Scope and Coverage of Transactions
- Applies to sales or financing of real estate on installment payments.
- Includes residential condominium apartments.
- Excludes industrial lots, commercial buildings, and sales to tenants under Republic Act Nos. 3844 (as amended by RA 6389).
- Buyer must have paid at least two years of installments to qualify for protections.
Rights of Buyers Who Default After Two Years of Installments
- Buyer entitled to a grace period without additional interest on unpaid installments.
- Grace period fixed at one month per year of installment payments made.
- This grace period right may be exercised only once in every five years of the contract term or its extensions.
- Upon contract cancellation, seller must refund the buyer the cash surrender value of payments:
- 50% of payments made if cancellation occurs within five years.
- Additional 5% per year after five years, capped at 90% of total payments.
- Cancellation takes effect thirty days after the buyer’s receipt of a cancellation notice or demand for rescission by notarial act and after full payment of the cash surrender value.
- Down payments, deposits, or options count toward total installment payments made.
Provisions for Buyers with Less than Two Years of Installment Payments
- Seller must grant a grace period of not less than sixty days from the installment due date.
- If payment is not made within this period, seller may cancel the contract thirty days after receipt by the buyer of the cancellation notice or rescission demand by notarial act.
Buyer's Rights to Assign or Reinstate Contract
- Buyer may sell or assign rights to another person under Sections 3 and 4.
- Buyer may reinstate the contract by updating the account during the grace period and before actual cancellation.
- Deed of sale or assignment must be executed by notarial act.
Right to Prepay Without Penalty
- Buyer may pay any installment or the full unpaid balance anytime in advance without interest.
- Full payment must be annotated in the certificate of title for the property.
Nullity of Contravening Contract Stipulations
- Any contract clauses contrary to Sections 3, 4, 5, and 6 are null and void.
Separability Clause
- If any provision of the Act is found invalid or unconstitutional, the remaining provisions remain unaffected.
Effectivity
- The Act took effect upon approval on September 14, 1972.