My mother has been trying to sell her condo unit beside ours for the past few months and there have been several inquiries but no serious buyers, until recently when I met with a newly married couple who had to move out ASAP from their rented place.
The couple liked the unit and requested that I furnish them a copy of the condo title to facilitate their bank loan. However, the bank would only loan them 80% of the assessed value, so they requested if they could just turn over the loan proceeds to my mother and then pay off the 20% directly to her through installment.
I said that this was not possible because the only way that the bank would release the loan was if the title was turned over to the couple and the property mortgaged to the bank, no way would my mom agree to the transfer of ownership if the property has not been fully paid. I mean really, who would agree to that right?
To make a long story short, I presented them with an agreement where they will pay off the 20% through monthly payments for a period of three years. And after three years, then they can apply for the loan and the unit will be theirs once the 80% is released. It was a straightforward and modified rent-to-own arrangement which I thought benefited all the parties because they could immediately move in once the agreement was inked and my mother will finally earn some cash with this property.
The basic terms were that the couple would issue 33 post-dated-checks and give 3 months worth of rent as security (1 month advance and 2 months deposit).
Now this was where the problem began.
They wanted to issue 12 PDCs yearly as they said they would be using their mother's checking account because they didn't have time to open their own account. Being Little Ms. Helpful, I told them that it was easy to open a checking account and that the BDO branch near both of us was open 7 days a week so they could easily open their checking account there.
But then they said that their mother advised them to only issue 12 PDCs because they might already be able to apply for a loan after 1 year. To which I responded that if that was the case then we would gladly return the uncashed PDCs to them.
Still they persisted because as it turned out, it was their mother who would be paying for the unit using her own checks. By then I was incredulous, because why would they tender checks from another person if they were going to be the ones to sign the contract? Wasn't it SOP that whoever signs the contract would also be the one to issue the checks?
I asked them why they couldn't issue their own PDCs, to which they answered "Kasi nga po mother namin ang magbabayad". I clarified my question and asked: Bakit hindi niyo magawa magbukas ng checking account? Bakit nakikihiram pa kayo ng cheke?
And they replied the same way: Kasi nga po mother namin ang magbabayad.
Suffice to say, the sale didn't push through and in their last text they accused me of not trusting them even if we still had the title in our possession. To which I answered that if they cannot even comply with issuing PDCs from their own account, which frankly was the simplest requirement, then "nakakawalang-tiwala talaga". I actually had an "as an adult you should be responsible enough to have your own checking account" speech ready, but let it go.
This then had me thinking about why PDCs had to be issued by the buyers themselves, as in this case. I know that this is the SOP in sales by installment, but what's the primary reason behind this? It can't be as evidence for a case under the bouncing checks law (B.P. 22), because the mere act of issuing a bounced check is already enough evidence, with knowledge of insufficiency of funds at the time of issuance presumed.
My conclusion was that it's for the seller's convenience. If the buyer fails to pay several monthly amortizations in succession then the contract will be easy to cancel, with the checks issued from the buyer's account entered into evidence as proof of default. But if two separate people sign the contract and issue the checks respectively, then that would be a more complicated affair necessitating additional evidence linking the two together (like why would Person B agree to shoulder Person A's obligation if Person B had no interest in the obligation). I'm not fully convinced with my conclusion though and if anybody out there has a simpler explanation then I'll be very grateful.
Congratulations to you if you read through the end of this lengthy post!