Cash Surrender Value & Refund Rights
Learn how the Maceda Law refund (cash surrender value) is computed when a contract is cancelled after 2+ years of payments. Understand the 50% base, the 5% annual increment, and the 90% cap.
The Cash Surrender Value Formula
“If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made:”
What This Means
When a buyer who has paid 2+ years of installments has their contract cancelled, the seller MUST refund the Cash Surrender Value (CSV). The base is 50% of total payments made. After 5 years of installments, this increases by 5% for each additional year, capped at 90%. So a buyer who paid 6 years gets 55%, 7 years gets 60%, and so on up to a maximum of 90% refund.
- Base refund: 50% of total payments made (for 2-5 years of installments)
- After 5 years: add 5% per additional year
- Year 6 = 55%, Year 7 = 60%, Year 8 = 65%... up to maximum 90%
- Cap: 90% of total payments made (never exceeds this)
- "Total payments made" includes down payments, deposits, and all installments
Real-World Scenario
A buyer paid P100,000 down payment and 7 years of monthly installments at P15,000/month (P1,260,000 in monthly payments). Total payments: P1,360,000. The contract is now being cancelled.
How much is the buyer's Cash Surrender Value?
Requirements for Valid Cancellation
“Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.”
What This Means
Cancellation is not automatic. the seller must follow a strict procedure. THREE requirements must all be met: (1) the buyer must receive a notice of cancellation or demand for rescission; (2) this notice must be by notarial act (notarized document); (3) the seller must have FULLY PAID the cash surrender value to the buyer. Only after ALL three conditions are met AND 30 days have passed does cancellation take effect. If any requirement is missing, the cancellation is void.
- Notice of cancellation must be sent to the buyer
- The notice must be a notarial act (notarized)
- Seller must FULLY PAY the cash surrender value to the buyer
- Cancellation takes effect 30 days AFTER the buyer receives notice
- ALL three requirements must be met. missing any one makes cancellation void
Real-World Scenario
Developer Pacific Heights sends a registered letter to a buyer saying: "Your contract is cancelled effective immediately due to non-payment." The letter is not notarized. The developer has not paid any refund to the buyer. The developer then sells the same unit to a new buyer.
Is the cancellation valid?
CSV Computation at Different Year Marks
“the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made”
What This Means
Here is the full computation table: 2-5 years = 50% refund; Year 6 = 55%; Year 7 = 60%; Year 8 = 65%; Year 9 = 70%; Year 10 = 75%; Year 11 = 80%; Year 12 = 85%; Year 13+ = 90% (cap). The "total payments made" base includes ALL money paid. down payment, reservation fees, deposits, and every monthly installment. The longer the buyer has paid, the more they get back, reflecting the greater equity they have built.
- 2-5 years of payments: 50% refund
- 6 years: 55% | 7 years: 60% | 8 years: 65%
- 9 years: 70% | 10 years: 75% | 11 years: 80%
- 12 years: 85% | 13+ years: 90% (maximum cap)
- Base for computation: ALL payments including down payment, deposits, options
Real-World Scenario
Three buyers in the same subdivision all default. Buyer A paid for exactly 2 years (total: P480,000). Buyer B paid for 5 years (total: P1,200,000). Buyer C paid for 10 years (total: P2,400,000). All contracts are being cancelled.
What is each buyer's Cash Surrender Value?
Frequently Asked Questions
What is the Cash Surrender Value under the Maceda Law?
It is the mandatory refund the seller must pay to the buyer when cancelling a contract where 2+ years of installments have been paid. The base is 50% of total payments made, increasing by 5% per year after 5 years, up to a maximum of 90% (Section 3(b), RA 6552).
Can a developer cancel my contract without paying the Cash Surrender Value?
No. Section 3(b) requires "full payment of the cash surrender value to the buyer" as a condition for valid cancellation. Without payment of the CSV, the cancellation is void and your contract remains in force, regardless of any notices sent.
What is the maximum refund under the Maceda Law?
90% of total payments made. This cap is reached after 13 years of installment payments (50% base + 5% × 8 additional years after Year 5 = 90%). The remaining 10% is effectively the seller's retention for the use of the property or administrative costs.