Tax on Rent Income

Income from rent is categorized under passive income and is therefore subject to 20% tax. As BIR becomes aggressive on taxing passive income, even to the point of checking the bank accounts of people, rents nationwide will surely increase. Heads up: massive inflation is inevitable.

Think about this. Real estate lease agents only take 8% commission, while BIR takes 20% tax. Ridiculous.

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If there is anything else important that I forgot to include in this article, or if you experienced a real estate transaction that is anomalous, scam, fraudulent scheme that you want me to document and expose for others to be warned, or if you want to donate to the war chest of real estate consumer rights advocacy, please feel free to email me at JohnPetalcorin@Gmail.Com. If you want to comment about this article, there is a provision for this purpose that you can find below.
Thank you so much for visiting my site. May God Bless You!

A Law Exempting Homeowners Association from All Taxes

QUESTION: Rltr John, this is about Bureau of Internal Revenue (BIR) Revenue Memorandum Circular (RMC) No. 65-2012. Is there a law that we can cite as reference to debunk the BIR ruling that imposes VAT on Association Dues?

ANSWER: Oh yes there is.

Section 18 of the Magna Carta for Homeowners and Homeowners’ Associations (Republic Act 9904) of January 7, 2010, says: "Where the LGUs lack resources to provide for basic services, the associations shall endeavor to tap the means to provide for the same. In recognition of the associations’ efforts to assist the LGUs III providing such basic services, association dues and income derived from rentals of their facilities shall be tax - exempt: Provided, That such income and dues shall be used for the cleanliness, safety, security and other basic services needed by the members, including the maintenance of the facilities of their respective subdivisions or villages."

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So if your HA (including Condominium Corporation) wants to be exempt from that VAT on Association Dues, you get it registered in Housing and Land Use Regulatory Board (HLURB) as a Non-Stock Non-Profit Corporation.

Just a piece of offer, HA administration, real estate ownership, leasing, and selling are most of the time complicated. Your HA can get me as common consultant at very cheap retainer basis; so that in any moment your HA or your members need advice on any real estate issues, just have them ring me up.

As lead convenor of the Integrated Professional Organization of Real Estate Practitioners (IPORESP), I would like to encourage the Homeowners Association to maximize your voice in the real estate sector and expand your connections with the real estate professionals by registering (for FREE) to IPORESP. Homeowners Association are part of the IPORESP organizational structure, and in fact, the HAs have their own Cluster (refer to IPORESP By-Laws). If you have any question on this, please ask me.

As founder of the Realter Society, I would like to inform everyone that HA Administrators can avail of the right to use the Rltr (Realter) professional title by registering in Realter Society. HA administrators include those who manage the Administration of condominium and subdivision homeowners associations; General Managers of hotels, resorts, and Golf and Country Clubs; including Property Managers and court-appointed Estate Administrators. If you have question on this, please ask me.

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Adirondack Chairs is best for poolsides.

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I dedicate this blog to Kate, Alyssa, and Jessa, PUP students in Accountancy who are conducting a group thesis research on Value Added Tax on Homeowners Associations.

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UPDATE. June 2014. MANILA, Philippines - The Court of Tax Appeals (CTA) has ruled that condominium or association dues as well as other fees collected from unit owners are not subject to income tax and withholding tax. Read more at
http://www.philstar.com/headlines/2014/06/23/1337973/condo-dues-not-subject-tax-court

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If there is anything else important that I forgot to include in this article, or if you experienced a real estate transaction that is anomalous, scam, fraudulent scheme that you want me to document and expose for others to be warned, or if you want to donate to the war chest of real estate consumer rights advocacy, please feel free to email me at JohnPetalcorin@Gmail.Com. If you want to comment about this article, there is a provision for this purpose that you can find below.
Thank you so much for visiting my site. May God Bless You!

P20,000/month is the benchmark 2 bed leasing in Metro Manila

QUESTION: Rltr John, I am planning to buy a condo unit as an investment so I can rent it out. What is the maximum rent for a 2 bedroom condo unit that I plan to buy at P4 Million? What is the expected ROI?

ANSWER: Check out the best alternative from the point of view of the renter/lessee. The benchmark in terms of price and quality would be whatever hotel can provide the cheapest yet quality service. If you are renting out a unit with two good beds with free Wifi and services, it cannot be higher than P20,000 nowadays. Any 2 bed unit with renting price higher than P20,000 would make the person think it is better to stay in Go Hotel at less than P20,000 a month.

Assuming you have zero operations cost, your annual ROI would be no higher than six percent (6%) if you buy a 2 bedroom unit at P4Million and have monthly rent income of P20,000. You are most fortunate if you can buy a 2 bedroom at P4 Million and also lucky if you can easily find a tenant and get your unit occupied the entire year.

That's why I was saying, for "investment" purpose wherein you want real cash flow, I would recommend you buy only a studio-type in school or business district area that is no more than P1.4 Million cash price (ask me if you want an example). Anything bigger than that would not be a good "investment" in terms of value. If you buy a unit proximate to isolated gambling places and far from the regular business and school district, you are done, investment down the drain!

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If there is anything else important that I forgot to include in this article, or if you experienced a real estate transaction that is anomalous, scam, fraudulent scheme that you want me to document and expose for others to be warned, or if you want to donate to the war chest of real estate consumer rights advocacy, please feel free to email me at JohnPetalcorin@Gmail.Com. If you want to comment about this article, there is a provision for this purpose that you can find below.
Thank you so much for visiting my site. May God Bless You!

Condo assoc fee is not part of rent

QUESTION: Rltr. John, I am offering my condo unit for rent. I am confused on my asking price. Should the asking price include the condo homeowners association fees?

ANSWER: The condo homeowners association is not part of the rent and should not be part of the asking price when you offer the unit for rent. The tenant, mandatory, pays it separately from the rent. The association fee is a payment for the tenant to enjoy the security, amenities, and janitorial services of the environment of the unit. Let me say it in simple logic. Only your unit is for rent. You cannot rent out the common areas. You cannot make money in renting out the common areas. So, that's why assoc fees are not part of the asking rent. Okay?

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If there is anything else important that I forgot to include in this article, or if you experienced a real estate transaction that is anomalous, scam, fraudulent scheme that you want me to document and expose for others to be warned, or if you want to donate to the war chest of real estate consumer rights advocacy, please feel free to email me at JohnPetalcorin@Gmail.Com. If you want to comment about this article, there is a provision for this purpose that you can find below.
Thank you so much for visiting my site. May God Bless You!

Is a condo property manager required to have PRC license as Real Estate Broker

QUESTION: Rltr. John, is a Property Manager of a condominium required to have a PRC license as a Real Estate Broker?

ANSWER: It depends on the operations of the person. If the person operates as mere Administrator of the Homeowners Association, then there is no need for him/her to get Real Estate Broker PRC license. The appropriate designation or title of persons operating under this category would be Building Administrator, or Condominium Administrator, or Homeowners Association Administrator, but they must avoid using the designation or title Property Manager.

A person who carries the designation or title of Property Manager operates as a caretaker or leasing agent of individual condo unit in exchange for a professional fee or any form of remuneration of personal services. In order to operate legally as a an independent service provider, a Property Manager must get a PRC license as a Real Estate Broker, or he/she can attach as Salesperson under the license of the Broker. The provisions, responsibilities, and obligations between the unit owner and property manager is forged by a Property Management Agreement, or Lease Agency Agreement, or a Special-Power-of-Attorney.

If the person is only a caretaker, whether a family relative of not, who is given access to the unit and authority to lease it out without any kind of compensation, then a simple Special Power-of-Attorney that would work perfectly fine; as long as it is written in the SPA that there is no compensation for the SPA-holder. Voluntary SPAs are considered extension of the principals and exempted from the requirement for licensing in PRC.

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IMPORTANT NOTICE: CONDO owners and tenants must read http://petalcorin.blogspot.com/2013/07/a-law-exempting-homeowners-association.html.

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If there is anything else important that I forgot to include in this article, or if you experienced a real estate transaction that is anomalous, scam, fraudulent scheme that you want me to document and expose for others to be warned, or if you want to donate to the war chest of real estate consumer rights advocacy, please feel free to email me at JohnPetalcorin@Gmail.Com. If you want to comment about this article, there is a provision for this purpose that you can find below.
Thank you so much for visiting my site. May God Bless You!

Who burdens VAT of homeowners association dues?

QUESTION: Rltr. John, The Bureau of Internal Revenue (BIR) has just released Revenue Memorandum Circular (RMC) No. 65-2012 which says association dues, membership fees, and other assessments/charges collected by condominium corporations are subject to VAT. Is the BIR correct? Who should pay the VAT?
ANSWER: Yes, the BIR is correct. Homeowners Association dues have VAT because there are "services" rendered in exchange of the due. Services in Association Dues includes homeowners administration, maintenance of common areas, and private security services. But who pays the VAT?
VAT is a type of tax that can be passed on the bottom line user of the VATable product or service, unless there is a prior agreement that someone else will. If the occupant of the condo unit is the owner of the unit, then the owner shoulders the VAT.
If the unit is on rent under a correct lease offer and contract, then the tenant pays the VAT. However, if the unit is rented out with a lease offer and contract is wrongly made, then the owner of the property pays the VAT. I taught this clearly in my blog titled, "Professional Real Estate Management Service (PREMS)".

WRONGLY MADE LEASE OFFER

A wrongly made lease offer and contract is one wherein the rent includes association dues. This happens when the price of the rent being offered includes association dues. Example: "Condo for Rent. Makati. P30,000 incl Assn Dues". Again, if the unit is rented out with a lease offer and contract is wrongly made, then the owner of the property shoulders the VAT, not the tenant.

Lahat na tax pahirap talaga yan. Pero meron namn yang return sa society, especially in the production of public goods and services. Hindi ang homeowners association ang pinahirapan ng VAT on HA Dues, kundi ang homeowner or ang tenant.

Ang condo na walang maayos na PMO or HA ay marumi, hindi secured, maraming kalat sa hallway.

In taxation theory and practice, when you say VAT, all kinds of VAT, pinapasa talaga ang burden nyan sa user ng product or service. VAT is an application of Economics. I finished BS Economics in UP.

The Association merely "remits" VAT to BIR. The Association charges VAT to the burden of the homeowner.

TAX EXEMPTION

If they want Homeowners Associations to be Tax Exempt, I can help, I have an "idea" that is worth a million pesos (but like a missionary in hell, I won't even get paid a single centavo). Argue on grounds of...... tantarantantannnnn.... "SELF-HELP", just like the CONSLA argument. If a group of people are pooling their money for a self-help endeavor, it can be tax exempt.

When the Association pays the Private Company for the security and janitorial services, the Association pays VAT. Any procurement or acquisition done by the Association is not VAT exempt. But when the members of the Association contributes membership fee or association dues, there should be no VAT on it because it is an internal fund-raising activity, a self-help mechanism of members, no service rendered.

If the Association is a service contractor and the private security and janitorial company is a sub-contractor, then the Association Due is VATable. But I doubt if the Association is classified as a service provider or service contractor. It looks like the BIR is wrong. Hmmmmm, I'll study this more.

By the way, for everone's information, Homeowners Associations (HA) is one of the integral cluster of the IPORESP. They have a cluster of their own. Their Presidents and Chief Administrators can be a member of IPORESP. This is per IPORESP By-Laws. This is the reason why we care for matters that affect Homeowners Associations.

HAs are exempt from taxes. You must also read http://petalcorin.blogspot.com/2013/07/a-law-exempting-homeowners-association.html.

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If there is anything else important that I forgot to include in this article, or if you experienced a real estate transaction that is anomalous, scam, fraudulent scheme that you want me to document and expose for others to be warned, or if you want to donate to the war chest of real estate consumer rights advocacy, please feel free to email me at JohnPetalcorin@Gmail.Com. If you want to comment about this article, there is a provision for this purpose that you can find below.
Thank you so much for visiting my site. May God Bless You!

Professional Real Estate Street-level Search (PRESS)

Professional Real Estate Street-Level Search

As a seasoned broker, I attest that the listings being advertised in classified ads, internet, and clandestine multiple listings are not sufficient to find the best or ideal property that the client is looking for. Street-level Search is still the best way to find it.

In the past, if we (brokers) can't find a listing in the internet that fits the demand of the client, we normally just forego the client. As we become seasoned, we realize that service must go beyond the convenience of the computers. To meet the demand of the Clients, I developed this customized search service for entities (individuals persons or companies) who are looking for residential, commercial space for rent, and industrial spaces to buy or lease in Metro Manila. The workload of this service involves actual search on the street level. Below is the workflow and output of the services:

1. Client sets an appointment for a meeting in the office of the broker by email.

2. Client will be assisted by Broker in writing the desired specifications (type of building, budget, floor area, facade, frontage, parking area, foot traffic, utilities, amenities, etc.) of the property to search for. A map will be used for the client to identify the area he/she want the search to cover. The Client will sign an authorization that will allow the broker to send an Intend to Buy/Lease to possible properties that will be found.

3. Broker deploys the Field Researcher (spotter) on motorbike to check the search area and look for properties that more or less qualify the specification of Client. The Spotter will take pictures of the property,  take down descriptive notes, and will hand over the Broker's Letter of Intent to Buy/Lease to the owner, manager, administrator, or c/o the security guard of the property on site. Owners or Agents of the spotted properties are given instruction to respond to the broker with an Offer to Sell/Lease.

4. The broker will send (by door-to-door courier) the individual Property Folder of the offers to the Client.

5. The Client may get the optional service of the broker to negotiate the acquisition/lease, or may deal directly with the Offerer.

SERVICE FEES

Field Research Service Fee (payment goes to the Field Researcher to be deployed by the Broker)- P2,000 per day which can already cover both sides of around ten to fifteen kilometer road(s)/street(s), or P2,000 per 2-4 Square Kilometer Search Range in areas with high concentration of streets. Additional reasonable fee will be charged to cover the actual operations cost for searches outside Metro Manila.

Initial Contact, solicitation of offers, and Property Folder Preparation (paid to the broker) - P2,000 per Folder.

Negotiation of acquisition or lease (optional service of the Broker) - 5% of the Total Acquisition Price (for Buying) or amount equivalent ot One Month Rent (for Leasing). This fee may be negotiated and agreed by and between the three parties (Broker-Buyer-Seller or Broker-Lessor-Lessee) as already part of the Total Contract Price, just like a broker’s Commission.


CONTACT PERSON
Rltr. John R. Petalcorin
Real Estate Broker Lic# 0010105
1504 Cityland Vitocruz Tower 2
#720 P. Ocampo Street, Malate, Manila PH
Cellphone: 0921-7172040 / Email: JohnPetalcorin@Gmail.Com

Official Receipt versus Acknowledgement Receipt in Leasing

QUESTION: Sir John, can you tell us when to issue and when not to issue Official Receipt?

ANSWER: There are two kinds of receipts. One is Official Receipt, and the other is Acknowledgement Receipt. Official Receipt is for BIR purposes. If your client pays you your earnings such as Professional Fee, Service Fee, or Commission, you use the Official Receipt.

On the other hand, Acknowledgement Receipt is for Non-BIR purposes, it is just a paper trail of the movement of paper, thing, offer, notice, information, or money or whatever anything that exists na pinasa sayo. When anyone gives you a document, or money on fiduciary account, you use Acknowledgement Receipt. Acknowledgement Receipt can be a rubber stamp on the document or just your simple hand-writing on a piece of paper that you give to the one who gives you the document or money as a proof that you received something.

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QUESTION: Sir John, I am property manager of a house and lot. It is being leased now to a tenant. Should I issue Official Receipt to the lease payments?

ANSWER: You only issue Official Receipt to lease payments if it is a SUB-LEASE case. A Sub-Lease is when the owner of the property leases the property to you and you in turn sub-lease it to someone else for profit. If it is a sub-lease, you issue Official Receipt.

On the other hand, a simple Property Management is not a sub-lease case. All payments of the tenant merely may only pass through you, but not paid to you because the payment is for the property owner. In this case, you issue Acknowledgement Receipt to the tenant, and you make sure that you have documents to prove that the payment is received by the owner of the property. In Property Management, it is the owner of the property who is obliged to issue Official Receipt, kapag wala siyang Official Receipt, problema nya yan.

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Of course the Acknowledgement Receipt can be monitored by anyone, including client, customers, BIR, or literally anyone. My point is, DO NOT USE OFFICIAL RECEIPT if the payment is not for your earnings, otherwise mabulabog ang accounting mo nyan.

You don't put lease payments under CASH. The payment is not for you, you are just a collector, you hand it over to the owner or deposit it on his bank account within the prescribed period specified by the owner. If this is too complex for you to understand, then tell the tenant to pay directly to the bank account of the Owner.

Lets say ang Lease ay P50,000. Ang commission mo P5,000. Pag mag-bayad ang Tenant sa bank account ng Owner P50,000. You bill the Owner the P5,000, bigyan mo Official Receipt ang Owner. Remember, ang client mo, ang magbabayad ng services mo, ang Owner, hindi ang Tenant.

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PILFERAGE is when Tenant pays P50,000 at ikaw ang binigyan ng pera, tapos binulsa mo ang P5,000 commission mo at ang dineposit mo sa banko ng Owner ay P45,000 lang. Pag ganyan ang arrangement ninyo ng Owner, ang tawag dyan ay Pilferage with Consent. Magulo yang Pilferage kasi ang Acknowldgement Receipt na makukuha mo sa Banko sa dineposit mo ay P45,000 lang so pag binigay mo yang A/R na P45,000 lang sa Tenant magkaka-problema ka nyan.

Rules on Improvements on Leased Properties

QUESTION: Sir John, upon termination of the lease, what are the rules relative to the improvements introduced by the lessee?

ANSWER: Below are the rules:

(1) If the improvements are useful and suitable for the purpose of the lease, the lessor shall pay the lessee one half (1/2) of the value of the improvements. If the lessor is not willing to reimburse said amount, the lessee may or may not remove the improvements as long as the original premises of the property, on which the improvement is attached to, will not suffer damages.

(2) If the improvement is merely ornamental (not permanent), the lessee is not entitled to any reimbursement. But he may remove it provided no damage is caused to the principal thing and the lessor does not choose to retain it by paying its value. If there are damages, the lessor may compel the lessee to pay for the restoration.

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QUESTION: Sir John, how is property improvement treated at termination of lease contract? Mr. Bernardo, the owner of the residential house in Quezon City, leased the property to Mr. Cruz, lessee, for ten (10) years. There was no stipulation between the parties as to improvements. The property had a driveway for cars but it had no garage. Mr. Cruz built a garage. What is the legal nature of the garage as an improvement?

ANSWER: The garage is useful improvement. It must be observed that it is suitable to the use for which the lease is intended, considering the fact that there is a driveway for cars. Besides, it has enhanced the utility of the property.

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QUESTION: Can Mr. Bernardo retain the garage after the expiration of the lease?

ANSWER: YES. Mr. Bernardo can retain the garage after the expiration of the lease, provided that he shall pay one half of its value at that time.

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QUESTION: Can Mr. Bernardo require Mr. Cruz to remove the garage after the expiration of the lease?

ANSWER: Mr. Bernardo cannot require or compel Mr. Cruz to remove the garage after the expiration of the lease.

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QUESTION: How would lessor/lessee disputes are to be avoided?

ANSWER: The lessee should always ask permission from the lessor before introducing any improvement on the property. Absentee lessors are advised to get a Property Manager (Real Estate Broker) who have full-time to monitor the property and attend to the lessee's requests.

Laws Protecting the Tenant from Rent Increase

Under Pres. Decree No.20, there are different limitations imposed upon the lessor in order to protect the lessee, such as:

(1) No lessor shall increase the rental as agreed upon;

(2) No lessor may demand a deposit, for any purpose of any amount in excess of two month rental in advance; and

(3) No lessor may judicially eject the lessee when the period which is fixed for the duration of the leases under Arts. 1682 and 1687 of the Civil Code has expired (Secs. 1,2 & 3, PD 20).

Grounds of Ejection of Tenant or Lessee

Batas Pambansa Bilang #25 provides six (6) grounds for judicial ejectment of lessees or tenants with monthly rentals not exceeding P300 as follows:

(1) Need of the lessor to make necessary repairs of the leased premises, provided, that after the said repair, the lessee ejected shall have the right of first refusal of the lease of the premises

(2) Expiration of the period of a written lease contract

(3) Arrears in the payment of rent for three (3) months at any one time

(4) Subleasing or assignment of lease without the written consent of the lessor

(5) Ownership by the lessee of another residential unit which he may use as his residence

(6) Need of owner to repossess his property for his own use, or for the use of any immediate member of his family as a residential unit, such owner or immediate member not being the owner of any other available residential unit

The importance of holdover clause

QUESTION: Sir John, I am a licensed real estate broker. A landowner signed up a broker listing agreement with me at 5% commission. The agreement expires in 1 year. Will I be entitled to the commission if the sale is consummated after the listing agreement expires?

ANSWER: Yes, if there is a HOLDOVER CLAUSE in the listing agreement. The clause is usually written in the manner below:

"This Listing Brokerage Contract expires after one year from the date of issuance. Should the sale be consummated after the expiration of this contract, the broker is still entitled to the commission provided the buyer or the buyer's representative is registered as a sales lead in writing to the attention and information of the seller on or before the expiration date of this Listing Brokerage Contract."


HOLDOVER CLAUSE- A provision in a listing agreement which entitles the broker to commission even when the sale was closed after the period of the authority provided that the buyer was registered by him with the seller and with whom he has negotiated during the period of his authority.

Holdover Clause may also be applied in lease contracts wherein this provision determines what happens when the tenant remains beyond the expiration of the lease. Example: after the expiration of lease, the landlord serves an eviction notice to the tenant, but the tenant was given an option to remain provided that the tenant will pay a certain amount per period based on the predetermined holdover clause of the lease contract.

Real Estate Lease Contract [Sample]

RESIDENTIAL LEASE CONTRACT

KNOW ALL MEN BY THESE PRESENTS:

This CONTRACT OF LEASE, made and executed in Marikina City, Philippines, by ANDRES BONIFACIO, of legal age, postal address at #5 Saturn St., Rancho 5 Concepcion Dos Marikina City; hereinafter called the LESSOR,

--and—

JOSE RIZAL, of legal age, married to JACK AGUINALDO RIZAL, Filipino citizen, and with residence and postal address at #69 Mango St., Villa Baha Subd, Brgy Trilala, Marikina City; hereinafter called the LESSEE,

WITNESSETH: THAT—

WHEREAS, the LESSOR is the absolute owner of real property located at #69 Mango St., Villa Baha Subd, Brgy Trilala, Marikina City.

WHEREAS, the LESSEE desires to lease the above-mentioned premises and the LESSOR is willing to lease the same to the LESSEE subject to the terms and conditions set forth herein below.

NOW, THEREFORE, for and in consideration of the foregoing, the LESSOR has let and leased to the LESSEE the subject real property, and the LESSEE hereby accepts the same by way of lease, according to the following terms and conditions:

LEASE TERM AND RENT

• TERM OF LEASE. This Lease Contract shall be for a period of ONE YEAR, commencing from 01 OCTOBER 2009 to 30 SEPTEMBER 2010.
• RENT. The rental of the leased premises throughout the period of lease shall be TWENTY THOUSAND PESOS (PhP20,000.00) per month payable on every 1ST day of the month.
• Furthermore, upon signing of this Lease Contract, the LESSEE agrees to pay the LESSOR the sum of FORTYTWO THOUSAND PESOS (PhP60,000.00) to be applied as DEPOSIT and ADVANCE RENT.
• DEPOSIT. The sum of FORTY THOUSAND PESOS (PhP40,000.00) shall be deemed as the DEPOSIT which shall be held by the LESSOR, to be refunded without interest only after the expiration of this Lease Contract. Such deposit may be applied to damages incurred in the leased premises through the fault or negligence of the LESSEE, members of the LESSE’S household, and/or guests. At the option of the LESSOR, any such damages shall be deducted from this deposit, and the balance if any shall be refunded to the LESSEE, normal wear exempted.
• ADVANCE RENT. The sum of TWENTY THOUSAND PESOS (PhP 20,000.00) shall be applied as rental or payments for ONE MONTH of the term of this contract to commence on 01 OCTOBER 2009.

USE AND MAINTENANCE OF LEASED PREMISES

• USE AND OCCUPANCY OF THE LEASED PREMISES. The leased premises shall be used by the LESSEE for residential purposes only. Occupancy of the leased premises shall be limited to the LESSEE, the LESSEE’S family, and their domestic help, such as drivers and servants.
• MAINTENANCE AND UTILITIES. Payment of all utility bills (such as water, electric, telephone, cable TV, association dues) and other normal maintenance costs of the leased premises (such as gardening plants, grass, hedges, as well as all other landscape maintenance shall be for the account of the LESSEE.
• SANITATION AND REPAIRS. The LESSEE shall keep the leased premises in a clean and in sanitary condition. The LESSEE is responsible in ensuring that the leased premises continue to be in good and tenantable condition. The LESSOR shall be responsible for all major repairs to be made on the premises, provided that the LESSEE must notify the LESSOR of such at least two (2) weeks in advance, specifying and describing such major repairs to be made on the water, electrical, and sewage installations caused by ordinary wear and tear, except repairs that are due to the fault or negligence of the LESSEE, members of the LESSEE’s household, guests, visitors, or pets. Minor repairs shall be for the account of the LESSEE. “Major Repairs” are those repairs costing more than TWO THOUSAND EIGHT HUNDRED PESOS (PhP2,800.00); while “Minor Repairs” are those repairs costing TWO THOUSAND EIGHT HUNDRED PESOS (PhP 2,800.00) or less per item of repair in question.
• FIRE HAZARDS AND OBNOXIOUS SUBSTANCES. The LESSEE shall not keep, deposit, or store in the leased premises any obnoxious substances, highly flammable materials, or other substance that may constitute a fire hazard.
• CONDITION AND INSPECTION OF LEASED PREMISES. The LESSEE shall maintain the leased premises in good and tenantable condition and for these purpose, the LESSOR reserves the right at reasonable times to enter and inspect the premises and to make any necessary repairs during such time. The LESSEE likewise agrees to cooperate with the LESSOR in keeping the leased premises in good and tenantable condition. The LESSOR must give five (5) days advance notice to the LESSEE through the telephone or a written note before each inspection.
• IMPROVEMENTS. The LESSEE accepts the property in as-is basis. The LESSEE may install air-conditioning units and other movable furnishings, appliances, and decorative items within the leased premises. The LESSEE shall take care of the removal of these items and shall not cause any damage to the leased premises, otherwise, the LESSOR may charge any such damages to the LESSEE. The LESSEE shall not make any major structural changes, alterations, or improvements to the leased premises without the written consent of the LESSOR. Furthermore, any and all major alterations or improvements made or introduced by the LESSEE in the leased premises shall, upon the termination of this Lease Contract, automatically become part of the structure of the leased premises and become the property of the LESSOR without any obligation on the LESSOR’s part to refund its value or cost to the LESSEE.

TRANSACTION, PAYMENT, OCCUPANTS RECORDATION

• The LESSOR shall keep a record of all transactions and payments. The LESSEE may view the records. The LESSEE shall also submit to the LESSOR the ID and COntact Numbers of each occupant of the leased premises.

LIABILITIES OF, AND LIMITATIONS ON, PARTIES

• BREACH BY LESSEE. Any violation of the LESSEE of the terms and conditions of this Lease Contract shall be sufficient ground for the termination and revocation of this Lease Contract.
• THIRD PARTY LIABILITY. During the LESSEE’s occupancy of the leased premises, the LESSEE shall hold the LESSOR free and harmless from any damage or responsibility to any person or property arising out of or as a consequence of the use and occupation of the leased premises by the LESSEE, members of the LESSEE’s household, agents, employees, domestic help, guests, visitors, or pets. However, when such damage is entirely the result of natural calamity, such as typhoon, earthquake, or flood, or is otherwise beyond the control of the LESSEE, the latter shall not be liable to the LESSOR.
• SUBLEASE AND ASSIGNMENT. The LESSEE shall not sublease or allow the leased premises to be occupied for a fee in whole or in part by any other person or entity. This Lease Contract shall apply to the benefit of and be binding upon the parties hereto and their respective heirs, successors, the LESSOR’s assignees, and the LESSEE’s assignees if the LESSOR consents to the assignment of this Lease Contract.
• ENCUMBRANCE OF LEASED PREMISES. In the event of a sale, transfer, mortgage, or any encumbrances of similar nature of the leased premises, the LESSOR shall advise the purchaser, mortgagor, or concerned third party that all the terms and conditions of this Lease Contract shall be respected.

RENEWAL AND TERMINATION OF LEASE

• RENEWAL. This Lease Contract shall be renewed IN WRITING ONLY. The LESSEE must provide in writing, at least thirty (30) days in advance of termination, written notice to the LESSOR of the LESSEE’s desire to renew the Lease Contract, if such be the case.
• TERMINATION BY LESSOR. Should the LESSEE fail to pay on the stipulated time or in the event of any violation of the terms and conditions stipulated in this Lease Contract, the LESSOR shall have the unilateral right to terminate this Lease Contract and enforce such right through either judicial or extrajudicial ejection. The LESSOR may exercise this right to terminate by sending a Termination Notice by Registered Mail – the notice is deemed received by the LESSEE after 15 days from the date the mail is registered to have been sent. If the LESSOR opts for extrajudicial ejection, the LESSOR or the LESSOR’s duly authorized representative may, after 15 days of the termination notice sent by registered mail, take actual, physical, complete, and full repossession of the leased premises, even without the consent of the LESSEE.
• FORFEITURE CLAUSE. The LESSEE is bound to respect the term period of this Lease Contract. Should the LESSEE decide to reside elsewhere or abandon the leased premises before the expiration of the lease term, the LESSEE must inform the LESSOR in writing at least 30 days in advance, otherwise, the DEPOST shall be forfeited in favor of the LESSOR.
• REMAINING UTILITY BILLS. The LESSEE shall also be liable to pay the LESSOR all the remaining utility bills and pending maintenance costs before any clearance or release from this Lease Contract may be granted by the LESSOR. The LESSEE must also provide proof of full payment of all bills before any clearance and release from this Lease Contract may be granted by the LESSOR.
• RETURN OF LEASED PREMISES. Upon termination of this Lease Contract, the LESSEE shall immediately vacate the premises and return possession thereof, including all the keys of the premises, in the same as well as good and tenantable condition.

CONTRACT ADMINISTRATION

• PROPERTY MANAGEMENT. The LESSOR may assign his/her rights, obligations, responsibilities, and representation to a Property Manager.
• DISPUTE RESOLUTION. In case of litigation arising from the provisions of this Lease Contract, the parties agree to submit to the jurisdiction of the proper court sitting in MARIKINA MUNICIPAL TRIAL COURT, to the exclusion of all other tribunals.
• OTHER PROVISIONS. This Lease Contract will be governed by, construed, and enforced in accordance with the laws of the Philippines. Any amendment or modification thereto must be in writing and signed by the parties hereto. No waiver by a party to any provision of this Contract shall be binding unless made expressly and in writing. If one or more provisions of this Contract shall be held invalid, illegal, or unenforceable, the remaining provisions shall remain in, and shall be given, full force and effect.

IN WITNESS WHEREOF, the parties hereto have hereunto set their hands at the place first above written, on this 1ST day of OCTOBER 2009.

ANDRES BONIFACIO: _______________________
OWNER/LESSOR MARITAL CONSENT: _____________________
PASSPORT #:_________
JOSE RIZAL: _____________________
LESSEE/TENANT MARITAL CONSENT: ______________
PASSPORT#:

SIGNED IN THE PRESENCE OF:
(This contract must be witnessed/signed by a Licensed Broker in compliance with RA 9646.)

JOHN ODONNELL R. PETALCORIN
LICENSED REAL ESTATE BROKER
REBL# 15901R EXP 12/31/2010

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Professional Real Estate Management Service (PREMS)

This Professional Real Estate Management Service (PREMS) that I offer is for absentee owners of Condominium Unit, Residential House, Commercial Space, Warehouse, Resort Property, and Vacant Lot in Metro Manila. This is also ideal for properties being offered for sale at Put Option that requires a Broker.
RESPONSIBILITIES OF OWNING A PROPERTY
Owning a property has set of expenses, which includes electricity, water, association dues, real property taxes, improvement, repainting, renovation, repairs, television cable, telephone, internet, installation of security lock systems, clean-up, acquisition of furniture and fixtures, and even prevent squatters in case of vacant lot. Taking care of these responsibilities needs time and it is a lot of hassle on the part of the absentee Property Owner. To avoid the hassle, absentee owners usually delegate these responsibilities to their trusted relatives, friends, or to a Professional Property Manager.
STANDARD DUTIES OF THE PROPERTY MANAGER
The basic duties of the Property Manager are:
1. Inspect the wellness of the property periodically and make arrangement with the occupant to ensure that it continues to be secured, clean, inhabitable, tenantable, in good shape, and in compliance to environmental restrictions.
2. Coordinate with contractor if installation or major repair is needed and coordinate permissions to construct an improvement on the property.

3. Attend important Homeowners Meetings and Vote as proxy in the absence of the Property Owner.

4. Keep oneself updated of the rules and regulation of the Homeowners Association.

5. Ensure that the Utility Bills are current and cleared.

6. Coordinate the errand of paying the Real Estate Property Tax and other government duties.

7. Coordinate with Building Security on the prevention any possible unauthorized occupants.

8. Report to the absentee owner all relevant new information, event or policy regarding the property.

EXPENSES

The Property Owner will shoulder all cost of major repairs, real property taxes fines and penalties. Should there be other major expenses in the execution of the Property Manager's duties that is already beyond the scope of compensation, such as constructing improvements, installing additional security instruments, fencing in case of vacant lot, and acquisition of fixtures, the Property Owner will decide on funding it on a case to case basis.

User-Fees. The expenses for minor repairs, association dues (including VAT on association dues), utilities, and preferential subscriptions are to be paid by the Property Owner if the property is unoccupied. These user-fees will be paid by the occupant/tenant in case of lease.

Property Management Fee. The retainer of the Licensed Professional Property Manager for these basic services is P20,000 per year (plus VAT if the manager is VATable, meaning he earns more than P1.5M per annum), regardless of size and type of property. It is paid in advance by the Property Owner at signing of Property Management Contract. The renewal may be taken by the Property Manager from the leasing income of property.

SPECIAL DUTIES OF PROPERTY MANAGER IN CASE OWNER WANTS THE PROPERTY TO EARN FROM LEASING OPERATION

If the unit owner wants to earn from leasing, the Property Manager will have the following special duties.

1. Determine the rent based on fair market value.

2. Offer and advertise the Property for Lease.

3. Present the property to interested Lessees.

4. Select the best Lessee if more than one applicant.

5. Negotiate and re-negotiate Lease Agreements.

6. Execute the closing, renewal, and termination Lease Agreement.

7. Keep a neat record of rent payment and profile of regular occupants and make it available to the owner or any person of authority upon inspection.

8. Provide instruction to the Tenant on the procedure of direct deposit of rent to a bank account that the Property Owner will nominate.

9. Coordinate the ejection the Lessee in case of breach of contract.

10. Keep the Lessee’s deposits in an Escrow Account and return the balance to the Lessee upon termination of contract after all damages are accounted and paid.

Finder’s Fee. The Finder’s Fee or Referral Fee is a customary incentive given to any informant who helped in finding/referring tenant. It is an out-of-the-pocket expense on the account of the Property Owner, just like a waiter’s tip. This Finder’s Fee is an expense that is separate from the Property Management Fee, and is sourced from the actual payment of rent. The rate of Finder’s Fee is ONE MONTH RENT if at least one year lease, or EIGHT PERCENT (8.0%) of a month’s rent if less than one year. Finder’s Fee can be a monthly payment as a fraction of rent or one-time payment if the rent of the entire lease period is paid in advance cash.

SUMMARY OF EXPENSES on the account of Property Owner in case of Managed Leasing

Property Management Fee: P20,000/yr + 12% VAT.

12% VAT of Income from Rent if over P12,800/month.

Tenant Finder’s Fee (8% of rent).

Real Property Tax (est. 0.4% of property value).

Major Repairs (on the need basis).

SUMMARY OF EXPENSES on the account of Tenant in case of Managed Leasing

Ingress—Property Manager Appearance Fee (P1,000).

Security Deposit (refundable net of arrears/damage).

Monthly Rent (always advance payment).

Utilities (Water, Electricity, Cable TV, Telephone, WiFi).

Monthly Homeowners Association Dues.

Minor scratch repairs and replacement of light bulbs.

Egress—Property Manager Appearance Fee (P1,000).

SAMPLE COMPUTATION OF RETURN OF INVESTMENT OF A CONDO UNIT

Investment

Cost of Unit: P1,700,000
Cost of Interior Design (furnitures and fixtures): P300,000
Total Investment: P2,000,000

Income

Total Income from Rent: P200,000
(assuming you get very lucky with a 10 months occupancy at P20,000 rent)

Expenses

Professional Manager Fee: P20,000
+VAT of Prof'l Mgt Fee: P2,400
+VAT of Income from Rent: P24,000
Finders Fee (8% of Income): P16,000
Real Property Tax: P8,000
Major Repair: P10,000
Total Expenses: P80,400

Net Income: P119,600

Annual Return of Investment (P119,600 / P2,000,000): 6 Percent (6%). The calculation above assumes that you were fortunate to have evaded the BIR Tax imposed on Passive Income (20%). Again and again, I would say that this assumes that this is your lucky year. You might also want to read my commentary about the blog of a seller agent on "Calculating Return-On-Investment For Condo Units".
DISTINGUISH TRANSIENT from LONG-TERM TENANT
For residential properties, long-term Tenants and Transients are both under Lease Contract and have the same "base rate of rent" per month. However, since transients are short-term occupants who just want to come and go without doing the actual paying of the utilities and association dues to the payment centers, the user-fees are added to the rent.

ASSIGNMENT OF SPECIFIC RIGHTS

In Property Management Agreement (PMA), the Property Owner assigns two basic rights to the Property Manager, (1) right to access the property, and (2) right to sign lease agreement. The Property manager will have access to the property and its common amenities without prejudice to the rules and regulations of the Homeowners Associations or the Building Administration. It is the Property Manager who will negotiate and sign the lease agreement in behalf of the Property Owner. In PMA, the Property Owner does not assign the Right to Sell to the Property Manager.

THIRD PART CONTROL

The Building Administrator or Homeowners Association shall be given copy of the Property Management Agreement (PMA). The PMA may be terminated by either party (Property Owner or Property Manager) in writing, addressed to each other and to the Building Administrator, either through personal delivery, fax, email, or postal mail.

TIPS FOR CONDO INVESTORS AND VACANT LOT OWNERS

The quick estimate of the maximum monthly Base Rent of a condominium unit is one percent (1.0%) of the total cost of acquisition and furnishing. For residential house and lots, the quick estimate is point five percent (0.5%) of the current fair market value of the property.

The most profitable type of real estate for leasing is condominium. It is best if the Property Owner will get the Property manager involved in determining the furnishing of the units to ensure that the unit can meet the basic needs of tenants in general.

It is much easier to lease out a condominium unit if it has parking, full-furnishing, and ready telephone, cable, and internet connection. For Metro Manila, parking is a must.

Absentee owners of vacant lots in Metro Manila, especially those that have area of over 1,000 square meters, are best if entered into Professional Property Management to prevent/repel squatters. The cost of removing a small group of squatters is worth at least 20 years services of a Professional Property Manager, plus the legal hassles.


CONTACT*

Rltr. JOHN R. PETALCORIN
Property Manager, Metro Manila Operation
SMART 0921-7172040
PLDT LL+ 02-5830858
Email: JohnPetalcorin@Gmail.Com
Real Estate Broker Lic#: 0010105


*NOTE: My Professional Real Estate Management Services (PREMS) can be requested by unit owners of the following condominiums or any condominium projects of Ayala, DMCI, Federal Land, SMDC, Eton, Century, Megaworld, Crown Asia, etc.:

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MRT TAFT

Park Avenue Mansions Condo
Antel Seaview Towers Condo
Harrison Mansions Condo
Bay Garden Condo


MRT MAGALLANES

Oriental Gardens (Orchids and Lotus Towers) Condo
Cityland Pasong Tamo Condo
Cityland Dela Rosa Condo
Cityland Makati Executive Tower 1 Condo
Cityland Makati Executive Tower 2 Condo
San Lorenzo Village Subd
Magallanes Village Subd
Dasmarinas Village Subd


MRT AYALA

The Columns Condo
West of Ayala Condo
Cityland 10 Tower 1 Condo
Cityland 10 Tower 2 Condo


MRT BUENDIA

Avida Condominiums
Salcedo Park Tower Condo
Classica Tower Condo
Westgate Plaza Condo
Manhattan Square Condo
Paseo Parkview Tower 1 & 2 Condo
Antel Platinum Tower Condo
Urdaneta Village Subd
Forbes Park Subd
Bel-Air Village Subd


MRT GUADALUPE

Joya Lofts and Towers Condo
Rizal Tower Condo
Hidalgo Place Condo
The Manansala Condo
Guadalupe Nuevo Village
Pinagkaisahan Village


MRT BONI

GA Towers 1 Condominium Condo
Cityland Pioneer Tower Condo
Pioneer Pointe Condo
Dansalan Gardens Condo
One Gateway Place Condo
Globe Telecom Plaza 1 Condo
Globe Telecom Plaza 2 Condo
Paragon Plaza Condo


MRT SHAW

Cityland Shaw Tower Condo
The Crescent Condominium Condo
Rennaissance 3000 Condo
Alexandra Tower D Condo
Alexandra Tower A Condo
Cityland Wack Wack Royal Mansion Condo
Lee Gardens Condo
California Garden Square Condo
Crisanta Tower Codominium Condo
Phoenix Heights Condominium Condo
Skyway Towers Condo
Valle Verde Tarraces Condo
San Antonio Village Subd
Kapitoyo Village Subd
Pleasant Hills Village
Highway Hills Village
Wack-Wack Subd


MRT ORTIGAS

AIC Grande Tower Condo
Cityland Mega Plaza Condo
Corinthian Executive Regency Condo
The Malayan Plaza Condo
Parc Chateau Condominium Condo
Parc Royale Condominium Condo
AIC Gold Tower Condo
Emerald Mansion Condo
Corinthian Gardens


MRT ANAPOLIS

One Beverly Place Condo
Tiffany Mansions Condo
LPL Greenhills Condo
Goldland Tower Condo
Goldland Plaza Condo
Avida Towers Condo
Platinum 1000 Condo
Annapolis Wilshire Plaza Condo
Greenhills Garden Square Condo
Platinum 2000 Condo
La Primera Casita Condo
White Plains Village
St. Ignatious Village
Greenhills Villages


MRT CUBAO

PYP Mansions II Condo
Theresa Condominium Condo
Regalla Tower Suites Condo
Prince Gregory Condominium
Manhattan Garden City Condo


MRT GMA KAMUNING

Atherton Place Condo
FSS Building 2 Condo
Prince Jun Condominium Condo
24K Mansion Condo
Mission Garden Condominium Condo
Lansberg Place Condo
Kamias Village
Pinagkaisahan Village
Timog-Morato Area Villages


MRT QUEZON AVE

Delsa Mansion Crystal Mansion Condo
Future Point Plaza 2 Condo
The Heart of the City Condominium Condo
Lourdes Condominium Condo
Lansdale Towers Condo
SJB Centro Plaza Condo
SJB Condominium Condo
Victoria Towers Condo
The Columbia Garden Residences Condo


MRT NORTH AVE

E&E Building Condo
Northridge Mansion Condo
Millionaire's Suite Condo
Kassel Residences Condo


LRT1 MONUMENTO

LRT1 5TH AVENUE

First Amiji Mansion Condo
Howard Tower Condo

LRT1 BAMBANG

YTL Tower Condo
Broadview Tower Condo
Cathay Mansions Condo
Diamond Plaza Condo
S Tower Condo
Dynasty Tower Condo


LRT1 CARRIEDO


Regina Towers 1 & 2 Condo
Mandarin Mansion Condo
Galleria de Binondo Condo
Escolta Twin Towers Condo
UniverCity Convenience Flats Condo


LRT1 CENTRAL

Gotesco Tower A Condo


LRT1 UNITED NATIONS

Alpha Grand View Tower A Condo
1322 Golden Empire Tower Condo
Mayfair Tower Condo
Sunview Palace Condominium Condo
Royal Bay Condo
Ermita Area


LRT1 QUIRINO

Malate Crown Plaza Condo
Astral Tower Condo
Standford Tower Condo
Ocean Tower Condo
Le Mirage Condo
Boulevard Mansion Condo
Echelon Tower Condo


LRT1 PEDRO GIL

Malate Adriatico Grand Residences Condo
One Adriatico Place Condo
Two Adriatico Place Condo
The Providence Tower Condo
Alpha Grand View Tower B Condo
Malate Area


LRT1 VITO CRUZ

Asiawealth Tower Condo
Cityland VitoCruz Towers Condo
Torre Lorenzo Condo
Balagtas Villas Condominium Condo
Burgundy West Bay Tower Condo
Burgundy Transpacific Place Condo
Pacific Regency Condo
Ivy Hill Residences Condo
Grand Tower Condo


LRT1 BUENDIA (GIL PUYAT)

Bay Gardens Towers (Palawan, Mactan, Crystal, Anchor) Condo
IPI Buendia Tower Condo
Monaco Garden Tower Condo
Cityland 8 Condo
Somerset Mansion Condo
One Rockefeller Condo
Boardwalk Tower Condo


LRT1 LIBERTAD

LRT1 BACLARAN

Diplomat Condominium

LRT2 SANTOLAN

Marquinton Residences Condo

LRT2 KATIPUNAN

One Beatriz Tower Condo
Xanland Place Condo
One Burgundy Plaza Condo
Burgundy Place Condo
Residencia de Regina Condo
Prince David Condo
Loyola Heights Subd
Xavierville Subd
La Vista Subd


LRT2 ANONAS

Project 2 Subd
Project 3 Subd
Sikatuna Village Subd
Teacher's Village Subd


LRT2 GILMORE

Gilmore Heights Condo
Xavier Hills Condo
Golden Plaza Condo
Golden Tower Condo
Le Gran Condominium Condo
The Eisenhower Condo
Valencia Hills Condo
Swire Elan Condo
New Manila Village
Horseshoe Village
Green Haven Park Homes Subd


LRT2 J. RUIZ

Asia Crest Mansion Condo
Quadrillon Mansion Condo
One Wilson Place Condo
Royal View Mansion Condo


LRT2 V MAPA

Hamstead Gardens Condo
Mezza Residences Condo


LRT2 LEGARDA

Casa de Aviles Condo
CEV Mansion Condo
Oblamco Building Condo
University Tower Condo


C5 ROAD

Eastwood Lafayette 2 Condo
Eastwood Lafayette 3 Condo
Eastwood Excelsior Condo
Eastwood Palazzo Residence Condo
Eastwood One Orchard Condominium Condo
Eastwood Olympic Heights Condo
Cypress Towers Condo
Rosewood Pointe
Bonifacio Heights Condo
Mahogany Place Condo-Subd Mix
Royal Palm Residences Condo


FORT BONIFACIO (GLOBAL CITY) TAGUIG CITY

Fifth Avenue Place Condo
Fairways Tower Condo
Essensa Towers (Cameron & Lawton) Condo
Regent Parkway Condo
One McKinley Place Condo
Pacific Towers Condo
Serendra Towers (1,B,C,D,E,F,G) Condo


SOUTH SUPER-HIGHWAY ALABANG

Studio One & Two Condo
Burch Tower Condo
West Cedar Condo
La Vie Flats Condo
West Parc Alder Condo
Ohana Place Condo

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.