Rental Policy

Philippine rental policy

Introduction

A high percentage of the Philippine population leases a house. Some are families, and some are students who are studying far from their homes.

Whichever category one belongs, it is important that both the lessee and the lessor know their rights when it comes to rental policy. This blog will help both parties to be informed, and gain some tips before or even during renting a home.

What is Renting?

Renting happens when two parties agree to exchange money for the temporary use of any goods, services or property. The agreement can either be verbal or written which usually depends on the amount of money involved and of course, trust is a factor when deciding whether to put it in writing or not.

Homes, cars, and equipment are the usual forms of rental in the Philippines. For this post, we will tackle rentals between a tenant and a landlord.

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

Rent Control Act of 2009, also known as Republic Act 9653 has been extended to December 31, 2017. This pertains to the limitation and privileges of lessor and lessee.

There is a particular range that both parties can and cannot do which regulates the stipulation of their contracts. This law is for the protection of both parties from conflicts.

The creation of the law was prompted due to the number of renters in the Philippines.

According to the National Economic Development Authority (NEDA), about 7.2% of the households in the Philippines are renters and about 97% pays rent equivalent to P10,000 and below.

Who is covered under the rent control act?

Urban Areas

If the lessor and the property to be rented is located in an urban area such as Quezon City, Manila or Navotas and if the current rent rate ranges from P1 to P10,000, they are covered by the law. Rental costs that go beyond P10,000 are no longer subject to the rent control act.

Rural Areas

If the lessor and the property to be rented is located in a rural area, and if the current rent rate ranges from P1 to P5,000, they are covered by the law. If the rate goes beyond P5,000, involved parties are not subject to the rent control act.

Properties under the rent-to-own scheme are not under the rent control act of 2009 since it has a separate agreement.

Rights of a Lessee

A lessee must know their rights when it comes to renting a property. The following are worth keeping in mind:

  • Every property that is subject to the rent control act has rental rate limited to 7% increase per annum.
  • The lessor cannot immediately evict the lessee in the first month’s failure of payment. The lessee may be evicted only during three consecutive months of not being able to pay the rent.

If the lessor refuses to accept payment, the lessee may deposit the payment by way of consignation to the appropriate court or with the city treasurer, or with the local barangay chairman. Lessee may deposit the amount to the lessor’s bank account within one month after refusal.

The lessee must inform the lessor if such act took place.

Rights of Lessor

It is important for a lessee to know their rights but the lessor also needs protection. For our lessors, the following are under the rent control act:

  • The lessor may set a new initial rent once the property is no longer rented.
  • The lessor is not required to return the lessee’s deposit payment if there are damages to the property or if there are any unpaid bills.

Eviction:

The lessor may evict the lessee for the following reasons:

  • If the lessor or any member of the lessor’s family needs the property
  • If the lessee rented the property to others (sub-lease) without the knowledge of the lessor.
  • If there are provisions for housing authorities to repair the property due to safety reasons
  • If the contract has ended

Advanced payments and deposits:

Lessors are allowed to collect not more than one-month advanced payment and two-month deposit. The deposit should be deposited in a bank under the lessor’s name.

The amount of deposit may only be used at the end of the contract if there are damages to the property that are caused by the lessee and are not common as well as outstanding utility bills.

Unused deposit together with the interest should be returned to the lessee at the end of the contract.

Who should pay the repairs of the property?

Agreements about property repairs should be indicated clearly in the lease contract.

If, however, both parties failed to indicate the matter in the agreement, and the lessee repaired the property with the approval of the lessor, the law requires that at least 50% of the repair expense should be reimbursed to the lessee.

If the lessor did not agree to the repair, no amount should be reimbursed to the lessee.

What are the penalties?

Violation of rent control act has equivalent penalties:

  • Fine that is not lower than P25,000 but not higher than P50,000
  • Imprisonment of not lower than one month and one day but not higher than six months.

Rights of Lessee Against Lessor

  • Right to legal enjoyment of premises– This is the right of the lessee to be free from harassment or unreasonable demands of the lessor as long as they are paying the rent and as long as the lessee is not engaged in illegal activities and not causing the public disturbance.
  • Right to safe premises – This includes repairs of damages to the property such as leaking roofs, broken pipes and other maintenance issues that directly affect the lessee. These should be paid by the lessor.
  • Right to binding terms – The lessee has the right to bring to court any violations of the contract being a legal document.
  • Limited right to withhold rent – The lessee has the right to withhold rent if the lessor refuses to repair damages to the property.
  • Right to lifestyle – The lessee has the right to live a lifestyle of their choice unless illegal. If, however, provisions such as a prohibition of smoking, the keeping of pets or painting of walls are included in the contract, it is only right for the lessee to follow it.
  • Right to privacy and control of property – The lessor is not permitted to enter the premises of the property unless there are needed repairs or if there is an emergency.

A Lessee’s Expenses for Renting

Paying the monthly rent is not the only obligation a lessee will have to accomplish when renting a property. This depends on the agreement between the two parties and on the lifestyle of the lessee.

Paying for the moving is just the start of it. To give us an idea, the following are included in the lessee’s monthly expenses:

  • Electricity and water – a lessee is expected to pay the electricity unless written otherwise in the contract. A lessee should make sure to transfer the bill in their name.
  • Air conditioning – some properties do not have built-in air conditioning and therefore adding up to the lessee’s expenses if they prefer to have it installed.
  • Cable & Internet – bundles are offered by providers that include both internet and cable. In today’s age, we cannot deny the importance of the internet in a household.
  • Renter’s insurance – this protects the lessee from expenses due to disasters such as theft, fire or flooding
  • Groceries – part of saving money is spending on groceries and cooking your own food at home and bring food to work. This will definitely help you spend less.
  • Car – if the lessee is in need of a car, they should also consider the maintenance, insurance and gas expenses for the car.
  • Parking – of course, if the lessee owns a car, they need a parking space which is sometimes charged.
  • Furniture – being new in the rented property, expenses for furniture can be high. A lessee may consider purchasing from thrift stores to save some money.

Tips for Renting a House

These are our last tips for those of you out there who are looking for a house to rent.

Find a good tenant, determine how much the rent is, make sure to protect your right to a lease, protect your property with insurance and prepare properly for evictions.