Policy and purpose
- The State must undertake a continuing program for the common good that encourages the development of affordable housing for the lower income brackets and other beneficiaries.
- The State must protect housing tenants in the lower income brackets and other beneficiaries from unreasonable rent increases.
Key definitions for the Act
- “Rent” means the amount paid for use or occupancy of a residential unit on a monthly or other basis.
- “Residential unit” means an apartment, house and/or land where another’s dwelling is located and used for residential purposes, including building houses, dormitories, rooms, and bedspaces offered for rent by owners.
- “Residential unit” includes units used for home industries, retail stores, or other business purposes if the owner and his or her family actually live therein and principally use it for dwelling purposes.
- Motels, motel rooms, hotels, and hotel rooms are excluded from the definition of “residential unit.”
- “Lessee” means the person renting a residential unit.
- “Owner/Lessor” includes the owner or administrator or agent of the owner of the residential unit.
- “Sublessor” means a person who leases or rents out a residential unit leased to him by an owner.
- “Sublessee” means a person who leases or rents out a residential unit leased to him by an owner.
- “Immediate members of family of the lessee or lessor” for purposes of repossessing the leased premises is limited to the spouse, direct descendants, or ascendants by consanguinity or affinity.
Coverage and where regulation applies
- All residential units in the National Capital Region and other highly urbanized cities are covered if the total monthly rent for each unit ranges from One peso (P1.00) to Ten thousand pesos (P10,000.00) as of the Act’s effectivity date.
- All residential units in all other areas are covered if the total monthly rent for each unit ranges from One peso (P1.00) to Five thousand pesos (P5,000.00) as of the Act’s effectivity date.
- Coverage applies without prejudice to existing contracts.
- The Act regulates rents for covered residential units; it does not cover rent-to-own agreements that result in transfer of ownership under Section 11.
Limits on rent increases
- For one (1) year from the Act’s effectivity, no increase may be imposed upon the rent of any residential unit covered by the Act.
- After the first year until December 31, 2013, the rent for a covered unit may not be increased by more than seven percent (7%) annually as long as the unit is occupied by the same lessee.
- When the residential unit becomes vacant, the lessor may set the initial rent for the next lessee.
- For boarding houses, dormitories, rooms, and bedspaces offered for rent to students, no increase in rental may be allowed more than once per year.
Authority to continue rental regulation
- Despite lapse of the period stated in Section 4, the Housing and Urban Development Coordinating Council (HUDCC) may continue regulation of the rental of certain residential units.
- The HUDCC may determine the period of regulation and its subsequent extensions if warranted.
- The HUDCC may determine which residential units are covered for continued regulation.
- The HUDCC may adjust the allowable limit on rental increases per annum, considering National Statistics Office (NSO) census on rental units, prevailing rental rates, the monthly inflation rate on rentals of the immediately preceding year, and the rental price index.
Payment timing, deposit limits, and forfeiture
- Rent must be paid in advance within the first five (5) days of every current month or at the beginning of the lease agreement unless the lease contract provides for a later payment date.
- A lessor may not demand more than one (1) month advance rent.
- A lessor may not demand more than two (2) months deposit.
- The deposit must be kept in a bank under the lessor’s account name during the entire lease duration.
- Any interest that accrues on the deposit must be returned to the lessee at the expiration of the lease contract.
- If the lessee fails to settle rent, electric, telephone, water, or other utility bills, or destroys house components and accessories, deposits and interest may be forfeited in favor of the lessor in an amount commensurate to the pecuniary damage.
Assignment, subleasing, and prohibited transfers
- Assignment of a lease or subleasing of the whole or any portion of a residential unit is prohibited without the written consent of the owner/lessor.
- Acceptance of boarders or bedspacers by assignment or subleasing without written consent of the owner/lessor is covered by the prohibition.
Judicial ejectment grounds
- Ejectment is allowed on the following grounds:
- Assignment of lease or subleasing of residential units in whole or in part, including acceptance of boarders or bedspaces, without the written consent of the owner/lessor.
- Arrears in rent for a total of three (3) months.
- For arrears, if the lessor refuses to accept the agreed rent:
- The lessee may consign the amount in court, or with the city or municipal treasurer, or barangay chairman, or in a bank in the name of and with notice to the lessor.
- The lessee must do this within one (1) month after the refusal.
- After consignation, the lessee must deposit rent within ten (10) days of every current month.
- Failure to deposit rent for three (3) months constitutes a ground for ejectment.
- Ejectment is allowed for legitimate need of the owner/lessor to repossess the property for his or her own use or for use by an immediate member of the family as a residential unit, if:
- The lease for a definite period has expired; and
- The lessor gives the lessee formal notice three (3) months in advance of the intention to repossess; and
- The owner/lessor is prohibited from leasing the residential unit or allowing its use by a third party for at least one (1) year from repossession.
- Ejectment is allowed for a need of the lessor to make necessary repairs of the leased premises subject to an existing condemnation order by appropriate authorities to make the premises safe and habitable, if:
- After repairs, the lessee ejected has the first preference to lease the same premises; and
- The new rent is reasonably commensurate with repair expenses.
- If the residential unit is condemned or completely demolished, the first preference rule for new repairs does not apply.
- Ejectment is allowed upon expiration of the lease contract period.
No ejectment for sale or mortgage
- A lessor or successor-in-interest may not eject a 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.
Rent-to-own agreements
- At the option of the lessor, the lessor may engage the lessee in a written rent-to-own agreement that results in transfer of ownership of the dwelling to the lessee.
- A rent-to-own agreement under this scheme is exempt from the coverage of Section 5.
Civil Code application and suspension
- Except when the lease is for a definite period, the portion of paragraph (1) of Article 1673 of the Civil Code of the Philippines referring to residential units covered by this Act is suspended during the Act’s effectivity.
- Other provisions of the Civil Code and the Rules of Court on lease contracts apply to residential units covered by the Act to the extent they do not conflict with its provisions.
Penalties for violations
- Any person, natural or judicial, who violates any provision of the Act is subject to:
- A fine of not less than PHP 25,000 nor more than PHP 50,000, or
- Imprisonment of not less than one (1) month and one (1) day to not more than six (6) months, or
- Both.
Information drive and regulatory review
- The Department of the Interior and Local Government and the HUDCC, in coordination with other concerned agencies, must conduct a continuing information drive about the Act.
- The information must be translated and made available in major regional dialects and posted in conspicuous public places, including barangay halls.
- The HUDCC must conduct every three (3) years from the Act’s effectivity a review of implementation and a study on rental regulation.
- The HUDCC must submit to Congress recommendations on whether continuing regulation remains necessary or deregulation is warranted.
Transition program for deregulation-free market
- The HUDCC and its attached agencies must formulate and implement a two (2)-year transition program that provides safety measures to cushion the impact in the event of a regulation-free housing market.
Separability, repeals, and effectivity
- If any provision or part of the Act is held invalid or unconstitutional, the remainder remains valid and subsisting under the Act’s separability clause.
- Any law, presidential decree or issuance, executive order, letter of instruction, administrative order, rule, or regulation contrary to or inconsistent with the Act is repealed, modified, or amended accordingly.
- The Act takes effect beginning fifteen (15) days after its complete publication in at least two (2) newspapers of general circulation.