Dear PAO,

My employer granted me a housing loan, and the proceeds were used to procure a house and lot. I mortgaged the house and lot to them, and the amortization payments were deducted from my salary. Unfortunately, I was terminated from work, so I failed to make several monthly payments. My former employer is now collecting the remaining balance of my loan. I heard that there is a law giving a buyer a certain grace period to pay the arrears. Would that law apply to my situation?

Wilmaine

Dear Wilmaine,

The law which protects buyers of real estates on an installment basis is Republic Act 6552, otherwise known as the “Realty Installment Buyer Act.” Section 3 of the same law provides that:

“In all transactions or contracts involving the SALE OR FINANCING of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred fortyfour, as amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any.

(b) 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: 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. xxx

The above-mentioned law, however, finds no application to the housing loan which was extended by your employer. The reason for this was discussed in the case of Spouse Sebastian vs. BPI Family Bank, Inc., et al., G.R. No. Q60Q07, October 22, 20Q4, where the Supreme Court, through Chief Justice Lucas P. Bersamin, stated that:

The petitioners’ insistence would have been correct if the monthly amortizations being paid to BPI Family arose from a sale or financing of real estate. In their case, however, the monthly amortizations represented the installment payments of a housing loan that BPI Family had extended to them as an employee’s benefit. The monthly amortizations they were liable for was derived from a loan transaction, not a sale transaction, thereby giving rise to a lender borrower relationship between BPI Family and the petitioners. It bears emphasizing that Republic Act No. 6552 aimed to protect buyers of real estate on installment payments, not borrowers or mortgagors who obtained a housing loan to pay the costs of their purchase of real estate and used the real estate as security for their loan. The “financing of real estate in installment payments” referred to in Section 3, supra, should be construed only as a mode of payment vis-à-vis the seller of the real estate, and excluded the concept of bank financing that was a type of loan. Accordingly, Sections 3, 4 and 5, supra, must be read as to grant certain rights only to defaulting buyers of real estate on installment, which rights are properly demandable only against the seller of real estate.

Applying the above-quoted decision to your situation, the Realty Installment Buyer Act clearly applies to the sale or financing of real property and not to a loan transaction like the housing loan you availed from your employer. Stated otherwise, the said law protects a buyer of real estate on an installment basis; not a borrower or mortgagor.

We hope that we were able to answer your queries. This advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated on.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net