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8/4/2019 Copy of Lease
1/25
lease reviewer 2011
Sales and lease comments and cases by hector de leon, UP, Ateneo and San beda civil law
reviewer | jen_biltz_albano/2011
CONTRACT OF LEASE
a contract by which one person binds himself to grant
temporarily, the use of a thing or the rendering of someservice to another who undertakes to pay some rent,
compensation, or price.
CHARACTERISTICS: (lease of things)
1. Consensual
2. Principal contract
3. Nominate
4. Subject matter must be within the commerce of man
5. Purpose should not be minimal
6. Onerous
7. Period is temporary
8. Period may be definite or indefinite
9. Lessor need not be the owner
RENT
The compensation either in money, provisions, chattels or
labor, received by the lessor from the lessee.
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lease reviewer 2011
Sales and lease comments and cases by hector de leon, UP, Ateneo and San beda civil law
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REQUISITES:
1. Must not be fictitious or nominal otherwise the contract
is considered essentially gratuitous2. Must be capable of determination
3. May be in the form of products, fruits, construction; as
long as it has value
WHEN LEASE OF REAL PROPERTY IS REAL RIGHT
Generally, a lease of real property is a personal right. Exceptions:
1. If it is for more than one year and to be enforceable it must be in
writing
2. If it is registered with Registry of Property, regardless of its period
EFFECTS IF LEASE OF REAL PROPERTY IS NOT REGISTERED:
1.The lease is not binding on third persons;2. Such third person is allowed to terminate the lease in case he
buys the property from the owner-lessor;
3. Actual knowledge of existence and duration of lease, isequivalent to registration;
4. Stranger knows of the existence of the lease, but was led tobelieve that the lease would expire soon or before the new lease infavor of him begins, the stranger can still be considered innocent.
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KINDS OF LEASE
1.Lease of things or properties whether immovable or movableproperty
one of the parties binds himself to give to another theenjoyment or use of a thing
for a price certain for a period which may be definite or indefinite But in no case will the period exceed 99 years.
WHAT CAN BE THE SUBJECT OF A LEASE- Only things which are within the commerce of man; lease ofproperties belonging to the public domain cannot be proper
subjects of lease; such contracts are void.
PERSONS DISQUALIFIED TO BECOME LESSEES:
(a) Husband and wife cannot lease to each other their separateproperties (exception: separation of property)(b) Those disqualified due to fiduciary relationship- Guardian: ward- Agent: principal
- Executor & administrators- Public officer: state property- Justices, judges: property under litigation- Others disqualified by law
LEASEBY FILIPINOS- may lease lands of public domain with an area of 500 has. andmay acquire not more than 12 has.
LEASE BY CORPORATIONS- at least 60% Filipino-owned, may lease lands ofpublic domainfora period of 25 years, renewable for not more than 25 years; the areanot to exceed more than 1,000 has. [One thousand Hectares]
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lease reviewer 2011
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RULE ON LEASE OF THINGS WHEN LESSEE IS AN ALIEN
(a) 99-year limit applies to aliens as long as it is a lease ofpersonalproperty
(b) Aliens CANNOT lease public lands, and cannot acquire privatelands except through succession
(c) If lease of real property (private lands), maximum of 25 yearsrenewable for another 25 years (P.D.713)
(d) Under the Investors Lease Act of 1995, the 25-year period wasextended to 50 years renewable for another 25 years provided the
following conditions are met:
lessee must make investments lease is approved by DTI if terms are violated, DTI can terminate it
NOTE: the ILA did not do away with P.D. 713, under ILA the
consent of DTI is required while in P.D. 713 it is not.
FORM OF CONTRACT OF LEASE OF THINGS- may be made orally but if the lease of real property is for morethan one year, it must be in writing under the statue of frauds [stillvalid but unenforceable]NOTE: - Owner has the right t fix the rent because the contract isconsensual and not imposed by law- Increasing the rent is NOT an absolute right of the lessor
- If the rent is fixed for the first time, courts cannot interfere; but ifit is a renewal, the courts can settle the disagreements
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Lease of work which refers to contract for a piece of work- one of the parties binds himself to produce a result out of his workor labor and the other party binds himself to pay a remunerationtherefor.
DUTIES OF CONTRACTOR WHO FURNISHES WORK &MATERIAL:
(a) duty to deliver
(b) duty to transfer ownership
(c) duty to warrant eviction and hidden defects
REMEDY OF EMPLOYER IN CASE OF DEFECTS:- ask contractor to remove the defect or to execute another work; ifcontractor fails or refuses, employer can ask another at thecontractors expense
Lease of service-one party binds himself to render some service to the other partyconsisting his own free activity of labor, and not its result and the
other party binds himself to pay a remuneration therefor.
3 KINDS:a. householdb. contract of laborc. common carriers
Lease of things
(1) Concept
Art. 1643. In the lease of things, one of the parties binds
himself to give to another the enjoyment or use of a thing
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for a price certain, and for a period which may be definite
or indefinite. However, no lease for more than ninety nine
years shall be valid.
(2) Consumable things cannot be the subject matter of
lease, Except
(a) Consumables only for display
or advertising. e. g. Wedding cakes for display in
Goldilocks, wine in a showcase of a store
(b) Goods are accessory to an industrial establishment
e.g., coal in a factory
(3) Special characteristics of lease of things;
(a) Essential purpose is to transmit the use and
enjoyment of a thing
(b) Consensual
(c) Onerous
(d) Price fixed in relation to period of use or enjoyment
(e) Temporary
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LEASE OF SERVICE DISTINGUISHED FROM PIECE OF WORK
LEASE OF SERVICE Contract for aPIECE OF WORK
The important object is thelabor performed by the lessor
The important object is thework done
The result is generally notimportant, hence the laboreris entitled to be paid even ifthere is destruction of the
work through fortuitous event
The result is generallyimportant; generally, the priceis not payable until the workis completed, and said pricecannot be lawfully demandedif the work is destroyed beforeit is finished and accepted
LEASE OF THINGS DISTINGUISHED FROM SERVICES:
LEASE OF THINGS LEASE OF SERVICES
Object of the contract is athing
Object is some work
Lessor has to deliver thething leased
Lessor has to perform somework or service
In case of breach, there canbe an action
In case of breach, no actioncan be taken
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LEASE OF SERVICES DISTINGUISHED FROM AGENCY
LEASE DISTINGUISHED FROM SALE:
LEASE SALE
Only the enjoyment or use istransferred
Ownership is transferred
Transfer is temporary Transfer is permanent
The lessor need not be theowner
Seller must be the owner orat least authorized by the
owner at the time it isdelivered
Price of the matter is notusually mentioned, beingimmaterial
Price of the thing is usuallyfixed in the contract
LEASE OF SERVICES AGENCY
It is based on employment The lessor of services doesnot represent his employernor does he execute juridicalacts
It is based on representationAgent represents his principaland enters into juridical acts
Principal contract Preparatory contract
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**In case of doubt, the intention of the parties is an
important factor in determining the contract entered into.
LEASE DISTINGUISHED FROM COMMODATUM:
LEASE COMMODATUM
Consist of cession of the useof a thing to another
Consist of cession of the useof a thing to another
It is onerous Essentially gratuitous
LEASE DISTINGUISHED FROM USUFRUCT
LEASE USUFRUCT
Ownership is not necessary Ownership is necessary
It is generally a personalright and is a real right onlyby exception
It is always a real right
It is limited to the usespecified in the contract
it includes all possible usesand enjoyment of the thing
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Lessor places and maintainsthe lessee in the peaceful
enjoyment of the thing
Owner allows theusufructuary to use and
enjoy the property
Its term is generally fora definite period
Its term may be for anindefinite period
It may be created bycontract as a generalrule
It may be created by law,contract, last will orprescription
Lessee has no duty tomake repairs
Usufructuary has duty tomake repairs
Lessee has no duty topay taxes
Usufructuary has duty topay taxes
Lessee cannotconstitute a usufruct ofthe property leased
Usufructuary mayconstitute a sublease
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LEASE DISTINGUISHED FROM MUTUUM
LEASE MUTUUM
Owner does not lose hisownership
Loses ownership of the thingloaned which becomes theproperty of the borrower ordebtor
Lessor lessee relationship Creditor/ debtor or obligee/obligor relationship
Real or personal property Only money or any otherfungible things
Governed by statute offrauds
Not governed
Not governed Governed by usury law
**Simple loan may be gratuitous or with a stipulation
(art.1933) **
PRICE IN LEASE:
ts, or in some other
useful things; some other prestation
- when the price consists of acertain percentage of the fruits obtained from the thing.
But is regarded as having the character more of a
partnership rather than a lease.
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Amount of Rent
the parties are not able to fix the price, or the basis for
its determination, the contract is ABSOLUTELY VOID. Ifthe lessee has entered upon the possession and enjoyment
of the thing, he will be liable for the damages for the
occupation of the thing.
PERIOD OF LEASE:
When the lease is for such time as the lessor or lesseemay please, it is considered as on for life, ending upon
the death of the party who would have terminated the
contract.
CANNOT be perpetual- there must always be a period,which may be definite or indefinite
If the period is indefinite, and the thing leased is ruralland, art.1682 shall apply; if it is urban land art. 1687
governs.
If the thing is neither rural nor urban land, theprovisions of the two articles should be applied by
analogy.
RURAL LAND
Art. 1682. The lease of a piece of rural land, when its
duration has not been fixed, is understood to have been for
all the time necessary for the gathering of the fruits which
the whole estate leased may yield in one year, or which it
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may yield once, although two or more years have to elapse
for the purpose.
URBAN LANDArt. 1687. If the period for the lease has not been fixed, it is
understood to be from year to year, if the rent agreed upon
is annual; from month to month, if it is monthly; from week
to week, if the rent is weekly; and from day to day, if the
rent is to be paid daily.
Rent Courts can fix a longer term
Monthly lessee occupied premises formore than a year
Weekly lessee has been inpossession for over sixmonths
Daily lessee has stayed in the
place for over one month
CAPACITY OF LESSEE
Those who are disqualified to buy certain things cannot
lease such things. (ART.1646, 1490,1491)
Lease of Real Estate
Every lease of real estate may be recorded in the Registry of
Property to be binding upon 3rd persons.
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Purchase of Leased Land
here a purchaser of land at the time of the purchase
has FULL KNOWLEDGE of the fact that the land has beenleased to a third person, he is BOUND to respect said lease,
although it is not recorded upon the certificate of title.
ASSIGNMENT OF LEASE
Art. 1649. The lessee cannot assign the lease without the
consent of the lessor, unless there is a stipulation to the
contrary.
However, a mere transfer of rights of the lessee, andnot of the contract itself, would not require the lessors
consent, unless there is an express stipulation to the
contrary.
SUBLEASE
Art. 1650. When in the contract of lease of things there isno express prohibition, the lessee may sublet the thing
leased, in whole or in part, without prejudice to his
responsibility for the performance of the contract toward
the lessor.
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ASSIGNMENT OF LEASE VS. SUBLEASE:
Assignment of lease Sublease
There is a transfer to a thirdperson of the rights andobligations arising from thelease contract
Merely another contract oflease, where the originallessee becomes in turn alessor
A sale of the lessees rights,
and when the lessor giveshis consent, the original
lessee is released
Even when the lessorconsents to the sub-lease,the original lease contract
subsists and is binding onthe lessee
Succession by particulartitle to one contract of lease
Juxtaposition of 2 leases
Lessee remains a party inthe contract
Lessee is disassociated fromthe original contract of lease
Sublessee does not have anydirect action against the
lessor
Assignee has a direct actionagainst the lessor, there
being novationSubleasing is allowed unlessthere is an expressprohibition
Assignment is not allowedunless the lessor gives hisconsent
(1) Remedy when property is subleased despite prohibition:
rescission and damages, or damages only.
(2) When in the contract of lease, there is no express
prohibition; the lessee may sublet the thing leased, in
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whole or in part, without prejudice to his responsibility for
the performance of the contract toward the lessor.
(a) House Rental Law (RA 877) there is a presumptionthat there would be no sublease unless the lessor allows it
(b) obligation of sublessee to lessor
SUBLEASE- a lessee may sublease the thing unless there is an expressprohibition to do so- if the prohibition to sublease is not express but only implied, thesublease will still be allowed- remedy of lessor if lessee violates prohibition: action for rescissionof the lease and may seek for damages- duration of sublease cannot be longer than that of the lease towhich it is dependent
RESPONSIBILITIES OF A SUBLESSEE TO THE LESSOR:1. for all acts which affect the use and preservation of the thingleased2. for any rent due to the lessor from the lessee which the latter
failed to pay- the lessor must collect first form the lessee- if the lessee is insolvent, the sublessee becomes liable (subsidiaryliability)
LEASE DISTINGUISHED FROM DEPOSIT:
LEASE DEPOSIT
Enjoyment or use of thingleased is the essentialpurpose
the safekeeping of the thingdelivered is the principalpurpose
The lessor cannot demandthe thing leased before theexpiration of the contract
The depositor can demandthe return of the subjectmatter at will
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Both movable andimmovable may be the object
Only movable may be theobject
Onerous Gratuitous
Consensual Real contract perfected uponthe delivery of the objectthereof
LEASE OF CHATTELS DISTINGUISHED FROM EMPLOYMENT:
LEASE OF CHATTELS EMPLOYMENT
Lessor and lessee relationship Employee employer relationship
Loses control or management of
the chattel
Retains control or management
over his chattelNo control or supervision overthe lessee
Exercises control andsupervision over his employee
Lessee pays rent to the lessor forthe enjoyment or use of thechattel
Employer pays wage or salary forthe services of the employee
LEASE OF WORK/SERVICE DISTINGUISHED FROM PARTNERSHIP:
LEASE OF WORK PARTNERSHIP
No principle of representation Every partner is an agent of thepartnership for the purpose of itsbusiness
Lessor performs a material actfor the benefit of the employer
Partners enter into commercialor business transactions for therealization of profits
Only 2 persons are involved Juridical personality separate
and distinct from that of each ofthe partner is formed
Work/service is dependent uponthe ends or purpose of the lessee
Partners perform acts conduciveto their own business purposes
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OBLIGATIONS OF THE LESSOR (Art. 1654)
1. to deliver the thing which is the object of the contract in suchcondition as to render it fit for the use intended;
2. to make on the same during the lease all the necessary repairs inorder to keep it suitable for the use to which it has been devoted,unless there is a stipulation to the contrary;
3. to maintain the lessee in the peaceful and adequate enjoyment ofthe lease for the entire duration of the contract.
4. Not to alter the form
o REPAIRS implies the putting back of something in thecondition in which it was originally
o IMPROVEMENT is the adding of something new thereto,hence, the filling of a vacant lot is not a repair nor theconstructions of a house.
- It is the duty of the lessee to give NOTICE of the need ofrepairs to the lessor, and he shall be liable for the
damages which by his neglect may be suffered by theowner.- lessor is NOT bound to make repairs caused by the lessee
himself.
Effect of Urgent Repairs
During the lease it should become necessary to make someurgent repairs upon the thing leased, which cannot bedeferred until the termination of the lease, the lessee isobliged to tolerate the work.
If the repair lasts for more than 40 days, the rent shall bereduced in proportion to the time-including the 40 days-
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and the part of the property of which the lessee has beendeprived.
When the work is of such a nature that the portion whichthe lessee and his family need for their dwelling becomes
uninhabitable, he may rescind the contract if the mainpurpose of the lease is to provide a dwelling for the lessee.
If after having been notified, the lessor fails to make urgentrepairs, the lessee, to avoid imminent danger, may order therepairs at the lessors expense.
Dangerous Conditions:
The lessee may terminate the lease at once by notifying thelessor, even if at the time the contract was perfected theformer knew of the dangerous condition or waived the right torescind the lease on account of the condition.
Alteration
Art. 1661. The lessor cannot alter the form of the thing leased insuch a way as to impair the use to which the thing is devoted underthe terms of the lease.
TRESPASS IN LEASE
o Trespass in fact (perturbacion de mere hecho)- Physical enjoyment is reduced- Lessor will not be held liable
o Trespass in law (perturbacion de derecho)- A third person claims legal right to enjoy the premises- Lessor will be held liable
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OBLIGATIONS OF THE LESSEE (Art. 1657)
1. pay the price of the lease according to the terms stipulated;
2. use the thing leased as a diligent father of a family devoting it tothe use stipulated, and in the absence of stipulation, to that whichmay be inferred from the nature of the thing leased, according tothe custom of the place;
3. pay the expenses for the deed of lease.
Pay Rent
ises only when the contract has been actually carried into effectby the delivery of the thing leased to the lessee for the purposestipulated in the contract.
Increase and Decrease of Rent
net of the assessed violation of the property
Failure to Pay for Rent
ction, recover the unpaid rent, plus accrued legal interestthereon at the rate of 6% per year.
Place and Time
ayment of rent shall be made at the domicile of the lessee; andwith respect to the time, the custom of the place shall be followed.
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Use the Thing Leased as a Diligent Father
o Standard: diligent father of a family, in the absence ofstipulation, to that which may be inferred from the nature of
the thing leased, according to the custom of the place.o The lessee is responsible for the deterioration of the thing
leased, unless he proves that it took place without his fault.oThe lessee is liable for any deterioration caused by members of
his household and by his guest and visitors.
Pay Expenses for the Deed of Lease (Art. 1662-1667)o Right of lessee to suspend payment of rentals
Art. 1658. The lessee may suspend the payment of the rent in casethe lessor fails to make the necessary repairs or to maintain thelessee in peaceful and adequate enjoyment of the property leased.
o Right to ask for rescissionLiability for Breach of Duties
o If the lessor or lessee should not comply with the obligation setforth in ART 1654 and 1657, the aggrieved party may ask for:
(1) rescission of the contract;
(2) indemnification for damages;
(3) only damages, allowing the contract to remain in force
o The lessor cannot be held responsible for damages fromdefects unknown to both parties.
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Alternative Remedies
o Performance of the contract and rescissiono In either case, the aggrieved party is entitled to such damages
but may not upon rescission of the contract recover thedamages that are appropriate only where the performance isdemanded.
Rescission of the Contract
Where the plaintiff alleges and submits proof that the defendantis in possession of a parcel of land as lessee, and the latter has notpaid the proper rents, he may be compelled, by reason of his
inability to pay to:
(1) return the leased property;
(2) the lessor has a right to rescind the contract;
(3) recover the unpaid rents
(4) eject the tenant from the land
oThe execution of the deed shall be equivalent to delivery butthis is a rebuttable presumption.
o If the thing leased has never been placed in possession of thelessee, he has the remedy of rescission.
Enforcement of Lease
o Where the lessor resumes possession of his leased property forits protection after the lessee has abandoned the same, thelessor has still the right to hold the lessee responsible until thetermination of the lease.
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Termination of Lease
(1) by the expiration of the period;
(2) by the total loss of the thing;
(3) by the resolution of the right of the lessor, such as when thelessor is usufruct is terminated;
(4) by the will of the purchaser or transferee of the things;
(5) by rescission due to non-performance of the obligation of one ofthe parties.
Period
o If at the end of the contract the lessee should continueenjoying the thing leased for fifteen days with the acquiescenceof the lessor, and unless a notice to the contrary by eitherparty has previously given, it is understood that there is animplied new lease, not for the period of the original contractbut for the time established in art. 1682(rural) and
1687(urban)
o When the parties have made no agreement and the tenantremains in possession with the acquiescence of the lessor for15 days after the expiration of the term, the duration of thetenancy is governed by article 1682 and 1687.
GROUNDS FOR EJECTMENT
1. when the period agreed upon or that which is fixed for theduration of leases (see 1682, 1687) has expired;
2. lack of payment of the price stipulated;
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3. violation of any of the conditions agreed upon in the contract;
4. when the lessee devotes the thing leased to any use or service notstipulated which causes the deterioration thereof.
5. (1657, par. 2)-to use the thing leased as a diligent father of afamily, devoting it to the use stipulated; and in the absence ofstipulation, to that which may be inferred from the nature of thething leased, according to the custom of the place;
Warranty of Lessor:
IN the cases where the return of the price is required,REDUCTION shall be made in proportion to the time duringwhich the lessee enjoyed the thing.
Art. 1547, 1555, 1561, 1566, 1567, 1568, 1569 Liability for the warranty is not equivalent to liability in
damages.
The lessor is liable for the warranty of the thing leased againstany hidden defects it may have, even when UNKNOWN to saidlessor.
But this liability for warranty of the thing leased does notamount to an obligation to indemnify the tenant for damages,which is only to be allowed, when lessor acted with fraud andin bad faith by concealing the defect and not revealing it to thelessee.
Tacit Renewal
o The fifteen-day period which brings about a tacit renewal ofthe lease, is not applicable to successive renewals.
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Judicial Ejectment
o The lessor may judicially eject the lessee for any of thefollowing causes:
(1) When the period agreed upon, or that which is fixed for theduration of leases under Art 1682 (rural) and 1687(urban), hasexpired;
(2) Lack of payment of the price stipulated;
(3) Violation of any of the conditions agreed upon in the contract;
(4) When the lessee devotes the thing leased to any use or servicenot stipulated which causes the deterioration thereof, or if he doesnot observe due diligence in its use.
o When the lease contract does not have a definite period, but isterminable upon 30 days notice, the lease will terminate uponthe expiration of 30 days from the receipt of notice, whetherthe termination coincides with the rent day or not.
o The landlord has the right to increase the rent after theexpiration of the stipulated period. And if no period isstipulated, in a lease of urban property, notice by the lessor ofan increase in rent is equivalent to notice of termination of theoriginal agreement.
PROPERTY