LAW ON LEASE

LEASE
May be defined as a consensual, bilateral, onerous, and commutative contract by virtue of which one
person binds himself to grant temporarily the use of a thing or to render some service to another who
undertakes to pay some rent, compensation or price.
CHARACTERISTIC OF LEASE
1. Consensual – meeting of the minds = binding;
2. Principal – its existence does not depend upon any other agreement;
3. Nominate – the law provides itself a name;
4. Purpose is to allow enjoyment or use of a thing (the person to enjoy is the lessee: the person
allowing the enjoyment by another is the lessor);
5. Subject matter must be within the commerce of man;
6. Purpose to which the thing will be devoted should not be immoral;
7. Onerous – there must be rent or price certain;
8. Period is temporary (not perpetual, hence, the longest period is 99 years);
9. Period is either definite or definite;
10. Lessor need not be the owner.
LEASE OF THINGS AND LEASE OF SERVICES
In lease of things, one of the parties, binds himself to give to another the enjoyment or use of a thing for
a price certain, and for a period which may be definite or indefinite. However, no lease for more than 99
years shall be valid.
In lease of work or service, one of the parties binds himself to execute a piece of work or to render to
the other some service for a price certain, but the relation of principal and agent does not exist between
them.
LEASE OF SERVICES V. CONTRACT FOR PIECE OF WORK
LEASE OF SERVICES CONTRACT FOR PIECE OF WORK
 Important thing is the work to be  Important thing is the work done
performed by the Lessor  Material matter is the product or the object
 Material matter is the service to be rendered produced by the said work
 Result is generally not important; hence  Result is generally important; generally,
the laborer is entitled to be paid even if there the price is not payable until the work is
is destruction of the work through fortuitous completed, and said price cannot be lawfully
event. demanded if the work is destroyed before it is
finished and accepted.

LEASE OF SERVICES V. AGENCY

LEASE OF SERVICES AGENCY
 It is based on employment – the lessor of  It is based on representation – agent
services does not represent his employer nor represents his principal and enters into judicial
does he execute judicial acts. acts.
 Principal Contract – exist on its own  Preparatory Contract – it is only attached to
the principal agreement

RULES ON LEASE OF CONSUMABLE GOODS

GENERAL RULE: Consumable goods cannot be the subject matter of a contract of lease of things.
RATIONALE: To use or enjoy the, they will have to be consumed. This cannot be done by a lease since
ownership over them is not transferred to him by the contract of lease.
EXCEPTIONS: (1) If they are merely exhibited | (2) If they are accessory to an industrial establishment
LEASE OF REAL PROPERTY
GENERAL RULE: Lease of real property is personal right.0
EXCEPTIONS: Lease partakes of the nature of real right if:
a. Lease of real property is more than 1 year
b. Lease of real property is registered regardless of duration
LEASE OF PERSONAL PROPERTY
Lease of personal property cannot be registered. To be binding against third persons, the parties
must execute a public instrument and must properly be notarized.
PERSONS DISQUALIFIED TO BE LESSEES
Persons referred to in Art. 1491 are disqualified of fiduciary relationships.
A husband and a wife cannot lease to each other their separate properties except:
a. If separation of property was agreed upon;
b. If there has been judicial separation of property
SUBLEASE
This is a separate and distinct contract of lease wherein the original lessee becomes a sublessor to a
sublessee.
GENERAL RULE: Allowed unless expressly prohibited.
 The sublessee is subsidiary liable for any rent due.
 The lessor has an accion directa against the sublessee for unpaid rentals and improper use of the
object.
SUBLEASE V. ASSIGNMENT OF LEASE
SUBLEASE ASSIGNMENT OF LEASE
 There are two leases and two distinct  There is only one juridical relationship, that of
juridical relationships although immediately the lessor and the assignee, who is converted
connected and related to each other into a lessee.
 The lessee does not transmit absolutely  The lessee transmits absolutely his rights to
his rights and obligation to the Sublessee the assignee
 The sublessee, generally, does not have any  The assignee has a direct action against the
direct action against the lessor. lessor

RIGHTS AVAILABE TO THE LESSOR IF THE LESSEE VIOLATES THE STIPULATION AND SUBLEASE TO 3 RD
1. Rescission and Damages
2. Plus Ejectment
Note: Lessor may allow the Sublease to continue but will still subject the Lessee to damages
OBLIGATION OF THE LESSOR
a. Delivery of the object (cannot be waived)
b. Necessary repairs
c. Maintenance in peaceful and adequate possession
OBLIGATION OF THE LESSEE
a. To pay rent
b. To use thing leased as a diligent father of a family, devoting it to the use stipulated
c. To pay expenses for the deed of lease
d. To notify the lessor of usurpation or untoward acts
e. To notify the lessor of need for repairs | f. to return the property leased upon termination of lease.
EFFECT OF LOSS OR DESTRUCTION OF THE THING LEASED
a. Total Destruction by a fortuitous event
 Lease is extinguished
b. Partial Destruction
 Proportional reduction of the rent, or
 Rescission of the Lease
WHEN CAN LESSEE SUSPEND PAYMENT OF RENT
1. If the lessor fails to undertake necessary repairs despite due notification, If the lessor does not
fix the necessary parts of the particular thing, the lessee can suspend the payment.
2. If the lessor fails to maintain the lessee in peaceful and adequate enjoyment of the
property leased.
NOTE: “SUSPEND” – for the intervening period, the lessee does not have to pay the rent.
WHEN IS THE SUSPENSION OF PAYMENT EFFECTIVE
The right begins:
a.) In the case of repairs, from the time he made the demand for said repairs, and the demand went
unheeded.
b.) In the case of eviction, from the time the final judgment for eviction becomes effective.
RULES ON URGENT AND NECESSARY REPAIRS
The lessee is obliged to tolerate the work although it may be very annoying to him and although during the
same time he may be deprived of a part of the premises.
1. If repairs last for less than 40 days: Lessee cannot act for reduction of rent or rescission.
2. If 40 days or more: lessee can ask for proportionate reduction.
Note: In either case, rescission may be availed of if the main purpose is to provide a dwelling place
and the property becomes uninhabitable.
RULES IF LESSOR FAILS TO MAKE NECESSARY REPAIRS
Lessor has the following rights, to wit:
a) Lessee may order repairs at the lessor’s cost
b) Lessee may sue for damages
c) Lessee may suspend the payment of the rent
d) Lessee may ask for rescission, in case of substantial damage to him
Note: Proper Notice for repairs must be given.
GROUNDS FOR THE LESSOR TO JUDICIALLY EJECT THE LESSEE
The lessor may judicially eject the lessee for any of the following causes:
(1) When the period agreed upon, or that which is fixed for the duration of leases under Arts. 1682 and
1687, has expired;
(2) Lack of payment of the price stipulated;
(3) Violation of any of the conditions agreed upon in the contract;
(4) When the lessee devotes the thing leased to any use or service not stipulated which causes the
deterioration thereof; or if he does not observe the requirement in No.2 of Art. 1657, as regards the
use thereof.
Note: The ejectment of tenants of agricultural lands is governed by special laws (Art. 1673)
INSTANCE OF IMMEDIATE TERMINATION OF LEASE
Article 1660. If a dwelling place or any other building intended for human habitation is in such a
condition that its use brings imminent and serious danger to life or health, the lessee may terminate the
lease at once by notifying the lessor, even if at the time the contract was perfected the former knew of the
dangerous condition or waived the right to rescind the lease on account of this condition.
PERIOD OF LEASE
 Lease made for a determinate time or fixed period
 Lease will be for the said period and it ends on the day fixed without need of a demand
 Parties are free to stipulate on the time as long as it does not exceed 99 years
WHEN THERE IS NO FIXED PERIOD OF LEASE – RURAL LANDS
For Rural Lands (Article 1680) it shall be for all the time necessary for the gathering of fruits
which the whole estate may yield in One year or which it may yield once and depending on crops for
harvest or how many will be harvested in a year.
WHEN THERE IS NO FIXED PERIOD OF LEASE – URBAN LANDS
For Urban Lands (Article 1687)
a) If the rent is paid daily: lease is from day to day
b) If rent is paid weekly: lease is from week to week
c) If rent is paid monthly: lease is from month to month
d) If rent is paid yearly: lease is from year to year
RULES ON THE EXTENSION OF LEASE PERIOD
1) If a lease contract for a definite term allows lessee to extend the term, there is no necessity for
lessee to notify lessor of his desire to so extend the term, unless the contrary is stipulated.

Note: Where according to the terms of the contract, the lease can be extended only by the written
consent of the parties thereto, no right of extension can rise without such written consent.

2) “May be extended” as stipulation: lessee can extend without the lessor’s consent but lessee must
notify lessor.
3) “May be extended for 6 years agreed upon by both parties ” as stipulation: This must be interpreted
in favor of the lessee. Hence, ordinarily the lessee at the end of the original period may either:
a. Leave the premises; or
b. Remain in possession
RULES ON THE EXTENSION OF LEASE PERIOD IN CO-OWNERSHIP
In co-ownership, assent of all is needed: otherwise, it is void or ineffective as against non-consenting
co-owners.
RULES IF THE LESSOR OBJECTS TO THE LESSEE’S CONTINUED POSSESSION
Requisites:
1. Contract has expired
2. Lessee continued enjoying the thing
3. Lessor Objected to this enjoyment
Note: If the three requisites are present, the lessee shall be considered a possessor in bad faith.
IMPLIED NEW LEASE (TACITA RECONDUCION)
This is the lease which arises if at the end of the contract the lessee should continue enjoying the thing
leased for 15 days with the acquiescence of the lessor, unless a notice to the contrary had previously been
given by either party.
Requisites:
a. The term of the original contract has expired
b. The lessor has not given the lessee a notice to vacate
 c. The lessee continued enjoying the thing leased for at least fifteen (15) days with the acquiescence
of the lessor
d. That there should have been no express contract entered into by lessor and lessee after the old
contract has ended
No Implied New Lease
1. When before or after the expiration of the term, there is a notice to vacate given by either party.
2. When there is no definite fixed period in the original lease contracts in the case of successive
renewals.
Effects of Implied New Lease
a) The period of the new lease is not that stated in the original contract but the time in Articles 1682
and 1687.
b) Other terms of the original contract are revived.
c) Terms that are revived are only those which are germane to the enjoyment of possession, but not
those with respect to special agreements which are by nature foreign to the right of occupancy or
enjoyment inherent in a contract of lease – such as an option to purchase the leased premises.
RULES IF THE LEASED PROPERTY IS PURCHASED BY ANOTHER
GENERAL RULE: Purchased of thing leased can terminate lease
EXCEPTIONS:
a) Lease is recorded in Registry of Property
b) There is a stipulation in the contract of sale that purchaser shall respect the lease
c) Purchaser knows the existence of the lease
d) Sale is fictitious
e) Sale is made with right of repurchase
RA 9563 – RENT CONTROL ACT OF 2009
RENT CONTROL IN THE PHILIPPINES
Is better known as the Rent Control Act of 2009, is the law that protects housing tenants (especially in the
lower-income class) against unreasonable rent increases. It also provides the eviction rules that both
landlords and tenants must observe.
This rental law in the Philippines covers housing units with a monthly rent of up to PHP 10,000 in Metro
Manila and other highly urbanized cities nationwide. PHP 10,000 above are exempted from the said law.
COVERAGE OF RA 9653
Particularly, the ff rental properties are covered:
 Apartments
 Boarding houses, bedspaces, dormitories, and rooms for rent
 Houses and/or land
AGENCY ASSIGNED FOR RA 9563
(HUDCC) Housing and Urban Development Coordinating Council. is the government agency in charge of
overseeing the implementation of the Philippines’ Rent Control Law or the Republic Act (RA) 9653 or  “An
Act Establishing Reforms in the Regulation of Rent of Certain Residential Units, Providing the Mechanisms
Therefore and For Other Purposes”.
RA 9653 was approved in 2009 and expired on December 31, 2013. Since then, the HUDCC has been
extending the provisions of the Act — and its latest extension is from January 1, 2018 until December 31,
2020.
This means the applicable rules and regulations of the Rent Control Law — its most salient points explained
below — are valid until December 31, 2020.
SALIENT POINTS
 Only Two Months Deposit is Allowed
Owners of residential units cannot demand more than that; anything beyond it is considered illegal.
o In addition, the law requires landlords to deposit said “2 Months Deposit” in a bank under the
lessor’s name. Interestingly, all interest that accumulated and accrued on the deposit shall be
returned to the tenant at the expiration of the rental contract, according to the law.
o The deposit and accrued interest may be used, as allowed by law, to pay the remaining obligations
of the lessee, including unpaid bills on water, electricity, telephone, and other utility bills, or for the
repair of damages and replacement of broken furniture, accessories, or components in the rented
unit.

 Rent to Own Scheme not Included

Rented units which are used as motels, motel rooms, hotels, and hotel rooms are not covered by RA 9653.
o Commercial spaces, including those used for home industries, retail stores, or other business
purposes, if the owner and his or her family actually live therein and use it principally for dwelling
purposes, are also not covered.
o Units under a rent-to-own scheme also do not fall under the Rent Control Act because they are
governed by separate contracts. Typically, in this contract, the landlord may engage the tenant in
a rent-to-own agreement that will allow the transfer of ownership of the rented unit to the
tenant at a later date. This is a separate, binding agreement between the lessor and lessee and, as
such, is exempted from the Rent Control Act.
LIMITS ON INCREASE FOR RENTED PROPERTIES
On an annual basis, the ff increase limits are set forth:
a) Maximum 2% price increase for Houses with Rent below P5,000
b) Maximum 7% price increase for Houses with Rent from P5,000 to P8,999
c) Maximum 11% price increase for Hoses with Rent from P9,000 to P10,000
SALIENT POINTS ON BOARDING HOUSES
As per the Rent Control Law, boarding houses, dormitories, rooms, and bedspaces offered for rent to
students can only increase rents once a year, even if a new boarder occupies the unit within the same
year.
ADDITIONAL GROUNDS FOR EJECTMENT
1. The tenant sub-leases the unit (that is, offers the unit for rent to other renters) without the explicit
written permission or consent of the owner;
2. The renter has three (3) months’ worth of unpaid rent;
3. After the expiration of the rent contract, the owner has a legitimate need to repossess the property
for his/her own use or that of his/her family as a residential unit, provided that the renter was
notified three months in advance;
4. The unit owner needs to make necessary repairs on the unit, which is the subject of an existing
order of condemnation by appropriate authorities, in order to repair the property and to make it
safe and habitable; and
5. The Lease Contract has expired.
PENALTIES FOR VIOLATION OF RENT CONTROL
According to the law, violators of the Rent Control Act face a fine of not less than P25,000 but not more
than P50,000, or imprisonment of one (1) month and one (1) day up to six (6) months, or both.
Penalties are set forth but the law lacks teeth in running after unscrupulous landlords who exploit their
tenants.