Right to Sell, Assign & Reinstate
Learn about the buyer's right to sell or assign their contract rights, reinstate a defaulted contract, and the requirement for notarial deeds of assignment under RA 6552 Section 5.
Right to Sell or Assign Rights
“Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The deed of sale or assignment shall be done by notarial act.”
What This Means
A defaulting buyer is not trapped. During the grace period and before actual cancellation, the buyer has three options: (1) sell their rights to someone else who can continue the payments; (2) assign the contract to another person; or (3) reinstate the contract by paying all arrears. The sale or assignment must be done through a notarial act (notarized deed). This gives buyers an exit strategy. if they cannot afford to continue, they can sell their equity to someone who can.
- Buyer can SELL their rights to another person during grace period
- Buyer can ASSIGN the contract to someone else
- Buyer can REINSTATE by updating (paying all arrears)
- These rights exist under BOTH Section 3 and Section 4
- Sale or assignment must be by notarial act (notarized document)
Real-World Scenario
Diana has paid 3 years of installments on a lot (P720,000 total) but can no longer afford the P20,000 monthly payments. She is within her grace period. Her friend Rico wants to buy her rights for P500,000 and continue the payments. The developer says "transfers are not allowed under the contract."
Can Diana sell her rights to Rico despite the contract prohibition?
Reinstating a Defaulted Contract
“the buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract.”
What This Means
Reinstatement means the buyer pays all missed installments to bring the account current, effectively "curing" the default. This right exists during the grace period AND during the 30-day notice period before actual cancellation. The key phrase is "before actual cancellation". as long as the cancellation has not yet taken effect (i.e., all requirements under Section 3(b) or 4 are not yet complete), the buyer can still reinstate. This creates a final window of opportunity for buyers to save their contracts.
- Reinstatement = paying all arrears to bring account current
- Available during grace period AND 30-day cancellation notice period
- Right exists until "actual cancellation" takes effect
- For Section 3 buyers: cancellation requires CSV payment. until paid, buyer can reinstate
- Reinstated contract continues as if no default occurred
Real-World Scenario
A buyer with 4 years of payments defaults and the grace period expires. The developer sends a notarized cancellation notice on July 1. On July 25 (before the 30-day period ends), the buyer walks into the developer's office with full payment of all arrears. The developer refuses, saying "the cancellation is already in process."
Can the developer refuse the reinstatement?
Notarial Act Requirement
“The deed of sale or assignment shall be done by notarial act.”
What This Means
Any transfer of the buyer's rights must be notarized. a simple private agreement is not sufficient. This protects all parties: the buyer (proves they received consideration), the assignee (proves valid transfer), and the developer (knows who the new obligor is). The notarial requirement also creates a public record of the transfer, preventing disputes about whether a valid assignment occurred.
- Sale or assignment of buyer's rights must be notarized
- A private written agreement alone is not sufficient
- Notarization creates a public document with evidentiary weight
- Protects buyer, assignee, and developer from disputes
- The developer should be notified of the assignment (though not explicitly required)
Real-World Scenario
Pedro sells his installment contract rights to Maria through a handwritten agreement witnessed by two neighbors. No notarization is done. Maria starts paying the monthly installments. The developer accepts Maria's payments for a year. Later, Pedro claims the assignment was invalid and demands the property back.
Is the assignment valid?
Frequently Asked Questions
Can I sell my installment contract rights to someone else if I can't continue paying?
Yes. Section 5 of RA 6552 gives you the right to "sell his rights or assign the same to another person" during the grace period and before actual cancellation. The sale or assignment must be done by notarial act (notarized document). Any contract provision prohibiting this is void under Section 7.
When is the last moment I can reinstate my defaulted contract?
You can reinstate "before actual cancellation of the contract" (Section 5). For 2+ year buyers, actual cancellation requires the CSV to be paid AND 30 days to lapse after notice. For less-than-2-year buyers, actual cancellation occurs 30 days after receipt of the notarized notice. You can reinstate at any point before these conditions are fully met.
Do I need the developer's consent to assign my contract rights?
Section 5 does not require the developer's consent. it grants the right directly to the buyer. Any contract clause requiring developer approval for assignment would be contrary to Section 5 and void under Section 7. However, it is advisable to notify the developer of the assignment so payments are properly credited.