COVID19 to the Rescue: I am Unable to Pay my Monthly Amortizations. Can I Still Refund My Payments?

crop businessman giving contract to woman to sign
Photo by Andrea Piacquadio on Pexels.com
BC & AC: BEFORE COVID19 & AFTER COVID19

Buyers who purchased residential property on installment during BC may have a harder time keeping up with the amortization payments during AC. Business losses and/or unemployment in AC will make it almost impossible to fulfill a lot of financial obligations.

BUYER AND DEVELOPER: DAVID VS. GOLIATH

Developers big or small have mastered the art of preparing and drafting boiler plate contracts to sell.

One thing is certain, when it comes to contracts to sell and default on amortization payments, developers will fight tooth and nail to forfeit your payments.

Does David stand a chance against Goliath? Fortunately, there are laws that were enacted specifically to protect property buyers from unscrupulous real estate developers.

PRESIDENTIAL DECREE NO. 957, REPUBLIC ACT NO. 6552, & ARTICLE 1174 OF THE NEW CIVIL CODE

PD 957 is perhaps one of the best crafted laws of the Marcos era. The law aims to protect property buyers and provides remedies in case a developer fails to finish a project development.

RA 6552 or more popularly known as the Maceda Law, in conjunction with PD 957, provides a remedy for a defaulting buyer of residential property that is paid on installment.

Article 1174 of the New Civil Code on the other hand tells us that a person shall not be responsible for events which could not be foreseen, or if the event is foreseen, is inevitable.

COVID19 PANDEMIC QUESTION:
WHAT IF I LOST MY JOB AND CANNOT AFFORD TO PAY, WHAT WILL HAPPEN TO ALL THE DOWN PAYMENTS I MADE TO THE DEVELOPER?

A defaulting buyer on installment has two remedies provided by law.

(1) PD 957: If the developer fails to complete the project within the approved period, the buyer is no longer obliged to continue payment and shall be entitled to a full refund.

(2) RA 6552: All other reasons aside from incomplete development, if a buyer on installment defaults, he shall be entitled to at least a 50% refund if amortization payments have reached at least two years. The buyer receives nothing if amortizations fail to add up to two years of payment

In a peculiar situation such as the COVID19 pandemic where millions are experiencing extreme financial hardship in a global scale, does the Maceda Law plainly apply? While RA 6552 contemplates mere inability of a buyer to pay, it does not however contemplate a special situation such as a financial meltdown of epic proportions.

Interestingly enough, Article 1174 starts to operate in favor of a defaulting buyer when all four requisities fall into place:

  1. The Pandemic is independent of the will of the buyer;
  2. It is unseen or unavoidable;
  3. It renders buyer incapable of paying subsequent amortizations in a normal manner;
  4. Buyer had no participation in, or aggravated the effects of the Pandemic.
person holding syringe
Photo by cottonbro on Pexels.com
IS COVID19 THE SILVER BULLET FOR EACH AND EVERY DEFAULTING INSTALLMENT BUYER?

Absolutely not. All three laws cited above operate in conjunction with each other and should be construed as a whole. While the effects of the pandemic are felt by the entire human race, not everyone is totally paralyzed from fulfilling their contractual obligations and is entitled to a refund.

Taken with sufficient evidence to prove extreme financial difficulty caused by this unforseen world event, all three laws may rescue a helpless property buyer from a forfeiture of his amortization payments.

 

Karl S. Borja is a Partner at Borja Salem Panis Baldonado and Associates. His practice includes real estate transactions, property law, and government regulatory compliance.

You may reach him at:

ksborja@bspba.law

6B Vernida I Condominium, 120 Amorsolo St. Legazpi Village, Makati City. Tel No. 02-847888395.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s