I am planning to buy a condominium unit in Pasig City. I am just awaiting approval of my loan because I intend to purchase that residential unit on installment basis. Assuming that I have already signed the agreement with the developer and I am unable to continue paying my installments, what are the remedies available to me? Will I be given a refund of what I have already paid? I do not have sufficient legal knowledge on matters like this. Please enlighten me.
The first thing you have to consider is your contract with the developer. Contracts provide the specific terms and conditions by which the parties have obliged themselves to comply with in good faith (Article 1159, New Civil Code of the Philippines). Hence, paramount consideration should be given to the provisions of the contract that you have executed with the condominium developer.
If your contract is silent or does not provide any information as to the effects and repercussions of a party’s failure to comply with his or her obligation, we may rely on the provisions of our law. In all transactions involving the sale or financing of real estate on installment basis, including residential condominium apartments but excluding industrial lots and commercial buildings, Republic Act (RA) 6552, or the “Realty Installment Buyer Protection Act,” may govern. As provided for under Section 3 thereof, if the buyer has paid at least two years of installments, he or she is entitled to the following rights in case he or she defaults on the payment of succeeding installments: “(a) To pay, without additional interest, the unpaid installments due within the total 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 percent of the total payments made and, after five years of installments, an additional five percent every year but not to exceed ninety percent of the total payments made; provided, that the actual 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. x x x Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made.” (emphasis supplied)
If, however, you were able to pay less than two (2) years of installments, the seller must give you a grace period of not less than sixty (60) days from the date the installment becomes due. If you fail to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty (30) days from your receipt of the notice of cancelation or the demand for rescission of the contract by a notarial act (Section 4, RA 6552).
You may also sell your rights to the property if you can no longer continue paying your unpaid installments with the developer. You also have the option of assigning your rights to another person. The deed of sale or assignment shall be done by notarial act. If you still wish to continue your contract before the actual cancelation thereof, you may reinstate the contract by updating your account during the grace period (Section 5, RA 6552).
We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.
Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to firstname.lastname@example.org