FAQ on Real Estate Lease

What is a Lease?
A lease is a contract whereby one of the parties binds himself to give another the enjoyment or use of a thing for a price certain, and for a price certain, and for a period which may be definite or indefinite. However, the New Civil Code (NCC) provides that no lease for more than 99 years shall be valid.

What are the legal implications of a Lease?
  • § Unless a lease is recorded, it shall not be binding upon third persons
  • § The lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary
  • § Where there is no express prohibition, the lessee may sublet the property leased, in whole or on part, without prejudice to his responsibility for the performances of the toward the lessor
The contract of lease is silent as to the rights of the lessee to assign or sublease. Can lessee assign or sublease without the consent of the lessor?
Lessee cannot assign the lease without the consent of the lessor. In case of sublease he can do so even without the consent of the lessor as long as the terms of the contract is silent on it or it was not prohibited in the lease contract.

What is sublease?
It is the lease by the lessee of a thing leased by him. The personality of the original lease is not ended. He remains to be a party to the contract of lease and continues to be directly responsible to the lessor.

What is assignment of lease?
  • § The original lessee assigns the unexpired term of his lease contract to another.
  • § The personality of the original lease is extinguished.
  • § The parties to the contract now become the lessor and the assignee.
How long is the duration of a lease and when is it terminated?
  • § As stipulated in the contract, or
  • § If there is no stipulation in the contract, it will depend on the rental period, if the rental is payable monthly, the lease is from month to month. If it is payable yearly, it is from year to year.
May the purchaser of a property that is a subject of lease terminate the lease?
Yes, when:
  • § the lease is not registered
  • § the purchaser has no actual knowledge of the lease
  • § there is no contrary stipulation to that effect in the contract of sale
What are the instances that the purchaser of a property subject of lease cannot terminate the lease?
  • § When the lease is recorded in the Register of Deeds
  • § When there is a stipulation in the contract of sale that the purchaser shall respect the lease
  • § When the sale is a “pacto de retro” sale
If there is no stipulation as to the duration of a lease, when will it terminate?
  • § Rural land- the lease of a piece of rural land, when the duration has not been fixed, is understood to have been made for all the time necessary for the gathering of the fruits which the whole estate lease may yield in one year, or which it may yield once, although two or more years may have to elapse for the purposes.
  • § Urban property- if the period for the lease has not been fixed, its understood to be from year to year, if the rent agreed upon is annual; from month to month, if it is monthly; from week to week, if the rent is weekly, and from day to day, if the rent is paid daily.
  • § However, even though a monthly rent is paid, and no period for the lease has been set, the courts may fix a longer term for the lease after the lease has occupied the premises for over one year. If the rent is weekly, the court may likewise determine a longer period after the lessee has been in possession for over six (6) months. In case of daily rent, the courts may also fix a longer period after the lessee has stayed in the place for over one month.
What happens when the lessee continues occupying a property fifteen (15) days after the lease has expired, without notice to vacate?
He is still the lessee there being a tacit renewal (tacita reconduccion), or implied new release, not for the period of the original contract, but for the time established, above (i.e), novation for one (1) month if rental is payable monthly, for one year, if rental is payable yearly, etc.
The contract of lease of Mario expired last Dec. 31, 1995 but he continues to occupy the property up to Jan. 20 1996. May Mario consider himself still a lessee?
  • § It depends, if within 15 days after the expiration of the lease, Mario has not received from the lessor a notice to vacate, then he is still a lessee. His contract of lease is deemed renewed, for one year or one month as the case may be.
  • § However, if within 15 days after the expiration of the lease, Mario was notified by the lessor to vacate, and still continue occupying the property, he becomes an illegal occupant.
What are the obligations of the lessor?
  • § To deliver the thing which is the object of the contract in such condition as to render it fit for the use intended
  • § To make on the same during the lease period all the necessary repairs in order to keep it suitable for the use to which it has been devoted, unless there is stipulation to the country
  • § To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract
What are the obligations of the lessee?
  • § To pay the price of the lease according to the terms stipulated
  • § To use the thing leases as a diligent father of a family devoting it to the use stipulated; and in the absence of stipulation, to that which may be inferred from the nature of the thing leased, according to the customs of the place
  • § To pay the expenses for the deed of lease
What is the right of the lease if the purchaser having the right to terminate does so?
  • § Demand that he is allowed to gather the fruits of the harvest
  • § Ask the vendor to indemnify him for damages suffered
Supposed the lessor makes a fictitious sale of the property in order to terminate the lease, can the purchaser make use of the right to terminate the lease?
No. The sale is presumed fictitious if at the time the supposed vendee demands the termination of the lease, the sale is not registered.
When can the purchaser in a Pacto de Retro Sale make use of the power to eject the lessee?
The purchaser in a Pacto de Retro Sale can make use of the power to eject the lessee upon the expiration of the period of redemption.
What are the different instances where the purchaser of the thing leased cannot terminate the lease?
  • § Where the lease is recorded in the Registry of Property
  • § Where there is stipulation in the contact of sale that the purchaser shall respect the lease
  • § Where the purchaser knows the existence of the lease
  • § Where the sale is fictitious
  • § Where the sale is made with right of repurchase
What are the grounds for which the lessor may judicially eject the lessee?
  • § When the period agreed upon, or that which is fixed by law or the court has expired
  • § Lack of payment of the price stipulated
  • § Violations of any of the conditions agreed upon in the contract
  • § When the lessee devotes the thing leased to any use or services not stipulated which causes deterioration thereof; or if he does not observe the requirement of due diligence as regards the use thereof
How does a lease end?
  • § If there is no day fixed upon demand
  • § If there is day fixed (conventionally or by law as in a month-to-month lease because of monthly rentals) on arrival of said day-without need of any demand
May an alien (individual, corporation or association) be a lessee of real estate property?
Under the new Civil Code ruling, the period of lease is allowed up to 99 years. P.D.471 however, has limited the period to 25 years only renewable for another 25 years.

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