Function of the Count
The number of installments made under the Maceda Law determines the buyer's statutory level of protection when the buyer defaults in an installment sale or financing of real property. The count separates buyers who have paid less than two years of installments from buyers who have paid at least two years of installments.
The count is not a measure of how long the buyer possessed the property, how long the contract has existed, or how long the buyer has been in default. It is a measure of installment payments actually satisfied under the contract, including payments that the statute treats as part of the installment count.
If the buyer has paid less than two years of installments, the statutory protection is a minimum grace period of sixty days from the due date before cancellation may proceed. If the buyer has paid at least two years of installments, the buyer earns a longer grace period, a cash surrender value upon cancellation, and additional refund percentages after longer performance.
Payments Included in the Computation
The starting point is the contract's installment arrangement. Regular amortizations or periodic payments credited to the real property's purchase price are counted because they are the payments the buyer undertook to make in installments.
Republic Act No. 6552 expressly includes down payments, deposits, and options on the contract in computing the total number of installments made. These items cannot be ignored merely because they were paid before the regular monthly amortization period began or because the contract labels them as equity, reservation, deposit, or option money.
The statutory inclusion prevents a seller from reducing the buyer's earned protection by separating the initial equity from the later amortizations. When the initial payment is part of the economic price paid for the real property, it is credited in determining whether the buyer has reached the two-year threshold and in determining the number of installment years already earned.
The count should therefore include payments that are applied to the price or to the buyer's installment obligation. It should not include amounts that are independent of the installment price, such as penalties for delay, attorney's fees, documentary expenses, transfer charges, association dues, real property taxes assumed separately by the buyer, utility deposits, or insurance charges, unless the contract clearly folds a particular charge into the agreed installment price.
| Payment or item | Effect on installment count | Reason |
|---|---|---|
| Regular monthly, quarterly, semiannual, or annual amortization | Counted | It directly satisfies a scheduled installment on the real property. |
| Down payment or buyer's equity | Counted | The statute includes initial price payments in computing installments made. |
| Deposit, reservation fee, or option money credited to the price | Counted | It is treated as part of the buyer's payment on the contract. |
| Advance or lump-sum payment applied to future amortizations | Counted to the extent applied | It satisfies installments ahead of schedule or reduces scheduled installment obligations. |
| Penalty, surcharge, collection fee, or liquidated damages | Not counted | It compensates for default and does not pay the property price. |
| Taxes, transfer expenses, insurance, or association dues separately charged | Not counted | They are collateral obligations unless incorporated into the installment price. |
| Dishonored check, unaccepted tender, or mere promissory note | Not counted until payment is realized or accepted | The law protects payments made, not promises to pay. |
Method of Converting Payments into Installments
Where the contract fixes a uniform periodic installment, nonperiodic amounts included by law are converted into installment equivalents by reference to the agreed installment amount. A down payment equal to twelve monthly amortizations is equivalent to one year of installments, and a down payment equal to six monthly amortizations is equivalent to six installments.
Where the installments vary by stage, percentage, or schedule, the better method is to credit each payment against the earliest unpaid obligations according to the contract. The number of installments made is then the number of scheduled installments fully satisfied, plus any statutory equivalent of included initial payments that the contract credits to the price.
When a payment only partially satisfies an installment, the partial amount is relevant to the total payments made and to the buyer's account balance, but it should not be treated as a full installment unless the contract or the parties' accounting treats the installment as fully paid. For statutory thresholds stated in years, the safer computation relies on completed installment equivalents.
Advance payments count when the seller applies them to future installments or to the outstanding installment price. A buyer who prepays several amortizations has made those installment equivalents, even if their due dates have not yet arrived, because the law is concerned with the amount of performance already rendered by the buyer.
Payments accepted after default but before effective cancellation also count, because the contract remains in force until cancellation is validly effected. If the buyer has already received a proper notarial cancellation and the statutory conditions for effective cancellation have been completed, later amounts do not revive the count unless the seller accepts them as reinstatement or as a new agreement.
Computing the Two-Year Threshold
The phrase at least two years of installments refers to installment equivalents amounting to twenty-four monthly installments when the contract is payable monthly. The same idea applies to other schedules: eight quarterly installments, four semiannual installments, or two annual installments constitute two years if those are the agreed periodic installments.
Initial payments included by the statute may be decisive. If the buyer paid a down payment equivalent to twelve monthly installments and thereafter paid twelve monthly amortizations, the buyer has paid two years of installments even though only one calendar year of monthly due dates has passed. The seller cannot disregard the initial equity to classify the buyer as having paid only one year.
Conversely, the passage of two calendar years from contract signing does not automatically mean two years of installments were made. If the buyer paid only a small down payment and then paid fewer than twenty-four monthly equivalents, the buyer has not reached the higher statutory protection merely because the contract is two years old.
The computation therefore proceeds by value and crediting, not by calendar duration alone. Determine the installment equivalent of all countable payments, add them, and identify whether the total reaches the statutory number of installments corresponding to two years.
Effect on Grace Period
For a buyer who has paid at least two years of installments, the grace period is computed at one month for every one year of installment payments made. The number of years is obtained from the same installment count, including down payments, deposits, and option payments that form part of the contract price.
Completed years of installment equivalents control the length of the grace period. A buyer with two years of installments earns a two-month grace period; a buyer with five years earns a five-month grace period. Partial years may increase the buyer's total payments and affect the accounting, but they do not automatically create another full month of statutory grace.
The statutory grace period is exercisable only once every five years of the life of the contract and its extensions. The computation of installments made identifies the length of the earned grace period, while the once-in-five-years limitation identifies how often the buyer may use that privilege.
Effect on Cash Surrender Value
The installment count also matters because it determines whether the buyer is entitled to a refund upon cancellation. A buyer who has paid at least two years of installments is entitled to a cash surrender value based on total payments made on the property, subject to the statutory percentage.
The basic cash surrender value is fifty percent of total payments made. After five years of installments, the buyer earns an additional five percent for every additional year, but the total refund percentage cannot exceed ninety percent of total payments made.
The phrase total payments made is related to, but not identical with, the number of installments made. The number of installments made determines qualification and percentage progression; total payments made supplies the monetary base to which the percentage is applied.
For the monetary base, count payments on the real property, including down payments, deposits, option payments applied to the contract, and amortizations paid. Exclude charges that are not payments on the property price, especially penalties and expenses imposed because of delay, unless the contract validly made them part of the installment price itself.
| Installment performance | Statutory consequence |
|---|---|
| Less than two years of installment equivalents | Minimum sixty-day grace period before cancellation process may proceed; no statutory cash surrender value under the higher-protection rule. |
| At least two years but not more than five years | Grace period of one month for every full year of installments made; cash surrender value of fifty percent of total payments made. |
| More than five years of installment equivalents | Same earned grace period rule; cash surrender value increases by five percent for every year after five years, capped at ninety percent. |
Cancellation and Timing of the Count
The relevant count is taken when the seller seeks to cancel the contract because of the buyer's default. The buyer's status at that point determines whether the seller must observe the rules for buyers with less than two years of installments or the rules for buyers with at least two years of installments.
For buyers with at least two years of installments, actual cancellation requires more than default and a demand letter. Cancellation becomes effective only after the required notice or demand by notarial act and the payment of the cash surrender value due to the buyer. Until the statutory cancellation requirements are fulfilled, the seller cannot rely on a prematurely terminated contract to ignore payments that should be credited.
Acceptance of payment after default may show that the seller continued the contract or allowed cure, depending on the surrounding acts and accounting. Once the seller credits a payment to the buyer's installment obligation, that payment forms part of the computation of installments made and total payments made.
Application to Common Contract Structures
In a contract with a large equity component followed by monthly amortizations, the equity payment is not excluded from the computation. If the equity is payable in several sub-installments before bank financing or turnover, those equity payments are countable installment payments because they are part of the real property price.
In a contract with a reservation agreement followed by a contract to sell, the reservation or option fee is counted when it is applied to the purchase price or treated as part of the buyer's payment under the contract. If the amount is purely a separate administrative charge and is not credited to the property price, it does not add to the installment count.
In a contract with escalating amortizations, payments are counted according to the installment obligations they satisfy. A payment satisfying a lower early amortization and part of a higher later amortization should not be simplified into a fictional average if the contract's actual schedule supplies the proper crediting method.
In a financed real estate sale where the seller or developer structures the price through in-house financing, the Maceda Law still looks to the buyer's installment payments on the real property. The seller cannot defeat the computation by describing the amortizations solely as financing charges when they are the mechanism by which the buyer pays the real property price.
Integrated Computation
A complete computation follows a sequence. First, identify the agreed installment schedule and the amount or value of each installment. Second, list all payments made by the buyer that are credited to the real property price, including down payments, deposits, and options on the contract. Third, exclude charges that are collateral to the price or imposed because of default. Fourth, convert countable nonperiodic payments into installment equivalents or credit them against scheduled installments. Fifth, determine the completed years of installment equivalents for the threshold, grace period, and refund percentage.
This method keeps the computation faithful to the protective policy of the Maceda Law. The buyer receives credit for the economic performance already rendered, while the seller remains protected against treating unpaid, dishonored, collateral, or penalty amounts as if they were completed installments on the price.