ii. Computation of Installment Payments

Computation of Installment Payments

Concept

Under the Realty Installment Buyer Act, the number of years of installment payments made determines the buyer’s grace period and, upon cancellation, the applicable cash surrender value. The law protects real estate installment buyers against onerous and oppressive conditions. (Sec. 1, Rep. Act No. 6552)¹ (Sec. 2, Rep. Act No. 6552)² (Sec. 3, Rep. Act No. 6552)³

Governing provisions

Section 3 supplies the computation rules when the buyer has paid at least two years of installments. Section 4 provides a different grace period when less than two years have been paid. Section 6 permits advance payment of an installment or the full unpaid balance without interest. (Sec. 3, Rep. Act No. 6552)³ (Sec. 4, Rep. Act No. 6552)⁴ (Sec. 6, Rep. Act No. 6552)⁵

Requisites / Rules

• Two-year threshold: First determine whether the buyer has paid at least two years of installments. This determines which statutory grace-period rule applies upon default in succeeding installments. (Sec. 3, Rep. Act No. 6552)³ (Sec. 4, Rep. Act No. 6552)⁴
• Grace period at or above the threshold: Allow one month for every one year of installment payments made. Within the total grace period earned, the buyer may pay the unpaid installments due without additional interest. The buyer may exercise this right only once every five years of the contract and its extensions. (Sec. 3, Rep. Act No. 6552)³
• Cash surrender value: If a contract covered by Section 3 is canceled, compute 50% of total payments made. After five years of installments, add 5% for every year, subject to a ceiling of 90% of total payments made. (Sec. 3, Rep. Act No. 6552)³
• Down payments, deposits, and options: Include these in computing the total number of installments made, as Section 3 expressly directs. (Sec. 3, Rep. Act No. 6552)³
• Advance payment: The buyer may pay any installment or the entire unpaid purchase-price balance in advance at any time, without interest, and have full payment annotated on the certificate of title. (Sec. 6, Rep. Act No. 6552)⁵

Distinctions

If less than two years of installments have been paid, Section 4 instead requires a grace period of at least 60 days from the installment’s due date. The one-month-per-year computation and the Section 3 cash surrender value rule concern buyers who have paid at least two years of installments. (Sec. 4, Rep. Act No. 6552)⁴ (Sec. 3, Rep. Act No. 6552)³

Key doctrines

The amount refundable under Section 3(b) is tied to total payments made and the applicable statutory percentage. In Moldex Realty, Inc. v. Saberon, the Court ordered a refund of the cash surrender value upon cancellation. The buyer’s rights upon default depend on whether the two-year payment threshold has been reached. (Moldex Realty, Inc. v. Saberon, G.R. No. 176289, 8 April 2013)⁶ (Danan v. Spouses Reyes, G.R. No. 195072, 29 May 2017)⁷

Exceptions

These Section 3 computations do not govern industrial lots, commercial buildings, or the sales to tenants excluded by that provision. (Sec. 3, Rep. Act No. 6552)³

Bar tip

Separate the two calculations: years of installment payments fix the grace period and percentage bracket; total payments made supply the base for the cash surrender value. Do not apply the Section 3 formula before checking the two-year threshold. (Sec. 3, Rep. Act No. 6552)³ (Sec. 4, Rep. Act No. 6552)⁴