Title VIII.

- LEASE
CHAPTER 1
GENERAL PROVISIONS
Art. 1642. The contract of lease may be
of things, or of work and service. (1542)
Art. 1643. 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. (1543a)
Art. 1644. In the lease of work or
service, one of the parties binds himself
to execute a piece of work or to render to
the other some service for a price
certain, but the relation of principal and
agent does not exist between them.
(1544a)
LEASE OF CONSUMMABLE GOODS
Art. 1645. Consumable goods cannot be
the subject matter of a contract of lease,
except when they are merely to be
exhibited or when they are accessory to
an industrial establishment. (1545a)
DISQUALIFICATIONS OF LESSEE
Art. 1490. The husband and the wife
cannot sell property to each other,
except:
(1) When a separation of property
was agreed upon in the marriage
settlements; or
(2) When there has been a judicial
separation or property under
Article 191. (1458a)
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
intrusted 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.
RECORDING OF LEASE
Art. 1647. If a lease is to be recorded in
the Registry of Property, the following
persons cannot constitute the same
without proper authority: the husband
with respect to the wife's paraphernal
real estate, the father or guardian as to
the property of the minor or ward, and
the manager without special power.
(1548a)

Art. 1648. Every lease of real estate

may be recorded in the Registry of
Property. Unless a lease is recorded, it
shall not be binding upon third persons.
(1549a)

ASSIGNMENT OF LEASE
Art. 1649. The lessee cannot assign the
lease without the consent of the lessor,
unless there is a stipulation to the
contrary. (n)
RIGHT OF LESSEE TO SUBLEASE
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)
OBLIGATIONS OF SUBLESSEE
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)

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)

WARRANTIES OF LESSOR
Art. 1653. The provisions governing
warranty, contained in the Title on Sales,
shall be applicable to the contract of
lease.
In the cases where the return of the price
is required, reduction shall be made in
proportion to the time during which the
lessee enjoyed the thing. (1553)

ALTERATION OF THE THING LEASED

Art. 1661. The lessor cannot alter the
form of the thing leased in such a way as
to impair the use to which the thing is
devoted under the terms of the lease.
(1557a)
USEFUL
IMPROVEMENTS
ORNAMENTAL EXPENSES

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.

GENERAL
LESSOR

OBLIGATIONS

OF

THE

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

AND

Art. 1678. If the lessee makes, in good

faith, useful improvements which are
suitable to the use for which the lease is
intended, without altering the form or
substance of the property leased, the
lessor upon the termination of the lease
shall pay the lessee one-half of the value
of the improvements at that time. Should
the lessor refuse to reimburse said
amount, the lessee may remove the
improvements, even though the principal
thing may suffer damage thereby. He
shall not, however, cause any more
impairment upon the property leased
than is necessary.

With regard to ornamental expenses, the

lessee shall not be entitled to any

reimbursement, but he may remove the

ornamental objects, provided no damage
is caused to the principal thing, and the
lessor does not choose to retain them by
paying their value at the time the lease is
extinguished. (n)

GENERAL
LESSEE

OBLIGATIONS

OF

THE

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)

URGENT REPAIRS
Art. 1662. If during the lease it should
become necessary to make some urgent
repairs upon the thing leased, which
cannot be deferred until the termination
of the lease, the lessee is obliged to
tolerate the work, although it may be
very annoying to him, and although
during the same, he may be deprived of
a part of the premises.

If the repairs last more than forty days

the rent shall be reduced in proportion to
the time - including the first forty days and the part of the property of which the
lessee has been deprived.

When the work is of such a nature that

the portion which the lessee and his
family need for their dwelling becomes
uninhabitable, he may rescind the

contract if the main purpose of the lease

is to provide a dwelling place for the
lessee. (1558a)

TRESPASS MADE BY A THIRD PERSON

Art. 1663. The lessee is obliged to bring
to the knowledge of the proprietor, within
the shortest possible time, every
usurpation or untoward act which any
third person may have committed or may
be openly preparing to carry out upon
the thing leased.

He is also obliged to advise the owner,

with the same urgency, of the need of all
repairs included in No. 2 of Article 1654.

In both cases the lessee shall be liable

for the damages which, through his
negligence, may be suffered by the
proprietor.

If the lessor fails to make urgent repairs,

the lessee, in order to avoid an imminent
danger, may order the repairs at the
lessor's cost. (1559a)

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)

RESCISSION
Art. 1659. If the lessor or the lessee
should not comply with the obligations
set forth in Articles 1654 and 1657, the
aggrieved party may ask for the
rescission
of
the
contract
and
indemnification for damages, or only the

latter, allowing the contract to remain in

force. (1556)
REMEDIES OF THE LESSEE
WHEN
THE
THING
LEASED
IS
TOTALLY OR PARTIALLY DESTROYED
Art. 1655. If the thing leased is totally
destroyed by a fortuitous event, the
lease is extinguished. If the destruction is
partial, the lessee may choose between a
proportional reduction of the rent and a
rescission of the lease. (n)
WHEN THE LESSOR FAILS TO MAKE
REPAIRS
Art. 1658. The lessee may suspend the
payment of the rent in case the lessor
fails to make the necessary repairs or to
maintain the lessee in peaceful and
adequate enjoyment of the property
leased. (n)
DANGEROUS CONDITION OF THE
THING LEASED FOR HABITATION
Art. 1660. If a dwelling place or any
other building intended for human
habitation is in such a condition that its
use brings imminent and serious danger
to life or health, the lessee may
terminate the lease at once by notifying
the lessor, even if at the time the
contract was perfected the former knew
of the dangerous condition or waived the
right to rescind the lease on account of
this condition. (n)
RETURN OF THE THING LEASED
Art. 1665. The lessee shall return the
thing leased, upon the termination of the
lease, as he received it, save what has
been lost or impaired by the lapse of
time, or by ordinary wear and tear, or
from an inevitable cause. (1561a)

Art. 1666. In the absence of a

statement concerning the condition of
the thing at the time the lease was
constituted, the law presumes that the
lessee received it in good condition,
unless there is proof to the contrary.
(1562)

LIABILITY
FOR
DETERIORATION
OF
LEASED

LOSS
THE

OR
THING

Art. 1667. The lessee is responsible for

the deterioration or loss of the thing
leased, unless he proves that it took
place without his fault. This burden of
proof on the lessee does not apply when
the destruction is due to earthquake,
flood, storm or other natural calamity.
(1563a)

Art. 1668. The lessee is liable for any

deterioration caused by members of his
household and by guests and visitors.
(1564a)

REMEDIES OF THE LESSOR

EJECTMENT; GROUNDS
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 ejectment of tenants of agricultural
lands is governed by special laws.
(1569a)
TERMINATION OF LEASE BY THE
PURCHASER OF THE LEASED LAND
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)

Art. 1677. The purchaser in a sale with

the right of redemption cannot make use
of the power to eject the lessee until the
end of the period for the redemption.
(1572)

REPUBLIC
ACT
NO.
December 22, 2001

9161

AN ACT ESTABLISHING REFORMS IN

THE REGULATION OF RENTALS OF
CERTAIN
RESIDENTIAL
UNITS,
PROVIDING
THE
MECHANISMS
THEREFOR
AND
FOR
OTHER
PURPOSES
Be it enacted by the Senate and House
of Representatives of the Philippines in
Congress assembled:
Section 1. Short Tittle. This ACT shall
be known and cited as the "Rental
Reform Act of 2002"

Section 2. Declaration of Policy. The

State shall for the common good,
undertake a continuing of urban land
reform an housing which will make
available at affordable cost decent
housing
and
basic
services
to
underprivileged and homeless citizens in
urban centers and resettlement areas.
Toward this end, the State shall establish
reforms in the regulation of retails of
certain residential units.
Section
3.
Monthly
Rental
and
Maximum Increase. Beginning 01
January 2002 and for a duration of three
(3) years thereafter ending on 31
December 2004, the monthly rentals of
all residential units in the National
Capital
Region
and
other
highly
urbanized cities not exceeding Seven
thousand five hundred pesos (P7,500.00)
and the monthly rentals of all residential
units is all other areas not exceeding
Four thousand pesos (P4,000.00) shall
not be increased annually by the lessor,
without prejudice to existing contracts,
by more than ten (10%).
Section 4. Definition of Terms. The
following terms as used in this Act shall
be understood as:
(a) "Rental" shall mean the amount paid
for the use or occupancy of a residential
unit whether payment is made on a
monthly or other basic.
(b) "Residential unit" shall refer to an
apartment, house and/or land on which
another's dwelling is located and used for
residential purpose and shall include not
only buildings parts or units thereof used
solely as dwelling places, boarding
houses,
dormitories,
rooms
and
bedspaces offered for rent by their
owners, except motels, motel rooms,
hotels, hotels rooms, but also those used
for home industries, retail stores or other
business purposes if the owner thereof
and his or her family actually live therein
and use it principally for dwelling
purposes.

(c) "Immediate members of family of the

lessee or lessor" for purposes of
repossessing the leased promises, shall
be limited to his or her spouse, direct
descendants
or
ascendants,
by
consanguinity or affinity.
(d) "Lessee" shall mean the
renting a residential unit.

person

(e) "Owner/Lessor" shall include the

owner or administrator or agent of the
owner of the residential unit.
(f) "Sublessor" shall mean the person
who leases or rents out a residential unit
leased to him by an owner.
(g) "Sublessee" shall mean the person
who leased or rents out a residential unit
from a sublessor.
(h) "Assignment of lease" shall mean the
act contemplated in Article 1649 of the
Civil Code of the Philippines.
Section 5. Rental and Deposit. Rental
shall be paid in advance within the first
five (5) days of every current month or
the beginning of the lease agreement
unless the contract of lease provides for
a later date of payment. The lessor
cannot demand more than one (1) month
advance rental and two (2) month's
deposit.
Section 6. Assignment of Lease of
Subleasing. Assignment of lease of
subleasing of the whole or any portion of
the residential unit, including the
acceptance of boarders or bedspacers,
without the written consent of the
owner/lessor is prohibited.
Section
7.
Grounds
for
Judicial
Ejectment. Ejectment shall be allowed
on be the following grounds;
(a) Assignment of lease or subleasing of
residential units in whole or 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 rental agreed upon, the
leased may either deposit by way of
consignation, the amount in court, or
with the city or municipal treasurer, as
the case may be, 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
rental within ten (10) days of every
current month. Failure to deposit the
rental for three (3) month shall constitute
a ground for ejectment. If an ejectment
case is already pending, the court upon
proper motion may order the lessee or
any person or persons claiming under
him to immediately vacate the leased
premises without prejudice to the
continuation
of
the
ejectment
proceedings. At any time, the lessor may,
upon the authority of the court, withdraw
the rentals deposited.
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
treasure 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 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 one 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 promises: Provided, however.
That the new rental 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.
Section 8. 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.
Section 9. Rent-to-Own Scheme. At
the option of the lessor, he or she may
engage the lessee in a written rent-toown agreement that will result in the
transfer or ownership of the particular
dwelling in favor of the latter. Such an
agreement shall be except from the
coverage of Section 3 of this Act.
Section 10. Application of the Civil Code
and Rules of Court of the Philippines.
Except when the lease is for a definite
period, the provisions of paragraph (1) of
Article 1673 of the Civil Code of the
Philippines, insofar as they refers to
residential units covered by this Act, shall
be suspended during the effectivity of
this Act, but other provisions of the Civil
Code and the Rules of Court on lease
contracts, insofar as they are not in
conflict with the provisions of this Act
shall apply.
Section 11. Coverage of this Act. - All
residential units in the National Capital
Region and other highly urbanized cities

the total monthly rental for each of which

does not exceed Seven thousand five
hundred pesos (P7,500.00) and all
residential units in all other areas the
total monthly rental for each of which
does not exceed Four thousand pesos
(P4,000.00) as of the effectivity date of
this Act shall be covered, without
prejudice to existing contracts.
Section 12. Penalties. - a fine of not less
than Five thousand pesos (P5,000) nor
more than Fifteen thousand pesos
(15,000.00) or imprisonment of not less
than one (1) month and (1) day to not
more than six (6) month or both shall be
imposed on any person,natural or
juridical, found guilty of violating any
provision of this Act.
Section 13. Information Drive. - The
Department of the Interior and Local
Government and the Housing and Urban
Development Coordinating Council, in
coordination
with
other
concern
agencies, are hereby mandated to
conduct a continuing information drive
about the provisions of this Act.
Section 14. Transition Program. - The
Housing
and
Urban
Development
Coordinating Council is hereby mandated
to formulate, within six (6) months from
effectivity hereof, a transition program
which will provide for safety measures to
cushion the impact of a free rental
market.
Section 15. Separability Clause. - If any
provision or part hereof is held invalid or
unconstitutional, the remainder of the
law or the provision not otherwise
affected
shall
remain
valid
and
subsisting.
Section 16. Repealing Clause. - Any law,
presidential
decree
or
issuance,
executive order, letter of instruction,
administrative order, rule or regulation
contrary to or inconsistent with, the
provisions of this Act is hereby repealed,
modified or amended according.

Section 17. Effectivity Clause. - This Act

shall take effect on 01 January 2002
following its publication in at least two
(2) newspapers of general circulation.

EXPIRATION OF LEASE
Art. 1669. If the lease was made for a
determinate time, it ceases upon the day
fixed, without the need of a demand.
(1565)

IMPLIED NEW LEASE

Art. 1670. If at the end of the contract
the lessee should continue enjoying the
thing leased for fifteen days with the
acquiescence of the lessor, and unless a
notice to the contrary by either party has
previously been given, it is understood

that there is an implied new lease, not for

the period of the original contract, but for
the time established in Articles 1682 and
1687. The other terms of the original
contract shall be revived. (1566a)
Art. 1672. In case of an implied new
lease, the obligations contracted by a
third person for the security of the
principal contract shall cease with
respect to the new lease. (1567)
RULE IN CASE OF CONTINUED
POSSESSION
OVER
LESSORS
OBJECTION
Art. 1671. If the lessee continues
enjoying the thing after the expiration of
the contract, over the lessor's objection,
the former shall be subject to the
responsibilities of a possessor in bad
faith. (n)