Hmmm, where do we start? There’s good news and bad news whether you’re a lessor or lessee. Section 4 of the Act provides that for a period of 1 year from its effectivity (should be around now), there is to be no rent increase for any covered residential unit. And, after such 1-year period until December 31, 20l3, the rent of any covered residential unit continuously occupied by the same lessee shall not be increased by more than 7% annually. In the case of boarding houses, dormitories, rooms and bedspaces offered for rent to students, no rent increase beyond once per year is allowed.
Residential Units Covered
A covered residential unit is any residential dwelling. Under Section 3 of the Act, it may be 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/her family actually live therein and use it principally for dwelling purposes.
Plus, a covered residential unit must have a total monthly rent ranging from P1.00 to P10,000.00 if in the National Capital Region and other highly urbanized cities, or ranging from P1.00 to P5,000.00 for all other areas. (Section 5) The same section inexplicably goes on to state that it is “without prejudice to existing contracts.” It would seem that to escape the law’s application, the landowner need only increase the rent. And the law affords no relief for those who are already paying high rentals.
Naturally, any rent-to-own agreement for the transfer of ownership of the leased premises in favor of the lessee is exempt from coverage. (Section 11)
Section 7 requires rent to be paid in advance within the first 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 1 month advanced rent.
Nor can lessor demand more than two 2 months deposit which shall be kept in a bank under the lessor's account name for the duration of the lease contract. Any and all accrued interest thereon shall be returned to the lessee at the end of the lease contract. But if 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 lessor in the amount commensurate to the pecuniary damage done by the lessee.
Under Section 8, the assignment of lease or the subleasing of the whole or any portion of the leased premises, including the acceptance of boarders or bedspacers, without the written consent of the owner/lessor is prohibited.
Under Section 10, no lessor or his successor-in-interest may eject the lessee on 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 lists the grounds for ejectment:
- Assignment of lease or subleasing of leased premises in whole or in part, including the acceptance of boarders or bedspacers, without the owner/lessor’s written consent;
- 3 months arrears in rent. 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 1 month after lessor’s refusal to accept payment.
The lessee shall thereafter deposit the rent within 10 days of every current month. Failure to deposit the rent for 3 months shall be 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 or to the bank where deposit was made, as the case may be, shall be allowed to withdraw the deposits;
- The legitimate need of the owner/lessor to repossess the property for own use or for the use of any immediate family member as a residential unit but the lease for a definite period must have already expired. You must stand by your contract.
The lessor is required to give formal notice of the intention to repossess the property 3 months in advance. And 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;
- The lessor’s need 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. After said repair, the lessee ejected shall be given first preference to lease the same premises. The new rent shall be reasonably commensurate with the expenses incurred for the repair. And if the residential unit is condemned or completely demolished, the lease of the new building will no longer be subject to the first preference rule in favor of lessee; and
- Expiration of the lease contract.
Civil Code provisions still apply
Provisions of the Civil Code and the Rules of Court on lease contracts, insofar as they are not in conflict with the provisions of the Act shall apply. (Section 12)
Section 19 states that the Act shall take effect beginning 15 days after its complete publication in at least 2 newspapers of general circulation. (SEC. 19) The Act was approved on July 14, 2009.