Published — February 22, 2018
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
Related Topic: Ejectment of Unlawful Occupant From Leased Premises
One of the contracts that most entrepreneurs will be entering into would be a contract of lease. Save for a few who have their own real property within which they will hold their principal place of business, a great majority of enterprises carry out their businesses on rented space. Even some big companies who wish to expand by adding branches in other locations would likely be leasing for their new spaces. Moreover, lease is not limited to real property, because movable property may also be the subject of lease, such as office equipment, movable machines and other similar items.
Lease is commonly known as a contract by which one party gives to the other the enjoyment of a thing at a fixed price, and as a contract in which one party undertakes to give to the other the use of a thing for a definite or indefinite period in consideration of a price certain. A lease has also been defined as a contract by which one of the parties agrees to give to the other for a fixed time and price the use or profit of a thing [See: G.R. No. L-40188].
Rent control law not applicable to business leases
The Rent Control Law, by express provision, is applicable only to all residential units in the National Capital Region and other highly urbanized cities with total monthly rent from P1.00 to P10,000.00, and all residential units in all other areas with total monthly rent of P1.00 to P5,000.00 [Sec. 5, R.A. No. 9653]. It is therefore clear that the Rent Control Law applies only to residential units, and not to commercial units or business leases.
Duration of lease
No lease shall be valid for more than 99 years [Art. 1643, Civil Code]. 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 [Art. 1687].
If the lease was made for a fixed period, then it ceases upon the day that was fixed by the parties without the need of a demand [Art. 1669]. However, if at the end of the contract the lessee should continue enjoying the thing leased for 15 days with the consent of the lessor, it is understood that there is an implied new lease, not for the period of the original contract, but for the periods corresponding to the payment of rent agreed upon by the parties. The other terms of the original contract shall be revived [Art. 1670].
Subleasing
In a sublease, the lessee becomes in turn a lessor to a sublessee. The sublessee then becomes liable to pay rentals to the original lessee. However, the relationship between the original lessor and lessee is not dissolved. The original parties continue to be bound by the original lease contract [See: G.R. No. 201787]. If there is no express prohibition in the lease contract against subleasing, then the lessee may do so [See: Art. 1650].
The sublessee, however, shall be subsidiarily liable to the original lessor for any rent due from the original lessee. This means that if the original lessee was not able to pay the rent, then the liability will fall due on the sublessee. However, the sublessee cannot be made liable beyond the amount of rent due from him in accordance with the terms of the sublease [See: Art. 1652].
Rules on making the necessary repairs
Unless there is a stipulation to the contrary, it is the lessor’s obligation under the law to make all necessary repairs on the leased property in order to keep it suitable for the use to which it has been devoted [Art. 1654]. The lessee may suspend the payment of the rent in case the lessor fails to make such necessary repairs [Art. 1658].
If during the lease it should become necessary to make some urgent repairs upon the thing leased, the lessee is obliged to tolerate the work being done, although it may be very annoying to him, and despite being deprived of a part of the leased premises. However, if the repairs last for more than 40 days, then the rent shall be reduced in proportion to the time and the part of the property that was deprived from the lessee [Art. 1662].
Even though it is the lessor who has the obligation to make the necessary repairs, the lessee has the obligation to at least inform the owner, with the same urgency, about the need to make such repairs to keep the thing being leased suitable for its intended use. In case of need for urgent repairs, the law allows the lessee to cause the repairs at the lessor’s cost in order to avoid imminent danger [See: Art. 1663].
Termination of the lease
Upon the termination of the lease, the lessee shall return the thing leased in the same good condition as he received it, except only in case of natural deterioration due to lapse of time, or by ordinary wear and tear [Art. 1665]. 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 [Art. 1666]. Because of this, the lessee is therefore responsible for the deterioration or loss of the thing leased, unless he is able to prove that the deterioration or loss took place without his fault [Art. 1667].
Since lease agreements are among the most common contracts that many business owners enter into (especially for lessors, because leasing, by itself, is already the actual business), it is important to know the rights and obligations of the parties to the lease in order to foster a harmonious landlord-tenant relationship from its commencement until its termination. After all, no business can operate without any space to occupy.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding lease and other special contracts, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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This blog was… how do you say it? Relevant!! Finally I have found something which helped me. Thanks a lot!