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Kayang-Hilltop Barangay

Baguio City
September 28, 2016
HON. MAURICIO G. DOMOGAN
Mayor
City of Baguio
Dear Sir:
POSITION PAPER
(On the Proposed New Terms and Conditions
Re: Lease Contracts between the City Government and the
Building Owners over City-owned Properties)
The Building Owners through the members of the Board of Directors of the
association on September 21, 2016, met to discuss the proposed provisions of
the new Lease Contracts between the City government and the Leaseholders.
The officers believing that the City government in order to generate
additional revenues for the City government,

inserted these new terms and

conditions in the proposed contracts of lease as follows:


1. Paragraph 4, which provides the advance payments of lot rentals on the
first 5 days of the month. We agree and appreciate your decision to
restore the first TEN (10) Days of the month to pay our advance
payments.
2. Par. No. 5, Sec. C: a new inserted provision which provides for an
increase of (Ph 1.00) every five (5) years after the execution of the
contracts. We unanimously approved the inclusion of this condition.
3. Par. 5, Sec. K:

which originally disallowed the transfer of leasehold

rights to Third persons without prior approval and consent of the City
government and the payment of fixed transfer fee of twenty-five
thousand (25,000.00) pesos or five per centum (5%) of the transfer price.
We approve and welcome the City governments amendment which
states:
Direct transfer to heirs shall be exempted from paying the transfer
fee, only those who waived their rights with monetary consideration
executed within the duration of this Contract, and who are not direct

heirs of the Lessee shall pay the transfer fee of Php 25,000.00. Those
who waived their rights prior to 2016 shall still be covered by the Php
2,000.00 pesos Transfer fee, provided that said transfer has been
confirmed through a Council Resolution.
4. Par. NO. 9 which provides for the commencement of the contract from
January, 2016, whereby the Building owners are required to pay back
rentals from January, 2016. Although the payment of back rentals is
onerous, we have unanimously agreed provided, that the Lessees shall
be allowed to pay their back rentals within one year from the signing of
a new Contract of Lease.
5. Par. 5, Sec. J: which provides: That after the expiration of this contract
as stipulated in par. (a) hereof, the Second Party shall turn over full
ownership and possession of the leased property and all the
improvements thereon and the First Party shall give priority to the
Second Party to negotiate the terms and conditions of a new lease
contract thereon without any obligation of the lessor to pay the lessee
the value of the same, provided, that the lessee be given the priority to
lease the premises under the terms and conditions the parties may
agree.
The inclusion of this controversial condition is exactly where the
problem starts. Why do the lessor has to resort to the confiscation of
private properties of the Building owners to raise additional revenues for
the City government? After all, the Building owners are willing to accept a
rental increase amounting to more than 600%. We agreed to accept this lot
rental increase believing that this is the most justified means the City can
resort to.
Our bonafide members deny having signed the new contract which
included this controversial condition. Those who signed may have been
manipulated by the agents of the lessor, and believing that this provision
was included in their expired or expiring contracts. Or they are not
members of the Building Owners Association and are not aware of the
present negotiation of terms and conditions between the Lessor and the
Lessees or they are situated in some other lots owned by the City
government.

We appeal to the Lessor to rethink its position on this provision. If


included, it is inhuman, because it disregards the interest of the individual
lessee, who spent quite a fortune to develop the once mountain-area that
was Kayang-Hilltop. They spent so much levelling of this area, and in the
constructions of their buildings.
Historically, none of our expired lease contracts provided for an
automatic transfer of ownership to the Lessor of these buildings. Not even
City Ordinance of 2000, neither Ordinance 60-84 and Resolution 103-69 of
1969, which enticed these Baguio City businessmen, invited by the City
government to develop the area into a commercial community provides for
automatic transfer of ownership of these structures. Instead, Resolution
103-69 on Par. 14, provided: That at the end of the lease contract between
the awardees and the City of Baguio, any improvement introduced by the
awardee on the lot awarded to him shall be properly appraised by
appraisers appointed by both parties and the appraised value shall be
reimbursed by the City of Baguio to the awardee, provided that in no case
shall such appraised value be more that 150% of the average assessed
value of the improvement as declared for taxation purposes for the last ten
(10) years before the appraisal. We are playing a game with specific rules
and these rules cannot be changed at the middle of the game to favor a
party.
In view of the provisions of these City Ordinance, and resolutions
which defines the relationship of the lessor and the lessees, the building
owners dont believe in the applicability of the Automatic Transfer Clause
of their Lease Contracts. They are builders in good faith under the existing
laws of the Philippines, having no claim of ownership over the City-owned
lots.
The inclusion of the Automatic Transfer provision is a change in the
rule of the game and it contravenes the above-mentioned laws since this
provision was not expressly provided in these laws. It is not enforceable
and it is a nullity, as asserted by then Atty. Juan B. Valdez, former City
Legal Officer in 1985, because the same has no source. It is confiscatory in
nature, given the following circumstances:

First, the buildings, are generally, big. And so much money have
been have been invested to build their four storey concrete buildings.
Second, the fifty years more less occupation by the building owners
is too short to recover their investments, the early unloading of fish
products and other products from the lowlands along main Kayang street
every day have discourage business prospectors, but to be candid, its
only now during the present administration that we are fast recovering
these capital investments.
Lastly, with the Automatic Transfer provision being inserted, the
lessor acquires ownership of these buildings without reimbursements,
without full proof options on the part of the lessees to lease both the
buildings and the lots owned by the City government. And therefore, the
building owners lost ownership and control over their buildings.
The Automatic Transfer Clause is at war with the requirements of due
process clearly observed in a democratic society like ours.
We appeal urgently therefore, to the City government as LESSOR of
these lots, headed by the Honorable Mauricio G. Domogan, Mayor of the
City of Baguio,
opportunity

to give the Building owners an extended a dignified

to fully recover their investments by the exclusion of the

Automatic Transfer Clause in view of our overwhelming approval of all the


new economic terms and conditions imposed by the City government.

Respectfully,