Law also won’t apply to a straight sale (i.e. a sale where
there is a downpayment and the balance is payable in the future in a single payment
only.) The seller can also assign his credit to another person, making that person the
new creditor.

If the buyer refuses to surrender the items to the seller, he becomes a perverse buyer-
mortgagor. When that happens, the seller can recover expenses and attorney’s fees.

The Recto Law also covers leases with the option to purchase.

The Maceda Law, Ra 6552

Do you want to know your rights as a real estate investor, or simply as a real estate
buyer who is making installment payments? The first logical step would be to know what
law applies and what that particular law contains, which in this case would be the full
text of Republic Act No. 6552. More popularly known as the Maceda Law, the RA 6552
follows.
The Maceda Law, RA 6552, is the real estate equivalent of the Recto Law. Like the
Recto Law, it also covers financing of sales of real property (which is why mortgages
also come in.) It doesn’t apply,however, to the following sales:
1. Industrial lots
2. Commercial buildings and lots
 3. Lands under the CARP Law
MACEDA LAW (RA6552) Maceda Law in the Philippines applies to the purchaser of
real property by installment payments when the purchase becomes cancelled by a
delinquency in payment. It provides the buyer with a right to a refund as a requisite for
cancellation of contract due to delinquency when the buyer has paid at least two years.
The refund is 50% of total payments; additional 5% per year after 5th year.

To qualify for the Maceda Law, the buyer must have already paid at least 2 years of
installment payments.
1. The buyer has the right to continue the unpaid installments due without additional
interest provided that the buyer must pay within the grace period. The grace period
provided is one month for every one year of installments paid.
2. The buyer has the right to opt for a refund of the installment payments being made
(This includes the down payments, deposits or options on the contract). The buyer
is entitled to 50% refund from his total payments made. An additional of 5% refund
per year for every 5 years.
If the buyer has paid less than two years installment:
The buyer has the right to continue his payments within a grace period of 60 days.
FULL TEXT OF MACEDA LAW:
REPUBLIC ACT NO. 6552REALTY INSTALLMENT BUYER PROTECTION ACTAN
ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON
INSTALLMENT PAYMENTS

Section 1. This Act shall be known as the “Realty Installment Buyer Act.”
Section 2. It is hereby declared a public policy to protect buyers of real estate on
installment payments against onerous and oppressive conditions.
Section 3. In all transactions or contracts involving the sale or financing of real estate
on installment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants under Republic Act Numbered
Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three
hundred eighty-nine, where the buyer has paid at least two years of installments, the
buyer is entitled to the following rights in case he defaults in the payment of succeeding
installments:
(a) To pay, without additional interest, the unpaid installments due within the total grace
period earned by him which is hereby fixed at the rate of one month grace period for
every one year of installment payments made: Provided, That this right shall be
exercised by the buyer only once in every five years of the life of the contract and its
extensions, if any.
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender
value of the payments on the property equivalent to fifty per cent of the total payments
made, and, after five years of installments, an additional five per cent every year but not
to exceed ninety per cent of the total payments made: Provided, That the actual
cancellation of the contract shall take place after thirty days from receipt by the buyer of
the notice of cancellation or the demand for rescission of the contract by a notarial act
and upon full payment of the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the
computation of the total number of installment payments made.

Section 4. In case where less than two years of installments were paid, the seller shall
give the buyer a grace period of not less than sixty days from the date the installment
became due.
If the buyer fails to pay the installments due at the expiration of the grace period, the
seller may cancel the contract after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act.

Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or
assign the same to another person or to reinstate the contract by updating the account
during the grace period and before actual cancellation of the contract. The deed of sale
or assignment shall be done by notarial act.
Section 6. The buyer shall have 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.
Section 7. Any stipulation in any contract hereafter entered into contrary to the
provisions of Sections 3, 4, 5 and 6, shall be null and void.
Section 8. If any provision of this Act is held invalid or unconstitutional, no other
provision shall be affected thereby.
Section 9. This Act shall take effect upon its approval.

Act No. 4122 also known as the

RECTO LAW
Article 1484 of the Civil Code provides for the remedies of a seller in contracts of sale of personal
property by installments, and incorporates the provisions of Act No. 4122, known as the Installment
Sales Law or the Recto Law, which then amended Article 1454 of the Civil Code of 1889.

RATIONALE � the object of Recto Law was to remedy the abuses committed in connection with the
foreclosure of chattel mortgages and was meant to prevent mortgagees from seizing the mortgaged
property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for
a
deficiency judgment.

� Under Article 1484 of the New Civil Code, in a contract of sale of personal property the price of
which is payable in installments, the vendor may exercise any of the following REMEDIES:
1. Exact fulfillment of the obligation, should the buyer fail to pay any installment;
2. Cancel the sale, should the buyer�s failure to pay cover two or more installments;
3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the buyer�s
failure to pay cover two or more installments.

� The remedies have been recognized as alternative, not cumulative, in that the exercise of one
would also bar the exercise of the others. They cannot also be pursued simultaneously.

� If the seller should foreclose on the mortgage constituted on the thing sold, he shall have no
further action against the purchaser to recover any unpaid balance of the price. Any agreement
to the contrary shall be void.

The provisions of Recto Law are applicable to financing transactions derived or arising from
sales of movables on installments, even if the underlying contract at issue is a loan because the
promissory note has been assigned or negotiated by the original seller.