LEGAL ASPECT OF LEASE

AND RELATED
PRINCIPLES

Prepared by: Atty. Arlyn Joy C. Allosa-Alaba, REA, REB

Definition of Lease

It is a consensual, bilateral, onerous,

and commutative contract by which one
person binds himself to grant
temporarily the use of a thing or the
rendering of some service to another
who undertakes to pay some rent,
compensation, or price.

Kinds of Lease

Lease of things (whether of personal or

real property
Lease of service ( includes household
service, contract of labor and common
carriers
Lease of work ( should be contract for a
piece of work)

Lease of things defined (Art 1643,

NCC)

In the 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 ninety-nine years shall be
valid.

Characteristics or Requisites for lease of

things

It is consensual
It is a principal contract
It is nominate
Purpose is to allow enjoyment or use of
a thing
The subject matter must be within the
commerce of man

Characteristics or
Requisites for lease of
things

The purpose to which the thing will be

devoted should not be immoral
The contract is onerous
The rent must not be fictitious or nominal, other wise,

there is a possibility that the contract is one of

commodatum
The rent must be capable of determination
The rent may be in form of products, fruits, construction.

The period is temporary

Characteristics or Requisites for

lease of things

The period is either definite or indefinite

If no term is fixed, we should apply Art. 1682 and Art.

1687, NCC
If a term is fixed, but the term is indefinite, as when the
tenant may use for as long as he desires, the court will fix
the term under the law of Obligation and Contracts.

The lessor need not be the owner

Rent Defined
Rent is the compensation either in money, provisions,
chattels, or labor, received by the lessor from the
lessee.

Lease
1. Only use or enjoyment is
transferred

Sale
1. Ownership is transferred
2. Transfer is permanent

2. Transfer is temporary
3. Lessor need not be the owner
4. The price of the object,
distinguished from the rent, is
usually not mentioned.

3. Seller must be the owner at the

time the property is supposed to be
delivered
4. Usually, the selling price is
mentioned

Lease

Simple loan

1. Lessor does not lose ownership

1. Lender loses ownership

2. Relationship is one of lessor and

lessee

2. Relationship is one of obligor and

obligee

3. Not governed by the usury law

3. Governed by the usury law

4. If what is leased is real property for

more than one year, the statute of
frauds must be complied with

4. Not governed by the statute of

frauds
5. Refers only to personal property

5. Refers to real and personal

property

Lease
1. Onerous contract
2. Not essentially personal in
character, hence right may be
transmitted to heirs
3. Consensual contract

Commodatum
1. This is essentially gratuitous; if
there is a price or rent, the
contract ceases to be a
commodatum
2. Personal in character, thus
death of either bailor or bailee
ends the commodatum
3. Real contract requires delivery
for perfection

Basis

Usufruct

Lease

As to extent

1. Covers all fruits and

uses as a rule

1. Generally covers only a

particular or specific
use

As to nature of the right

2. Is always a real right

2. Is a real right only if, as

in the case of a lease
over real property, the
lease is registered or is
for more than one year
otherwise, it is only a
personal right

As to the creator of the right 3. Can be created only by

the owner, or by a duly
authorized agent,
acting in behalf of the
owner
As to origin
4. May be created by law,
contract, last will or
prescription

3. The lessor may or may

not be the owner

4. May be created as a
rule only by contract

Basis

Usufruct

Lease

As to cause

5. The owner is more or

less passive, and he
allows the usufructuary
to enjoy the thing given
in usufruct

5. The owner or lessor is

more or less active, and
he makes the lessee
enjoy

As to repairs

6. The usufructuary has

the duty to make the
ordinary repairs

6. The lessee generally

has no duty to pay for
repairs

As to taxes

7. The usufructuary pays

for the annual charges
and taxes on the fruits

7. The lessee generally

pays no taxes

As to other things

8. A usufructuary may
lease the property itself
to another

8. The lessee cannot

constitute a usufruct on
the property leased

LEASE OF RURAL AND URBAN

LANDS
Rural Lands (Product-Producing lands)
Regardless of site, if the principal purpose is to
obtain products form the soil, the lease is of rural
lands. Lesee is interested in soil products.
Urban Lands (Non-product producing lands)
lands leased principally for purposes of residence
are called urban lands.

Who are disqualified to become

lessees?

Husband and wife (Art 1490, NCC)

Persons relatively incapacitated to buy (Art
1491, NCC)
Guardians
Agents
Administrators
Public Officers and employees
Justices, judges, prosecuting attorneys, clerk of

courts and other officers and employees connected

with the administration of justice, lawyers
Others disqualified by law

Registration with the ROD

Personal property: No
Real property: Yes
Proper authority is required for the
following persons:
Husband, with respect to the paraphernal

property of the wife

Father or guardian, with respect to the
property of the minor or ward
Manager or administrator of conjugal property;
of co-ownership; of state patrimonial property

Assignment of the Lease

Lessee cannot assign the lease without

the consent of the lessor, unless there is
a stipulation to the contrary.

Sub-leasing

General rule : subleasing is allowed

unless there is an express prohibition,
without prejudice to his responsibility for
the performance of the contract toward
the lessor.

Distinction between subleasing

and assignment

In subleasing, the lessee retains an interest in the

lease, he remains a party of the contract. While in
assignment, the lessee makes an absolute transfer of
his interest as lessee, thus, he dissociates himself
from the original contract of lease

The sub-lessee does have any direct action against

the lessor while an assignee has a direct action
against the lessor

Can be done even without the permission of the

lessor ( unless there be an express prohibition)

Liability of the sublessee to the

lessor

Directly liable to the lessor for acts

pertaining to the use and preservation of
the property
Subsidiarily liable to the lessor for any rent
due from the lessee but not beyond the
amount of rent due from him
Note: advance payment of rent by the sublessee is disregarded in so far as the lessor
is concerned except if justified by the
custom of the place

Effects of eviction of the lessee

Sub-lessee should also be ousted even

if not sued in the ejectment case.
In cases where the lessee and
sublessee are evicted, and the lessee
appeals, the sublessee cannot be
evicted

Lessors warranties

Against eviction
Hidden defects
Reduction in the price shall be made in
proportion to the time during which the
lessee enjoyed the thing.

Destruction of the thing leased

Total destruction
Lease is extinguished

Partial destruction
Lessee may choose between proportional

reduction and rescission of the lease

Obligation of the lessor

Delivery of the object in such condition as to

render it fit for the use intended

Making of necessary repairs to keep it

suitable for the use it has been devoted

Maintenance in peaceful and adequate

possession for the entire duration of the
contract.
Refers to legal possession

Obligation of the Lessee

To pay the lease price (rent)

To use the thing leased as a diligent
father of a family, devoting it to the use
stipulated or if there is no stipulation,
that which may be inferred from the
nature of the thing leased, according to
the custom of the place
To pay the expenses for the deed of
lease

When may a lessee suspend

payment of rent?

If the lessor fails to make the necessary

repairs,

If the lessor fails to maintain the lessee

in peaceful and adequate enjoyment of
the property leased.

Time for repairs

If less than 40 days, the lessee cannot ask for

reduction of rent, or for recission.
He is also obliged to tolerate the work even if it is very

annoying to him unless the place becomes

uninhabitable, he can ask for rescission.

If 40 days or more, lessee can ask for

proportionate reduction (including the first 40
days)
Rescission is available in both cases, if the main

purpose is to provide a dwelling and the place

becomes uninhabitable.

Duties of Lessee concerning

Usurpation and Repairs

To notify the lessor of usurpation or

untoward acts

To notify the lessor of need for repairs

Consequences if lessor fails to

make the urgent repairs

Lessee, in order to avoid imminent

danger, may order the repairs at the
Lessors cost
Lessee may sue for damages
Lessee may suspend the payment of the
rent

Duty of the lessee at the end of

the lease contract

Return the property, either physically or

constructively, in the same condition as
he received it except lost and
impairment by lapse of time, ordinary
wear and tear, and inevitable cause or
fortuitous event

When is lease supposed to end?

Upon agreement of the determinate time

of termination.
If no period is fixed, it will depend on the
mode of payment
For rural lands
As agreed
Depends on the time for the planted crop to

be harvested

Rules on the extension of lease

period

If the lease contract for a definite term allows the lessee to extend the term,
lessee is not required to notify lessor, his continued stay is evidence of his desire
to extend the lease (unless there is a stipulation as to notice to lessor to extend
lease).

may be extended lessee can extend, without the lessors consent but must
notify lessor.

may be extended by agreement of both parties must be interpreted in favor of

the lessee, who may choose to leave the premises or continue to remain
(unless it can be discern that there must be mutual agreement).

In case of co-ownership, an extension is not valid against a co-owner who did

not give his consent to such extension.

If written consent is necessary for such extension, then extension cannot be had
without a written consent.

What is implied new lease or

tacita reconduccion?

That which arises if at the end of the

lease, the lessee should continue
enjoying the thing lease for 15 days with
the acquiescence of the lessor-unless a
notice to the contrary had been
previously given by either party

Effects of the implied new lease

Period is not stated in the original

contract but would depend on the mode
of payment of lease.
Other terms of the original lease are
revived.

What if the lessor objects to the

continued possession?

Lessee becomes a possessor in bad

faith
He may be compelled to:
To forfeit the construction without indemnity;

or
Buy the land regardless of whether or not its
value is considerably more than the value of
the construction; or
To demolish the construction at his expense.

Requisites for the lessee be considered

as a possessor in bad faith:

The contract of lease has expired.

The lessee continues enjoying the thing leased.

The lessor has objected to this enjoyment.

Causes for ejectment of the

lessee

When the period agreed upon, or that which is fixed for the
duration of leases has expired;

Lack of payment of the price stipulated;

Violation of any of the conditions agreed upon in the

contract;

when use not in accordance with the stipulation which

causes deterioration.

Note: ejectment of tenant of agricultural lands is governed

by special laws.

Place and time of payment of the

Rent

As to place
Agreed stipulation
If none, domicile of the lessee

As to time
Agreed stipulation
If none, local customs

Special Provisions for leases of

Rural lands

Losses
On account of sterility of land
No reduction
Due to fortuitous events
Ordinary fortuitous events
No reduction
Extraordinary fortuitous events
If more than of the fruits is lost, there is reduction
If or less, no reduction

Special Provisions for leases of

Rural lands (cont)

Duration of lease
Fixed stipulation
If none, time necessary to gather fruits in one year or

if harvested only once, duration necessary to gather

it even if such time be more than two or more years.

Land tenancy on shares shall be governed by:

Special laws
Stipulations of the party
Provisions on partnerships
Custom of the place

Special Provisions for leases of

Rural lands (cont.)

Tenant on shares cannot be ejected except in

cases specified by law.
Just Causes (RA 1199, Agricultural Tenancy Law
Bona fide intention of the landholders to cultivate the
land personally by himself or thru the employment of
farm machinery and equipment
Violations or failure to comply with the terms and
conditions of the contract or of the law
Tenants failure to pay the agreed rental or deliver the
landholders share, except when cause by fortuitous
events of force majeure
When tenant uses the land for a purpose other that that
specified by agreement of the parties

Special Provisions for leases of

Rural lands (cont.)
When share tenant fails to follow those proven farm

practices which will contribute towards proper care

of the land and increase agricultural production.
Tenants negligence caused serious injury to the
land which will impair its productive capacity
Conviction by a competent court of a tenant or any
member of his immediate family or farmhousehold
of a crime against the landholder or a member of his
immediate famil

Special Provisions for leases of

Urban lands

Repairs
Special stipulation
If none, custom of the place
In case of doubt, construed against the lessor

Duration
As agreed
If none, if paid daily, day to day; if paid weekly, week to week, if paid monthly,

month to month, and if paid yearly, year to year

For long staying lessee, the court may give longer period
Daily rent if stay is over one month
Weekly rent if stay is over six months
Monthly rent if stay is over one year

If furniture are also lease duration is the same of the leased

Rent control law of 2009

(RA 9653)

Increase in rent
Not more than 7% in one year if occupied by the same

lessee
In cases of boarding house, dormitories, rooms, bedspaces
for students - no increase for more than once a year

Coverage
NCR and highly urbanized cities
Rent P1 to P10,000.00
Other places
Rent P1 to P5,000.00

Authority to continue rental regulation

-divulged to the HUDCC

Rental payment
To be paid in advance within the first five

days of current month or at the beginning of

the lease or as to stipulated
Lessor not allowed to demand for more than
one month advance and for more than two
months deposit, which deposit is to be
deposited in the bank under the name of the
lessor.

Prohibition against assignment,

subleasing even of a part of the leased
residential unit including acceptance of
boarders or bedspacers without the
written consent of the lessor.

Grounds for Judicial Ejectment:

(a) 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;

(b) 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;

(c) 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 lessors 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;

(d) 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

(e) Expiration of the period of the lease contract.

Prohibition Against Ejectment by

Reason of Sale or Mortgage.

No lessor or his successor-in-interest

shall be entitled to eject the lessee upon
the ground that the leased premises
have been sold or mortgaged to a third
person regardless of whether the lease
or mortgage is registered or not.

Rent-to-Own Scheme.

At the option of the lessor, he or she

may engage the lessee in a written rentto-own agreement that will result in the
transfer of ownership of the particular
dwelling in favor of the latter. Such an
agreement shall be exempt from the
coverage of Section 5 of this Act.

Penalties.

A fine of not less than Twenty-five

thousand pesos (P25,000.00) nor more
than Fifty thousand pesos (P50,000.00)
or imprisonment of not less than one (1)
month and one (1) day to not more than
six (6) months or both shall be imposed
on any person, natural or juridical, found
guilty of violating any provision of this
Act.

This act was supposed to expire on December 2013 but was

extended to December 2015 through the initiative of VP Binay

Basis: Preliminary results of the study showed that about 1.5 million
households or 7.2 percent of the total 21.5 million households
nationwide are renters. Of this, 97 percent pay P10,000 and below
monthly, Binay said.
In 2012, the monthly average family income of renters in the country
was P23,968, with P27,246 for NCR and P20,794 for other areas.
Families in NCR spend about 12.4 percent of their income for house
rent.

Sen. Recto is supposed to file a bill for its extension up to 2017. no

update yet.

Thank you! Have a nice

day!