Rent Control Act of 2009 (R.A. 9653) in the Philippines

Rent Control Act applies to residential units having a certain ceiling on rental payments.

Coverage

Republic Act No. 9653 or the Rental Control Act of 2009 covers lease contracts over residential units. However, it has a limited coverage and does not entirely cover all leases of residential units.

The law applies to only to residential units in the National Capital Region and other highly urbanized cities which have a total monthly rent not exceeding P10,000.00, and residential units in all other areas which have a total  monthly rent of P5,000.00, in both cases the minimum is P1.00.

Rent to own scheme

The lessor has the option to engage the lessee in a written rent-to-own agreement that will transfer the ownership of the particular residential unit in favor of the lessee. This agreement will result in the lease taken out of the coverage of the Rent Control Act despite the amounts stated in the immediately preceding paragraph.[1]

Concepts

A rent refers to “the amount paid for the use or occupancy of a residential unit whether payment is made on a monthly or other basis”.[2]

A residential unit refers 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 bedspaces 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”.[3]

For purposes of repossessing the leased premises, the term immediate members of family of the lessee or lessor is limited to “his or her spouse, direct descendants or ascendants, by consanguinity or affinity.”[4]

The Lessee refers to “the person renting a residential unit”.[5]

The Owner/Lessor includes “the owner or administrator or agent of the owner of the residential unit.”[6]

The Sublessor refers to “the person who leases or rents out a residential unit leased to him by an owner.”[7] On the other hand, the Sublessee refers to “the person who leases or rents out a residential unit from a sublessor.”[8]

Rental payment and deposit

1 month advance payment and 2 months deposit

The lessor is only permitted to require one (1) month advance rental payment and two (2) months deposit.[9] Any other additional amount or in excess of these are not allowed.

The two (2) months deposit is required to be kept in the lessor’s bank account during the entire duration of the lease agreement.[10] Any and all interest that accrues therein will have to be returned to the lessee at the expiration of the lease contract.[11]

Offsetting for deposit for liabilities

The lessor is allowed to forfeit in the amount commensurate to the pecuniary damage or liability attributable to the lessee.[12] This may include unpaid rent, electric, telephone, water, or such other utility bills or destroys any house component and accessories.[13]

Monthly payment of rent

The rent is due to 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.[14] Thus, the lessor and the lessee may agree to a later payment date after the 5th day of the month – i.e. on/before 25th of every month.

Conversely, they may not agree to a payment date earlier than the 5 days provided. That is to say, the law does not allow requiring 1 month advance payment of the monthly rent. For example, a lessee cannot be made to pay in January for rental on February. This excludes the 1 month advance payment stated earlier.

Limitations on Increase of Rent

7% maximum annual increase

The rent of any covered residential unit cannot be increased by more than seven percent (7%) every year provided it is occupied by the same lessee. Otherwise stated, the lessor is only allowed to increase annually the rent of the same lessee up to 7% of the current rent. For example, the lessor may increase the lessee’s current rent of P5,000.00 up to P5,350.00. The lessor may choose a lower rate (5%) but cannot exceed the maximum rate (7%).[15]

Initial rent for next lessee

Once the residential unit is vacated, the lessor may set the initial rent for the next lessee. In general, there is no limitation imposed on the lessor as to how much rent may be charged for the next lessee.[16] As a lease is essentially a contract, the rental fee will be the subject of negotiations and agreement by both the lessor and the lessee.

By way of exception, the lessor cannot increase the rental more than once per year if the residential units are boarding houses, dormitories, rooms, and bedspaces offered for rent to students.[17] In these types of residential units, the lessor is allowed to increase the rental once a year only even if it is with a new lessee already.

HUDCC empowered to regulate rent

The Housing and Urban Development Coordinating Council (HUDCC) has 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.”[18]

In doing so, it is mandated to take into consideration the census by the Philippine Statistics Authority (PSA) on rental units, prevailing rental rates, monthly inflation rates on rentals of the immediately preceding year, rental price index, among others.[19]

Assignment of lease and subleasing

Without the written consent of the owner/lessor, the lessee is prohibited from assigning the lease of the residential unit or subleasing it, whether in whole or in part, including the acceptance of boarders or bedspacers.[20]

Grounds for judicial ejectment

The lessor may commence judicial ejectment based on the following grounds:

  1. 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;[21]
  2. 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; [22]
  3. 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;[23]
  4. 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;[24] and
  5. Expiration of the period of the lease contract.[25]

The grounds for ejectment provided for in paragraph 1 of Article 1673 of the Civil Code does not apply to covered residential units – except for lease with a definite period. All other grounds and provisions on lease in the Civil Code, as well as the Rules of Court on lease contracts, are applicable insofar as they do not conflict with the Rent Control Act.[26]

Prohibition against ejectment due to sale or mortgage

The lessor or his successor-in-interest are not entitled to eject the lessee on the ground that the residential unit has been sold or mortgaged to a third person – even if the lease or mortgage is registered or not.[27]

Non-compliance

Non-compliance of this law may result in a penalty of either a fine or imprisonment, or both. For violations, a fine of P25,000.00 to P50,000.00, or imprisonment from 1 month and 1 day to 6 months, or both fine and imprisonment may be imposed on the offender. The penalty will be imposed on any natural/juridical person found liable.[28]

 

– – –

[1] Sec. 11, Ibid.

[2] Sec. 3[a], R.A. 9653.

[3] Sec. 3[b], Ibid.

[4] Sec. 3[c], Ibid.

[5] Sec. 3[d], Ibid.

[6] Sec. 3[e], Ibid.

[7] Sec. 3[f], Ibid.

[8] Sec. 3[g], Ibid.

[9] Par. 1, Sec. 7, Ibid.

[10] Ibid.

[11] Ibid.

[12] Par. 2, Sec. 7, Ibid.

[13] Ibid.

[14] Sec. 7, Ibid.

[15] Sec. 4, Ibid.

[16] Ibid.

[17] Ibid.

[18] Sec. 6, Ibid.

[19] Ibid.

[20] Sec. 8, Ibid.

[21] Sec. 8 (a), Ibid.

[22] Sec. 8 (b), Ibid.

[23] Sec. 8 (c), Ibid.

[24] Sec. 8 (d), Ibid.

[25] Sec. 8 (e), Ibid.

[26] Sec. 12, Ibid.

[27] Sec. 10, Ibid.

[28] Sec. 13, Ibid.