Advance Payments & Void Contract Clauses
Learn about the buyer's right to pay in advance without interest and how the Maceda Law nullifies any contract clause that attempts to override its protections.
Right to Pay in Advance Without Interest
“The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property.”
What This Means
Buyers can pay ahead. either individual installments or the entire remaining balance. at any time, without paying any interest on the advance amount. This means if a buyer suddenly has funds (inheritance, bonus, etc.), they can pay off the property immediately and save on future interest. Additionally, once fully paid, the buyer has the right to have this annotated on the certificate of title, which protects their ownership interest in the public record.
- Buyer can pay any installment in advance at any time
- Buyer can pay the FULL remaining balance at any time
- No interest charged on advance payments
- Upon full payment, buyer can have it annotated on the certificate of title
- Seller cannot impose prepayment penalties or lock-in periods
Real-World Scenario
A buyer with 15 years remaining on a condominium installment plan (P8 million balance) receives an inheritance and wants to pay off the full remaining balance. The developer says: "Early termination carries a 5% prepayment penalty of P400,000, and we need 60 days processing time."
Is the prepayment penalty enforceable?
Contrary Stipulations Are Void
“Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and void.”
What This Means
Section 7 is the teeth of the Maceda Law. It makes ALL of the following contract clauses void: clauses that shorten or eliminate grace periods (Sections 3-4), clauses that reduce or waive the cash surrender value (Section 3(b)), clauses that prohibit assignment or transfer of rights (Section 5), clauses that impose prepayment penalties (Section 6), and any other clause that diminishes the buyer's statutory rights. The law cannot be contracted away. these rights are mandatory and non-waivable.
- ANY contract clause contrary to Sections 3, 4, 5, or 6 is NULL and VOID
- Grace periods cannot be shortened or waived by contract
- Cash surrender value cannot be reduced or waived
- Right to assign/sell cannot be prohibited
- Prepayment penalties are void
Real-World Scenario
A Contract to Sell contains these clauses: (1) "Buyer waives all rights under RA 6552"; (2) "In case of default, all payments are automatically forfeited"; (3) "Buyer cannot assign this contract without developer's written consent"; (4) "Early full payment carries a 3% processing fee."
Which of these clauses are enforceable?
Right to Title Annotation
“to have such full payment of the purchase price annotated in the certificate of title covering the property.”
What This Means
When a buyer fully pays the purchase price, they have the right to have this fact annotated (recorded) on the certificate of title. This is a protective measure. it creates a public record that the property has been fully paid for, preventing the developer from selling the same property to someone else or encumbering it with a mortgage. The buyer should exercise this right immediately upon full payment, as it provides legal protection against developer fraud or insolvency.
- Upon full payment, buyer can demand annotation on the certificate of title
- Annotation creates a public record of the buyer's completed purchase
- Protects against double-selling by the developer
- Protects against developer mortgaging the fully-paid property
- Works in conjunction with PD 957 Section 25 (title delivery obligation)
Real-World Scenario
A buyer fully pays off a subdivision lot and requests annotation on the title. The developer says: "We'll process the title transfer later. annotation is not necessary since we already issued an official receipt." Six months later, the developer goes bankrupt and a bank claims the lot as collateral for the developer's corporate loan.
Could the buyer have prevented this situation?
Frequently Asked Questions
Can a developer charge a prepayment penalty if I pay off my lot early?
No. Section 6 of RA 6552 gives the buyer the right to pay the full balance "any time without interest." Under Section 7, any contract clause imposing prepayment penalties is null and void. The developer cannot charge any fee or penalty for early payment.
Can I waive my Maceda Law rights in the contract?
No. Section 7 explicitly states that "any stipulation in any contract... contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and void." A waiver of Maceda Law rights is itself contrary to the law and therefore unenforceable. These rights are mandatory and cannot be contracted away.
What should I do immediately after fully paying off my property?
Under Section 6, demand that your full payment be annotated on the certificate of title. This creates a public record protecting you against the developer selling the property to someone else, mortgaging it, or going bankrupt. This works alongside PD 957 Section 25 which requires the developer to deliver the title upon full payment.