MACEDA AND RECTO LAW
installment to exercise grace period
REALTY INSTALLMENT BUYER
PROTECTION ACT
• To protect buyers of real estate on
installment payments against onerous and
oppressive conditions. (Sec. 2)
• Includes:
 sale or financing of real estate on
installment payments, including
residential condominium
apartments
• Excludes:
 industrial lots, commercial
buildings and sales to
tenants under RA 3844
RIGHTS OF BUYER: GRACE PERIOD
• To pay, without additional interest, the
unpaid installments due within the total
grace period earned by him
• Grace period? one month 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
RIGHTS OF BUYER: CASH SURRENDER
VALUE
• If contract is canceled, seller shall refund to
the buyer the cash surrender value of
the payments
• How much? equivalent to 50% of the total
payments made, and, after five years of
installments, additional 5% every year but
not to exceed 90% of the total payments
made:
• Provided, actual cancellation of contract
shall take place after 30days 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.
• Less than 2 years- NO REFUND
• More than 2 years – 5 years- 50%
• More than 5 years- 50% + additional
5% for every year but not to exceed
90%
• TP (Total Payments) x % Refund=
CSV
Take Note:
• Buyer has paid at least 2 years of
and CSV
• If less than 2 years- not less than 60
days. After 30 days from receipt of
notice by buyer, seller may cancel
• Down payments, deposits or options
on the contract shall be included in
the computation of the total number
of installment payments made
ASSIGNMENT OR
REINSTATEMENT
• Buyer has a right to sell or assign his
rights over the lot or unit to another
person or reinstate the contract
• How? By updating the account
• Provided this is done during
the grace period and before actual
cancellation of the contract
RIGHT TO PAY IN ADVANCE
 The buyer has the right to pay
in advance any installments or the
full unpaid balance without interest
any time and have such full payment
annotated in the title.
RECTO LAW
 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.
When applicable?
• Sale of personal property by
installments
• Leases with the option to purchase
• Not applicable to a straight sale (DP
+ another single future payment)
Remedies under Article 1484 of the
New Civil Code
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
Foreign ownership limit
constituted, should the buyer’s
failure to pay cover two or more
installments.
 Remedies are alternative, not
cumulative, in that the exercise of
one would also bar the exercise of
the others.
 They cannot also be pursued
simultaneously.
Condominium Act
What is a Condominium?
Rights of a Condominium Owner
 Interest in real property consisting
of a separate interest in a unit in a
residential, industrial, or commercial
building and an undivided interest in
common in the land and other
common areas of the building.
What is a unit?
 part of the condominium project
intended for any type of independent
use or ownership, including one or
more rooms or spaces located in one
or more floors (or part or parts of
floors) in a building or buildings and
such accessories as may be appended
thereto.
Master Deed
Project
 The entire parcel of real property
divided or to be divided in
condominiums, including all
structures thereon
Common areas
 The entire project excepting all units
separately granted or held or
reserved
Who can own a Condominium?
• Filipino citizens and corporations
• Foreigners but not more than 40% of
total and outstanding capital stock of
a corporation
• Take note: Foreigners and foreign
corporations are prohibited to own
land
• Foreigners can buy and own condo
units in the Philippines
• Foreign ownership within a
particular condominium building
must not surpass 40%.
• As long as 40% has not been
reached, foreigners may freely
purchase freehold condominium
units.
• Absolute ownership of unit
• Limited ownership of walls, ceilings
and floors
• Co-ownership of land and common
areas in proportion to units owned
• Exclusive easements of airspace
within unit
• Non-exclusive easement to common
areas
• Right to repair and decorate
• Sell, lease and mortgage unit
• To vote and be voted upon the
corporation
• A description of the land, building,
common areas, and facilities
• State the nature of the interest
acquired by the purchaser in the
separate units and common areas
• Include plans of the land and
building, as well as any reasonable
restrictions on alienation or disposal
of the condominium.
• Can be amended or revoked with the
consent of the registered owner and
 holders of any lien or encumbrance
on the property
Dissolution of Corporation
• In case of involuntary dissolution,
the common areas owned by the
corporation are transferred to the
members or stockholders in
proportion to their interest, subject to
the rights of creditors.
• Upon voluntary dissolution, the
corporation may sell the entire
project and liquidate the interests of
the owners.
• The corporation may also be
dissolved by the affirmative vote of
all stockholders or members.
Pledge, Real Mortgage, Antichresis and
Chattel Mortgage
Common Provisions to Pledge and
Mortgage
• a. They are constituted to secure
fulfillment of the principal
obligation.
• b. The pledgor or mortgagor is the
absolute owner of the thing pledge or
mortgage.
• c. The person constituting the pledge
or mortgage have free disposal of the
property and in the absence thereof
that may be legally authorized for the
purpose; and
• d. The when the principal obligation
becomes due the things in which
the pledge or mortgage consists may
be alienated for the payment of the
creditor.
 Stipulation authorizing the creditor
to appropriate the things given by
way of pledge and mortgage or to
dispose of them
 Declared null and void by law.
 Aappropriation must be automatic
without need of further act on the
part of the debtor
Indivisibility of Pledge and Mortgage
• Indivisible even though the debt may
be divided among debtor or creditor
• Debtor’s heirs who has paid the debt
cannot ask for the proportionate
extinguishments of the pledge or
mortgage as long as the debt is not
completely satisfied
• Creditor’s heirs who received his
share of the debt return the pledge or
cancel the mortgage
• Do not apply where several things
given and each of them guarantees
only a determinate portion of the
credit
WHAT S PLEDGE?
• Contract by virtue of which the
debtor delivers to the creditor or to
the third person a movable or
instrument evidencing incorporeal
rights for the purpose of securing
the fulfillment of a principal
obligations and once fulfilled, the
thing delivered shall be returned with
all the fruits and accessions
Characteristics
• a. Real
• b. Accessory
• c. Unilateral
• d. Subsidiary
• e. The thing pledged be placed in the
possession of the creditor or of a
third person by common agreement.
Kinds of Pledge
• Voluntary or conventional-
agreement of parties
• Legal- created by operation of law
• Possessory lien, depositary’s
right of retention
• May thing pledge be alienated?
• Yes, provided the pledgee
consents to the sale.
Ownership passes to
the vendee but subject to
rights of pledgee
Rights of Pledgee
• Retain the thing in his possession
 • To be reimbursed for the expenses • To substitute the thing pledged if it is
endangered without fault of the
• To compensate "set off (the fruits,
pledgee
income, dividends or interests)
• To bid and have preference at the
• To bring the actions which pertain to
foreclosure sale
the owner of the thing pledged
• To demand the return of the thing
• To sell the thing pledged at the
pledged upon the e3tinction of the
public auction
principal obligation.
• To claim a substitute or demand
Obligations of the Pledgor
immediate payment
• To notify the pledgee of any flaw or
• To sell the thing pledged at public
defect of the thing pledged 2nown to
auction
him
• To bid at the public sale
• To reimburse the pledgee for
• To collect the amount that become expenses made for its preservation
due
• To fulfill his principal obligation
• To choose which one of the several
Extrajudicial Foreclosure Sale
thing pledged shall be sold
• a. The debt is due and unpaid
Obligations of the pledgee
• b. The sale must be at a public
• To take care of the thing pledge with
auction
the diligence of a good father of the
family • c. There must be notice to the
pledgor and owner stating the
• To answer for its loss or deterioration
amount due; and
in the proper case
• d. The sale must be made with the
• Not to deposit the thing pledge with
intervention of a notary public.
a third person unless authorized
Rules on the proceeds after sale of the
• To be responsible for the acts of his
thing pledged
agents or employees with respect to
the thing pledged • Price of sale more than the amount
due- debtor is not entitled to the
• Not to use the thing pledged unless
excess unless otherwise agreed upon
authorized or its preservation so
requires • Price of sale less than the amount
due- creditor is not entitled to
• To advise the pledgor without
recover any deficiency
delay of any danger to the thing
notwithstanding any stipulation to
pledged
the contrary.
• To promptly advise the pledgor or
Note:
owner in case of sale at public
auction of the result thereof • The creditor may sue on the principal
obligation instead of electing to sell
• To return the thing pledged when the
the thing pledged.
principal obligation is paid
• In pledge by operation of law after
Rights of Pledgor
payment of the debt and expenses,
• To continue to be the owner of the the remainder of the price shall be
thing pledged delivered to the obligor
• To demand the deposit of the thing • Under the Chattel Mortgage Law,
pledged should the creditor use it the mortgagor can also recover the
without authority excess
Extinguishment of Pledge • Mortgage does not extinguish the
title of the mortgagor who does not
• Return of the thing pledged by the
lose his right to dispose
pledgee to the pledgor or owner any
stipulation to the contrary being void
• Renunciation or abandonment Scope of Mortgage
e3ecuted in writing by the pledgee
• Natural accessions
even without return of the thing
• Improvements
• Destruction or loss of the thing
pledged • Growing fruits
• Extinction of the principal obligation • Rents or income not yet received
when the obligation becomes due
• Other causes of e3tinguishments or
ordinary obligations • Proceeds of insurance received or
owing from insurance of the property
Real Estate Mortgage
• Amount received in virtue of
 Contract whereby the debtor secures
expropriation
to the creditor the fulfillment of the
principal obligation, subjecting such Foreclosure
immovable property or real rights in
 Remedy available to the mortgagee
case the principal obligation is not
by which he subject the mortgaged
complied with.
property to the satisfaction of the
Characteristics obligation to secure which the
mortgage was given through the sale
• Real
of the property at public auction and
• Accessory the application of the proceeds to the
payment of his claims
• Unilateral
Kinds of Foreclosure
• Subsidiary
• Judicial
KINDS OF MORTGAGE
• Bringing an action to the
Voluntary
RTC of the province or cuty
 One which is agreed to between by where real property is located
the parties or constituted by the will ir any part thereof lies
of the owner of the property
• Extrajudicial
Legal
• Insertion in the contract
 One required by law to be executed giving the mortgagee the
in favor of certain persons prior right upon default of the
debtor to foreclose the
Equitable mortgage by
 One which, although it lacks the
proper formalities of a mortgage,
show the intention of the parties to
make the property as a security for a
debt
Effects of Mortgage
• Creates a real right
• The mortgagee may demand
payment from any possessor of the
mortgaged property