LEGAL ASPECTS OF SALE MORTGAGE AND LEASE

D
ct whereby a party, for consideration, binds himself to transfer ownership and possession of a property in fav

WHO CAN ENTER INTO CONTRACT OF SALE

As a general rule, all persons, whether natural or juridical, who can bind
themselves have legal capacity to buy and sell.
ABSOLUTE INCAPACITY TO SELL AND BUY.
1. The husband and wife cannot sell property to each other except in the following cases:
a. When separation of property was agreed upon in their marriage settlement
executed before the marriage. or,
b. When the spouses obtained a juridical decree of separation of property during their
marriage
2. Unemancipated minors, insane or demented persons, and deaf-mutes who do not know
how to write cannot give consent to a contract.
3. Foreigners cannot buy real estate in the Philippines except in the following cases:
a. When the purchase refers to a condominium unit not exceeding 40% interest in the
condominium project
b. When the foreigner is a former natural-born Filipino citizen, subject to the limitations
prescribed by Batas Pambansa 185.
 RELATIVE INCAPACITY TO BUY (PAGE J)

◼ The following persons cannot buy, even at public or juridical auction,either in person or through another:

1.

Public officials and employees—with reference to property of the State or any of its political subdivision, the admin

2.

Agents—with reference to property entrusted to them for administration or sale, unless the consent of the Principa

3. Guardians—with reference to property under guardianship.

4. Executors and administration—with reference to property under their administration.

5. Justices, judges, fiscals and clerks of court—with reference to

property in litigation or levied on execution in the court within
jurisdiction.
 DACION EN PAGO
◼This refers to conveyance of real property to a creditor in payment of an obligation or debt.

DISTINCTIONS BETWEEN SALE AND DACION EN PAGO

Sale
1. There is no pre-existing obligation by the seller in favor of the buyer

2. Sale creates an obligation to pay (by the buyer)

3. There is more freedom in pricing

Dacion En Pago
1. The assignor has pre-existing Obligation to the assignee

2. Dacion extinguishes and obligation to Pay (by assignor)

3. There is less freedom in pricing

 CONTRACT OF SALE AND CONTRACT TO SELL

1. Distinction: In a contract of sale, there is already a transfer of ownership;

In contract to sell, there is no transfer of ownership yet but merely mutual
promise to sell and buy.

2. Criterion: The test to determine whether a contract is a contract of sale or

a contract to sell is not the manner of payment, but whether of not there is
conveyance of ownership in the grant of dispositive clause of the deed.
There is transfer of ownership when the dispositive clause states that the
vendor thereby sells transfers, and conveys unto the vendee in a manner
absolute and irrevocable xxx”

ESSENTIAL ELEMENTS OF SALE

1. Legal Requisites for validity – consent of parties, object, and consideration.
2. Formal Requisites:

a. An agreement for the sale of real estate must be in writing and subscribed
to by the parties in order to be enforceable by action.

b. When the sale is through an agent, the authority of the agent must be in a
public instrument.
 EXPENSES FOR EXECUTION AND REGISTRATION OF SALE

ecution
◼ and registration of the sale. In other words, the parties may stipulate as to who will pay the expenses

RULE IN CASE OF DOUBLE SALE

The priority of rights in case of double sale should be governed by the following rules:

1. The buyer who acquired in good faith and was the first to register the sale shall have a better right.

of the
2. buyers registered the sale, the buyer who acquired in good faith and was the first in Possession shall ha

rs registered
3. the sale or took possession, then the buyer who acquired in good faith and has the oldest title sh
RULE WHEN AREA SOLD IS DIFFERENT FROM THAT STAT

1. If the sale is for a lump sum, there shall be no adjustment in the price
although the actual area is different from that stated in the deed.

2If the sale states - the price per square meter, the following rules shall apply;

a. If the actual area is more, the buyer may return the excess or retain it by
paying a proportionate additional amount.

b. If the actual is less, the buyer may demand for the deficiency. If this is not
possible, the buyer is entitled to a proportionate refund or rescission of the
contract, provided that in case of rescission, the deficiency in area is not less
than one-tenth of the area in the deed.
 SALE WITH MORTGAGE AND SALE WITH
ASSUMPTION OF MORTGAGE
1. Sale with mortgage is a sale on installment basis with transfer of ownership
where the balance of the purchase price is secured by a simultaneous
mortgage on the same property executed by the buyer
in favor of the seller.

rty is covered
2. by a pre-existing mortgage, and the buyer pays the seller a stipulated amount (cash involved) an

ge, two3.
registration fees are paid to the Registry of Deeds because two contracts are being registered – the co

ly one registration fee is paid because only one contract is being registered – the contract of sale; the pre-exis
 PREFERENCE OF PARTIES ON INSTALLMENT SALE
ith mortgage. This is so because a contract to sell does not involve transfer of ownership yet, and in case of de

case of default in payment, the buyer does not yet lose ownership because the seller still has to foreclose the

OBLIGATIONS OF PARTIES

1. Seller; (a) Transfer ownership of property sold, (b) Warrant against eviction
and hidden defects, and(c) deliver possession to the buyer, (d) pay expenses for
execution and registration of the deed of sale, Unless otherwise stipulated.

2. Buyer; (a) pay the price, and (b) accept delivery of possession
 MARITAL CONSENT IN SALE

Required in the following cases:

bsolute community of property, except when the property is inherited or acquired before the marriage by a s

g the spouses is conjugal partnership, except when the property is acquired by inheritance or with exclusive f
 1.

TRANSFER OF INHERITE
When the registered owner dies without any debt and the heirs want the title transferred in the

a. Deed of Extrajudicial Settlement of Estate (or affidavit or adjudication if there is only

one heir)
b.
Owner’s duplicate certificate of title.
c.
Affidavit of publication from newspaper that the extrajudicial settlement was
d. published once a week for three consecutive weeks.
BIR certificate of authority to register (after payment of estate tax and documentary
e. stamps)
f. BIR estate tax confirmation receipt
g. Transfer tax receipt (from decedent to heirs)
Real estate tax clearance

2.
If the property will be sold by the heirs, the following additional documents are required:

eeda.of sale
R certificate
b. of authority to register the sale (after payment of capital gains/withholding tax and documentary stamp
R confirmation receipt for capital gains/withholding tax and documentary stamps Transfer tax receipt (from heirs to
c. of incorporation and board resolution (if buyer is a corporation).
ticles
d.
 e.
MACEDA LAW (R.A. 6552)
1. Objective – To protect buyers of real estate on installment against onerous
and oppressive conditions

nt 2.
covered by contract to sell and not sale with mortgage, including residential condominium, apartments but

3. Rights of buyer who has paid two years or more:

a. To pay, without additional interest, any installment due within the grace period
which is equivalent to one month for every year of installment payments,
provided that such right can only be availed of once every five years.
b. To receive a 30-day notarial notice of cancellation before his contract can be
canceled for delinquency
c.
To receive the cash surrender value of his total payments before his contract can
be canceled for delinquency. The refund is equivalent to 50% of total payments
and, after the fifth year, and additional 5% per year of payments but not to
exceed 90% of total payments.
d. To transfer or assign his right to the contract.
e. To register or annotate his contract on the title
f.
To pay, without additional interest, the full principal balance of the price before
the term of the contract.
 4.Rights of buyer who has paid less than two years: The buyer has practically the same rights as

a. The grace period to pay without additional interest any installment due is fixed at sixty days.

uency,
b. the buyer is only entitled to receive a 30-day notarial notice of cancellation but without right to receive

RIGHT TO REFUND UNDER MACEDA LAW AND P.D.957

Maceda Law

to1.
refund applies as a requisite for Cancellation of contract due to delinquency when Buyer has paid at least tw
d is 50% of total payments plus additional 5% per year after the fifth year.
2.

Presidential Decree 957

1. Right to refund applies when developer fails to complete development within the reglimentary period.
Refund is 100% of total payments plus interest .
2.
 PACTO DE RETRO SALE (CONVENTIONAL REDEMPTION)

1. Definition – it is a sale where the vendor reserves the right to purchase or

redeem the property.

eriod – Depends
2. on the agreement of the parties which in no case shall exceed tenyears. In the absence of sti

, the vendor may still repurchase the property within 30 days from final judgment in a civil action that the con

LEGAL REDEMPTION

the right
1.granted by law to certain parties to repurchase or to have preferential right to buy, even against the
 2.Cases when legal redemption applies:

he registered
a. owner whose property has been the subject of extra-judicial foreclosure or tax sale may redeem

m. Legitimate
b. tenants for at least ten years of land in urban land reform area shall have the preferential right t

f co-ownership.
c. A co-owner may exercise the right of redemption in case the share of any co-owner is sold to

d shall d.
have the right of redemption when a piece of rural land which does not exceed one hectare is sold, exc

portion
e.thereof cannot be used for any practical purpose within a reasonable time, having been bought mere
 REAL ESTATE MORTGAGE
DEFINITION

Real estate mortgage is a contract in which specific property is

hypothecated to secure the fulfillment of a principal obligation without
necessity of change of possession.

KINDS OF MORTGAGE

1. Conventional or Voluntary – one created by agreement of the parties.

2. Legal – one created by law wherein the creditor is deemed to have a lien
on the property without the necessity of stipulating it. (Example: By
specific provision of law, any person who has supplied
materials in the construction of a building is deemed to have a lien on
the building)

3. Judicial – one created or resulting from a court decision as when a deed

of sale is declared by the court to be a mortgage.

4. Closed Mortgage – one which cannot be paid earlier than maturity,

unless the mortgagor agrees to accept early payment.

5. Open Mortgage – one which can be paid off at any time before maturity.
 CASES WHEN CONTRACT IS PRESUMED TOBE EQUITAB

1. When the price in a pacto de retro sale is unusually low.

2.
When the vendor retains possession as lessee or otherwise.
3.
When the redemption period in a pacto de retro sale is extended after
the expiration.

4. When the vendor binds himself to pay the realty tax.

5.
When the vendee retains part of the purchase price.
6.
Other cases wherein it can be clearly inferred that the intention of the
parties is a mortgage contract.

7. In case of doubt, a contract purporting to be a sale with right to

repurchase shall be construed as an equitable mortgage.
 REQUISITES OF MORTGAGE

incipal
1. obligation Mortgagor must be the absolute owner of the property Mortgagor must have free disposal
egistered
2.
3.
4.

WHAT ARE INCLUDED IN MORTGAGE

gs and1.improvements, unless expressly excluded. Rents not yet collected at the time of loan maturity.
ot yet2.harvested at the time of loan maturity
3.

VOID STIPULATION IN MORTGAGE

um - a1.stipulation which authorize the mortgagee to appropriate the property as his own automatically upon
do – a stipulation which prohibits the mortgagor from alienating or selling the property during the term of the

2.
DISTINCTIONS BETWEEN REAL ESTATE MORTGAGE AND
CHATTEL MORTGAGE

Real Estate Mortgage Chattel Mortgage

1. Object Covers real property Covers personal property

2. Form Must be in public

May bedocument
in private document provided it is accompanied by affid

3. Redemption
Mortgagor has right of redemption after
foreclosure sale
DISTINCTIONS BETWEEN REAL ESTATE MORTGAGE AND
ANTICHRESIS

Real Estate Mortgage Antichresis

1.Possession Mortgagor retains Mortgagee gets

possession of property possession of property

2.Fruits Mortgagor retains right Mortgagee collects the apply value thereof in payment
to collect fruits of property
principal

3.Realty TaxMortgagor pays realty Mortgagee assumes realty tax on prope

tax on the land
 MORTGAGE TO ALIEN

olve conveyance of the property to the mortgagee. However, in case of foreclosure, the alien mortgagee cann

REQUISITES FOR DISCHARGE OF MORTGAGE

f the obligation.
1. Execution of Deed of Release of Mortgage. Registration on Deed of Release of Mortgage
2.
3.

DEFICIENCY JUDGMENT

mortgagor
1. to pay the balance of the obligation if the proceeds of the judicial foreclosure is not sufficient to co
gor is only liable for deficiency judgment when he is at the same time the debtor.

2.
 JUNIOR AND SENIOR MORTGAGE

1. Junior mortgage is one which is subordinate or inferior in lien or claim to another mortgage.

2. Senior mortgage is one which is superior in lien or claim to another mortgage.

or mortgagee
3. must be paid first. In other words the senior mortgage enjoys preferential right over the junior mortgage with re

FORECLOSURE OF MORTGAGE

1. Definition – It is a process instituted by the mortgagee by which the property subject of

mortgage is sold at public auction to satisfy the principal obligation.

2. General Steps in Judicial Foreclosure:

a. Filling with court of complaint for foreclosure

b. Notice and hearing
c. Court order to pay obligation within 90 days
d. Public auction if obligation is unpaid within 90 days Court approval of sale
e.
 RIGHT OF REDEMPTION AND EQUITY OF REDEMPTION

1. and the period is one year from auction sale except when the property was acquired by free patent, homestead paten
closure

Equity on redemption applies in judicial foreclosure which may be exercised before the sale is2.approved by the court. Afte
the Philippines, the mortgagor is given the right of redemption either one year from confirmation of the sale after judicia

LEASE

DEFINITION

Lease is a contract whereby a person, for consideration gives to another the possession use, and enjoyment of a pr

Lease Free Estate is the right of the owner-lessor to receive the contract rent and the
reversion of the property at the end of the lease.

Leasehold is the right of the leasee to use the property subject to compliance with the provision on the lease contra
 PERIOD OF LEASE

1. Lease periods depends on the agreement of the parties which in no case shall exceed:

99 years,
a. if leasee to another is a Filipino citizen (civil code);
25 years
b. renewal to another 25 years if lease is a foreigner but not an investor.
50 years
c. renewal to another 25 years is lease is a foreigner investor and the leased area shall used solely for investment (R.A

factories, assembly or processing plants, agro-industrial enterprises land development for industrial or comm

y investment in the Philippines through actual remittance of foreign exchange or transfers of assets upon reg

m depends
2. on the manner the rental is paid in case of urban land. In case of agricultural land, the period shall
 RENT CONTROL BP 877 AS AMENDED BY RA 6643 AND RA 6828
1. Applicability. The law applies to properties used for residential purpose where
the monthly rental does not exceed p480.00 as of July 1, 1985.

2. Rental increase. The law prohibits the lessor from increasing the rental by
more than 10% for the period July 1, 1985 to December 31, 1995, and not
more than 20% per year thereafter.

3. Rental Deposit – The lessor is prohibited from demanding any advance rental
but is allowed to ask for deposit not exceeding one month rental.

4. Concept of Residential Unit. Includes not only units used solely for dwelling
but also those used for business provided that: a) the lessee and his family
actually live therein; b) the initial capitalization does not exceed P5,000.00;
and c) the operation of the business does not require the service of persons
other than members of the lessee’s family:

5. Properties exempt from rent control:

a. Motels and motels rooms

b. Hotel and hotel rooms
c. Boarding houses
d. Dormitories
e. Rooms and bed spaces
 ASSIGNMENT OF LEASE AND SUBLEASE
Assignment of Lease

Original
1. lessee ceases to be party to the lease contract and his rights and obligation are assumed by the assig

2.

Lessee can only assign if he is expressly authorized in the lease contract

3. Assignment covers entire property

Sublease

1. Original lessee continues to be party to the lease Contract.

e can sublease
2. if he is expressly authorized in the lease contract and if the lease contract is silent as to authori

3. Sublease may cover only part of property

Q1. IF THE LEASE CONTRACT IS
SILENT AS TO THE RIGHTS
OF THE LESSEE TO ASSIGN
OR SUBLEASE, CAN HE DO
SO WITHOUT THE CONSENT
OF THE LESSOR?
A. Lessee cannot assign the lease without the consent of the Lessor.
In case of sublease, the can do even without the consent of the
Lessor as long as the terms of the contract are silent on it so it was
not prohibited in the lease contract.

DURATION OF LEASE & WHEN IT IS TERMINATED

 As stipulated in the contract

 If there is no stipulation in the contract, it will depend on the

rental payment; if the rental is payable monthly, the lease is from
month to month. If it is payable yearly, it is from year to year.
Q2. MAY THE BUYER OF A
PROPERTY SUBJECT
TO LEASE TERMINATE
THE LEASE?
A. YES, WHEN:

1. The lease is not registered with the Registry of Deeds

(annotated at the back of a title)

2. The buyer has no actual knowledge of the lease.

3. There is no contrary stipulation to that effect in the contract

of sale.
Q3. WHAT ARE THE INSTANCES
WHEN THE BUYER OF A
PROPERTY SUBJECT OF
LEASE CANNOT TERMINATE
THE LEASE?
A. 1. When it is registered with the Registry of
Deeds

2. When there is a stipulation in the contract of

sale that the buyer shall respect the lease.

3.When the buyer knows the existence of the

lease

4. When the sale is pacto de retro sale

Q4. IF THE CONTRACT OF
LEASE EXPIRES BUT THE
LESSEE CONTINUES TO
OCCUPY THE PROPERTY,
CAN THE LESSEE STILL BE
CONSIDERED A LESSEE?
A1. It depends. If within 15 days after the expiration of
the lease and the lessee has not received from the
Lessor a notice to vacate, then he still is a lessee. His
contract is deemed renewed, for one year or one
month, as the case may be, depending on how he pays
his rental.

IF THE CONTRACT OF LEASE EXPIRES

A2. However, if within 15 days after the expiration of the

lease, the Lessee was notified by the Lessor to vacate the
property but he still continues occupying the property, then
he becomes an illegal occupant.
 LEASE TO ALIENS

Under the new Civil Code ruling, the

period of lease is allowed up to 99
years. PD 471 however, has limited
the period to 25 years but renewable
for another 25 years.
 IMPROVEMENT ON PROPERTY

ed,1.he is entitled to fifty percent refund of the value of the improvements at the end of the lease. If the lessor

bursement
2. but he may remove the ornamental objects provided no damage is caused to the principal and the

WHEN PURCHASER OF LEASED PROPERTY BOUND TO RESPECT LEASEHOLD

1. When the lease is registered;or

2. When the buyer has actual knowledge of the lease even if it is not
registered, or

3. When the contract of sale provides that the buyer shall recognize the leasehold.
 REPAIRS

Unless otherwise stipulated, the lessor is obliged to make the necessary repairs on the property.

Failure by the lessor to undertake the repair when so obligated is a ground to suspending payment of renta

TACITA RECONDUCTA

see continues occupancy with the acquiescence of the lessor and without notice to vacate for at least fifteen d

GROUNDS FOR EJECTING TENANT

1. Under Civil Code (when property is not subject to rent control)

Non-payment of rental even for one month

Expiration of the period
Violation of any provision of lease contract
Misuse of the property
 2. Under Rent Control Law (when property is subject to rent control)

a. Assigning of the lease of subleasing without the written consent of the lessor.

b. Non-payment of rental for three months

c.
s expired, 2) three months notice in advance is given the lessee. 3) the owner of immediate member of his fam

d.
Ownership by the lessee of another residential unit provided the lessor gives three months advance notice.

e. Condemnation order by appropriate authority

DISTINCTIONS BETWEEN SALE, MORTGAGE AND LEASE

1. Sale and lease are principal contracts, while mortgage is an accessory contract.

2. In sole of possession, while in mortgage there is no transfer of possession.

3. In sale, there is transfer of ownership, while In mortgage and lease there is no.
 “RENT CONTROL ACT OF 2005” R. A. No.

SALIENT FEATURES

t be
1. increased by more than ten (10%) annually as long as the unit is occupied by the same lessee. When the r

2.
oms and bed spaces offered for rent by their owners, except motels, motel rooms, hotels, hotel rooms, but als
urrent month or the beginning of the lease agreement unless the contract of lease provides for a later date of
he lease agreement. Any and all interest that shall accrue therein shall be returned to the lessee at the expira

y bills or destroys any house components and accessories, the deposits and interests therein shall be forfeited

4.Assignment of Lease or Subleasing – assignment of lease or subleasing of the whole or any portion of the
 5. GROUNDS FOR JUDICIAL EJECTMENT – Ejectment shall be allowed
on the following grounds:

esidential
(a) units in whole or in part, including the acceptance of boarders or beds pacers, without

e lessee
(b) may either deposit , by way of consignation, the amount in court ,or with the city or muni

rent within ten (10) days of every current month. Failure to deposit the rentals for three (3) month

n joint affidavit by him and the lessee to be submitted to the city or municipal treasurer and to the
(c) Legitimate need of the owner/lessor to responses his or her own use
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 has 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
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 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 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 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. (Sec. 7)

n-interest
6. shall be entitled to eject the lessee upon the ground that the leased premises have been sold or mor

tten rent-to-ownagreement that will result in the transfer of ownership of the particular dwelling in favor of t
7.

8. Ten thousand pesos (P10,000.00) and all other areas the total monthly rent for each of which does not e
xceed
 Republic Act No. 9653

AN ACT ESTABLISHING REFORMS IN THE REGULATION OF RENT OF CERTAIN

RESIDENTIAL UNITS, PROVIDING THE MECHANISMS THEREFOR AND FOR
OTHER PURPOSES.

Be it enacted by the Senate and House of Representatives of the Phili

ppines in Congress assembled:

SECTION 1. Short Title. – This Act shall be known and cited as the “Rent Control
Act of 2009.“

SEC. 2. Declaration of Policy. – The State shall, for the common good,
undertake a continuing program of encouraging the development of
affordable housing for the lower income brackets and other
beneficiaries. Toward this end, the State shall continue to protect
housing tenants in the lower income brackets and other beneficiaries
from unreasonable rent increases.
 SEC. 3. Definition of Terms. –

The following terms as used in this Act shall be understood as:

(a) “Rent” shall mean the amount paid for the use or occupancy of a residential
unit whether payment is made on a monthly or other basis.

(b) “Residential unit” shall refer to an apartment, house and/or land on which
another’s dwelling is located and used for residential purposes and shall
include not only buildings, part or units thereof used solely as dwelling
places, boarding houses, dormitories, rooms and beds paces offered for rent
by their owners, except motels, motel rooms, hotels, hotel 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 premises, shall be limited to his or her spouse, direct
descendants or ascendants, by consanguinity or affinity.

(d) “Lessee” shall mean the person renting a residential unit.

(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 leases or rents out a residential unit
from a sublessor.
SEC. 4. Limit on Increases in Rent. – For a period of one (1) year from its
effectivity, no increase shall be imposed upon the rent of any residential
unit covered by this Act: Provided, that after such period until December
31, 20l3, the rent of any residential unit covered by this Act shall not be
increased by more than seven (7%) annually as long as the unit is
occupied by the same lessee: Provided, further, That when the residential
unit becomes vacant, the lessor may set the initial rent for the next lessee:
Provided, however, That in the case of boarding houses, dormitories,
rooms and bedspaces offered for rent to students, no increase in rental
more than once per year shall be allowed.

SEC. 5. Coverage of this Act. – All residential units in the National Capital Region
and other highly urbanized cities, the total monthly rent for each of which
ranges from One peso (P1.00) to Ten thousand pesos (P10,000.00) and all
residential units in all other areas, the total monthly rent for each of which
ranges from One peso (P1.00) to Five thousand pesos (P5,000.00) as of
the effectivity date of this Act shall be covered, without prejudice to
existing contracts.

SEC. 6. Authority to Continue Rental Regulation. – Notwithstanding the lapse of

the period provided in Section 4 of this Act, the Housing and Urban
Development Coordinating Council (HUDCC) is hereby granted the
authority to continue the regulation of the rental of certain residential
units, to determine the period of regulation and its subsequent extensions
if warranted, to determine the residential units covered and to adjust the
allowable limit on rental increases per annum, taking into consideration,
among others, National Statistics Office (NSO) census on rental units,
prevailing rental rates, the monthly inflation rate on rentals of the
immediately preceding year, and rental price index.
SEC. 7. Rent and Requirement of Bank Deposit. – Rent 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 rent. Neither can he/she demand more than two (2) months
deposit which shall be kept in a bank under the lessor’s account name
during the entire duration of the lease agreement. Any and all interest
that shall accrue therein shall be returned to the lessee at the expiration
of the lease contract. In the event however, that the lessee fails to settle
rent, electric, telephone, water or such other utility bills or destroys any
house components and accessories, the deposits and interests therein
shall be forfeited in favor of the latter in the amount commensurate to
the pecuniary damage done by the former.

SEC. 8. Assignment of Lease or Subleasing. – Assignment of lease or subleasing

of the whole or any portion of the residential unit, including the
acceptance of boarders or bed spacers, without the written consent of the
owner/lessor is prohibited.
SEC. 9. Grounds for Judicial Ejectment. – Ejectment shall be allowed on the following
grounds:

(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 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;
(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.

SEC. 10. 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.

SEC. 11. Rent-to-Own Scheme. – At the option of the he or she may

lessor,
engage the lessee in a written rent-to-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.
SEC. 12. Application of the Civil Code and Rules of Court of the Philippines . –
Except when the lease is for a definite period, the provision of
paragraph (1) of Article 1673 of the Civil Code of the Philippines, insofar
as they refer 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.

SEC. 13. 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.

SEC. 14. Information Drive. – The Department of the Interior and Local
Government and the HUDCC, in coordination with other concerned
agencies, are hereby mandated to conduct a continuing information
drive about the provisions of this Act, which shall be translated and be
made available in major regional dialects and shall be posted in
conspicuous public places, including barangay halls.

SEC. 15. Review of the Rental Regulation – The HUDCC is hereby mandated to
conduct every three (3) years from the effectivity of this Act a review of
its implementation and a study on rental regulation, and submit to
Congress its recommendation on whether a continuing regulation is still
necessary or deregulation is already warranted.
SEC. 16. Program to Cushion Impact in the Event of a Regulation-Free Rental
Housing Market –
The HUDCC and its attached agencies are hereby mandated to formulate
and implement a two (2) year transition program which will provide for
safety measures to cushion the impact in the event of a regulation-free
housing market.

SEC. 17. 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.

SEC. 18. 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 accordingly.

SEC. 19. Effectivity Clause. – This Act shall take effect beginning fifteen (15) days
after its complete publication in at least two (2) newspapers of general
circulation.