The Supreme Court (SC) has reminded that in the sale of real estate property on installment basis, the buyer must be given 60 days to settle unpaid amortizations and the rescission of sale must be enforced 30 days from receipt of the notarized cancellation.

In a decision, the SC said the conditions on cancellation of sale are contained in Republic Act No. 6552, the Act to Provide Protection to Buyers of Real Estate on Installment Payments.

Section 4 of RA 6552 provides: “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 (60) days from the date the installment became due.”

It also provides: “If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty (30) days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.”

In a decision written by Associate Justice Antonio T. Kho Jr., the SC said the purpose of RA 6252, popularly known as “Maceda Law,” is to protect real estate buyers on installment payments against one-sided conditions in contracts.

With the decision, the SC upheld the validity of contracts to sell between State Investment Trust, Inc. (SITI) and spouses Carlos and Victoria Baculo after the firm failed to meet the Maceda Law’s cancellation requirements. 

A summary of the decision issued by the SC’s Office of the Spokesperson stated that SITI owned two parcels of land in Batasan Hills, Quezon City, which it offered to sell to spouses Baculo through two contracts to sell, allowing them to pay the total purchase price in installments over three years. 

When the spouses failed to complete payments, SITI sent letters demanding payment within five days and later declaring the contracts to sell cancelled. 

The spouses refused to vacate the property, leading SITI to file an ejectment case. 

While the Metropolitan Trial Court and Regional Trial Courts ruled in SITI’s favor, the Court of Appeals (CA) reversed the decisions with a ruling that contract cancellation requires a notarized notice under the Maceda Law. 

The SC affirmed the CA’s ruling. It pointed out that while a seller may cancel a contract to sell under the Maceda Law on its own without going to court, it must still comply with Section 4 of the law, which requires: (1) a 60-day grace period for the buyer to settle overdue installments, counted from the date the installment became due; (2) a notarized notice of cancellation from the seller; and (3) cancellation only after 30 days from the buyer’s receipt of the notarized notice. 

The SC found that SITI’s letters were not notarized, and it failed to provide the required 60-day grace period, giving only five days to settle the balance. 

It explained that under the Revised Rules on Evidence, a proper notarial act occurs when a person appears before a notary public and confirms signing a document voluntarily. 

It also said that notarization makes private documents public and allows sellers to cancel the contract on their own, even without agreement from the other parties. 

While affirming the validity of the contracts, the SC said that spouses Baculo must pay the outstanding balance with interest, after which SITI must execute a Deed of Absolute Sale in their favor. 

If they fail to pay within 60 days, they must vacate the properties without further demand, it also said.