Category Archives: law on lease

Lease

What is lease?

Lease is a consensual, bilateral, onerous and commutative contract by virtue of which one person binds himself to grant temporarily the use of the thing or to render some service to another who undertakes to pay some rent.

Art. 1842. The right to an account of his interest shall accrue to any partner, or his legal representative as against the winding up partners or the surviving partners or the person or partnership continuing the business, at the date of dissolution, in the absence of any agreement to the contrary. (n)

What are the properties which may be leased?

1. Lease of Public Domain which must be those alienable lands (agricultural lands) of 1,000 hectares maybe leased by private corporation for 25 years and 12 hectares by Filipino citizens

2. Private Lands and/or improvements thereof.

What is the recording of lease of personal property?

As a general rule, the lease of real property is personal right. However if the lease partakes of the nature of real right if the lease real property is more than one (1) year or is registered regardless of duration.

Who are the persons disqualified to be lessees?

A husband and a wife cannot lease to each other their separate properties except if separation of property was agreed upon or if there has been judicial separation of property.
This is to prevent prejudice to creditors and to prevent the stronger spouse from influencing unduly the weaker spouse. Also, those mentioned in this article of the New Civil Code are disqualified:

Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another:
(1) The guardian, the property of the person or persons who may be under his guardianship;

(2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given;

(3) Executors and administrators, the property of the estate under administration;

(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or institution, the administration of which has been entrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale;

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.

(6) Any others specially disqualified by law. (1459a)

*Persons referred to in Article 1491 of the New Civil Code are disqualified because of fiduciary relationships

References:

The New Civil Code

Obligations of Lessor and Lessee

What are the obligations of the lessor?

Obligations of the lessor is expressly enumerated in this article of the New Civil Code:

Art. 1654. The lessor is obliged:

(1) To deliver the thing which is the object of the contract in such a condition as to render it fit for the use intended;

(2) To make on the same during the lease all the necessary repairs in order to keep it suitable for the use to which it has been devoted, unless there is a stipulation to the contrary;

(3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract.
(1554a)

*The lessor is also obliged not to alter the form in such a way as to impair the use to which the thing is devoted

What are the obligations of the Lessee?

Obligations of the lessee is expressly enumerated in this article of the New Civil Code:

Art. 1657. The lessee is obliged:

(1) To pay the price of the lease according to the terms stipulated;

(2) To use the thing leased 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 custom of the place;

(3) To pay expenses for the deed of lease. (1555)

*The lessee is obliged to pay rent, to use the thing leased as a diligent father of a family, devoting it to the use stipulated, to pay expenses for the deed of lease, to notify the lessor of usurpation or untoward acts, to notify the lessor of need for repairs, to return the property leased upon.

What are the rules in case of urgent 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, if repairs last for not more than 40 days. If the period is 40 days or more, lessee can ask for reduction of the rent in proportion to the time including the 1st 40 days and the part of the property of which he is deprived

What are the effects if lessor fails to make urgent repairs?

The lessee may:
1. Order repair at the lessor’s cost
2. Sue for damages
3. Suspend the payment of the rent
4. Ask for rescission, in case of substantial damage to him

What are the kinds of trespass in lease?

Art. 1664. The lessor is not obliged to answer for a mere act of trespass which a third person may cause on the use of the thing leased; but the lessee shall have a direct action against the intruder.
There is a mere act of trespass when the third person claims no right whatever. (1560a)

1. Trespass in fact is when the physical enjoyment is reduced. There is a mere physical disturbance on the property leased such as an intrusion of an intruder without any legal claim to justify his entry into the property. The lessor will not be held liable. The duty to maintain the lessee in the peaceful enjoyment of the lease is a warranty that the lessee shallnot be disturbed in hislegal, and notphysical, possession

2. Trespass in lawis whena third person claims legal right to enjoy the premisesand the lessor will be held liable.

References:

The New Civil Code

Jurado, D. (1999). Civil Law Reviewer. Quezon City: Rex Printing Company, Inc.

Robles V. LizarragaHnos. G.R. No. L-16736, December 22, 1921

Duration of Lease

What is the duration of lease?

Lease made for a determinate time or fixed period be for the said period and it ends on the day fixed without need of a demand. But if there is no fixed period for rural lands it shall be for all time necessary for the gathering of fruits which the whole estate may yield in 1 year, or which it may yield once. It is exemplified in this article of the New Civil Code:

Art. 1680. The lessee shall have no right to a reduction of the rent on account of the sterility of the land leased, or by reason of the loss of fruits due to ordinary fortuitous events; but he shall have such right in case of the loss of more than one-half of the fruits through extraordinary and unforeseen fortuitous events, save always when there is a specific stipulation to the contrary.

Extraordinary fortuitous events are understood to be: fire, war, pestilence, unusual flood, locusts, earthquake, or others which are uncommon, and which the contracting parties could not have reasonably foreseen. (1575)

As for urban lands the following rules shall apply, and below is the supporting article of the law:

a) If 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

Art. 1687. If the period for the lease has not been fixed, it is 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 to be 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 lessee has occupied the premises for over one year. If the rent is weekly, the courts may likewise determine a longer period after the lessee has been in possession for over six 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. (1581a)

What is implied new lease?
Implied lease is which when at the end of the contract the lessee continues 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. It is required that the term of the original contract has expired, the lessor has not given the lessee a notice to vacate and the lessee continued enjoying the thing leased for at least 15 days with acquiescence of the lessor.

When is there no implied new lease?

The is no implied lease when before or after the expiration of the term, there is a notice to vacate given by either party and when there is no definite fixed period in the original lease contract as in the case of successive renewals. Its effect includes that the period of the new lease is not that stated in the original contract but the time in Article 1682 and 1687 and other terms of the original contract are revived.
Note that the 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 as discussed by the court in the case of Dizon V.Magsaysay (GR No. 23399, May 31,1974).

What is perpetual lease?

Perpetual lease is a lease contract providing that the lessee can stay in the premises for as long as he wants and for as long as he can pay the rentals and its increases. However, this is not permissible, it is a purely potestative condition because it leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive will of the lessee.

Note that In Jespajo Realty V. CA, 27 Sept. 2002, the SC upheld a lease contract, which provides that “the lease contract shall continue for an indefinite period provided that the lessee is up-to-date in the payment of his monthly rentals” for the contract is one with a period subject to a resolutory condition.

References:
Divino V. Fabie de Marcos, G.R. No. L-13924,January 3, 1962

DizonV..Magsaysay ,GR No. 23399, May 31,1974

Jespajo Realty V. Court of Appeals,G.R. No. 113626, September 27, 2002

Jurado, D. (1999). Civil Law Reviewer. Quezon City: Rex Printing Company, Inc.

The New Civil Code

Lease v Sublease

What is the difference between assignment of lease and sublease?

As a general rule, the lessee cannot assign the lease without consent of the lessor except if there is stipulation to the contrary. This is because the aassignment of this nature constitutes a novation by substituting the person of the debtor so the creditor-lessor must consent.

What is sublease?

Sublease is a separate and distinct contract of lease wherein the original lessee becomes a sublessor to a sublessee. It is allowed unless expressly prohibited and the sublessee is subsidiarily liable for any rent due. This is expressed in this article:

Art. 1651. Without prejudice to his obligation toward the sublessor, the sublessee is bound to the lessor for all acts which refer to the use and preservation of the thing leased in the manner stipulated between the lessor and the lessee. (1551)

What are the rights of Lessee to Sublease?

Unlike in assignment, a lessee may generally sublease the property in the absence of express prohibition. This is supported by the following articles:

Art. 1649. The lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary. (n)

Art. 1650. When in the contract of lease of things there is no express prohibition, the lessee may sublet the thing leased, in whole
or in part, without prejudice to his responsibility for the performance of the contract toward the lessor. (1550)

What are the rights of lessor if sublease is expressly prohibited but entered into by Lessee?

a. Rescission and damages;
b. Damages only (Contract will be allowed to remain in force)
c. Ejectment

What are the instances when sublessee is liable to the lessor?

This is when all acts which refer to the use and preservation of the thing leased in the manner stipulated between the lessor and the lessee. Also, the sublessee is subsidiarily liable to the lessor for any rent due from the lessee. The sublessee shall not be responsible beyond the amount of rent due from him. This is better explained in this article:

Art. 1652. The sublessee is subsidiarily liable to the lessor for any rent due from the lessee. However, the sublessee shall not be responsible beyond the amount of rent due from him, in accordance with the terms of the sublease, at the time of the extrajudicial demand by the lessor.
Payments of rent in advance by the sublessee shall be deemed not to have been.

References:

The New Civil Code

Jurado, D. (1999). Civil Law Reviewer. Quezon City: Rex Printing Company, Inc.

Purchase of Real Property

What are the rules in the purchase of the leased property?

This article of the New Civil Code may be followed in the purchase of a leased property:

Art. 1676. The purchaser of a piece of land which is under a lease that is not recorded in the Registry of Property may terminate the lease, save when there is a stipulation to the contrary in the contract of sale, or when the purchaser knows of the existence of the lease.

If the buyer makes use of this right, the lessee may demand that he be allowed to gather the fruits of the harvest which corresponds to the current agricultural year and that the vendor indemnify him for damages suffered.
If the sale is fictitious, for the purpose of extinguishing the lease, the supposed vendee cannot make use of the right granted in the first paragraph of this article. The sale is presumed to be fictitious if at the time the supposed vendee demands the termination of the lease, the sale is not recorded in the Registry of Property. (1571a)

*As a general rule, the purchaser of thing leased can terminate the lease except if the lease is recorded in Registry of Property, there is stipulation in the contract of sale that purchaser shall respect the lease, the purchaser knows the existence of the lease, the sale is fictitious or the sale is made with right of repurchase.

References:

F.S. DivinaGracia Agro Commercial V. Court of Appeals, G.R. No. L-47350, April 21, 1981

Jurado, D. (1999). Civil Law Reviewer. Quezon City: Rex Printing Company, Inc.

The New Civil Code

Judicial Ejectment

What are the grounds for judicial ejectment?

The grounds for judicial ejectment is expressly laid down in this article of the New Civil Code:

Art. 1673. 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 Articles 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 Article 1657, as regards the use thereof.

*The demand of payment must be coupled with demand to vacate the premises. Otherwise, the Unlawful Detainer case will not prosper. The ejectment of tenants of agricultural lands is governed by special laws. A notice or demand to vacate does not have to expressly use the word ―vacate‖ as it suffices that the demand letter puts the lessee or occupant on notice that if he does not pay the rentals or comply with the terms of the lease contract, it should move out of the leased premises

The rules set down by Republic Act (RA) 9653 or the Rent Control Act of 2009 may also be followed in the lease of rented condominium unit:

“SEC. 9. Grounds for Judicial Ejectment. – Ejectment shall be allowed on the following grounds:

1. Assignment of lease or subleasing of residential units in whole or in part, including the acceptance of boarders or bedspacers, without the written consent of the owner/lessor;

2. Arrears in payment of rent for a total of three (3) months: Provided, That in the case of refusal by the lessor to accept payment of the rent agreed upon, the lessee may either deposit, by way of consignation, the amount in court, or with the city or municipal treasurer, as the case may be, or barangay chairman, or in a bank in the name of and with notice to the lessor, within one (1) month after the refusal of the lessor to accept payment.

The lessee shall thereafter deposit the rent within ten (10) days of every current month. Failure to deposit the rent for three (3) months shall constitute a ground for ejectment.
The lessor, upon authority of the court in case of consignation or upon joint affidavit by him and the lessee to be submitted to the city or municipal treasurer or barangay chairman and to the bank where deposit was made, shall be allowed to withdraw the deposits;

3. Legitimate need of the owner/lessor to repossess his or her property for his or her own use or for the use of any immediate member of his or her family as a residential unit: Provided, however, That the lease for a definite period has expired: Provided, further, that the lessor has given the lessee the formal notice three (3) months in advance of the lessor’s intention to repossess the property and: Provided, finally, that the owner/lessor is prohibited from leasing the residential unit or allowing its use by a third party for a period of at least (1) year from the time of repossession;

4. Need of the lessor to make necessary repairs of the leased premises which is the subject of an existing order of condemnation by appropriate authorities concerned in order to make the said premises safe and habitable: Provided, That after said repair, the lessee ejected shall have the first preference to lease the same premises: Provided, however, That the new rent shall be reasonably commensurate with the expenses incurred for the repair of the said residential unit and: Provided, finally, That if the residential unit is condemned or completely demolished, the lease of the new building will no longer be subject to the aforementioned first preference rule in this subsection; and

5. Expiration of the period of the lease contract.”

References:
The New Civil Code

Jurado, D. (1999). Civil Law Reviewer. Quezon City: Rex Printing Company, Inc.

Maximo Roxas, et al. VS. IAC, CelestinoPernes ,et al. GR. No. 74279, January 20, 1988

Republic Act (RA) 9653 “An Act Establishing Reforms in the Regulation of Rent of Certain Residential Units, Providing the Mechanisms Therefor and for Other Purposes”, July 14, 2009