Policy and purpose
- Section 2 directs the State to undertake a continuing program of encouraging the development of affordable housing for the lower income brackets and other beneficiaries.
- Section 2 requires continued protection of housing tenants in the lower income brackets and other beneficiaries from unreasonable rent increases.
- Section 2 frames rent regulation as a measure for the common good through affordable housing development and tenant protection.
Key definitions under the Act
- “Rent” means the amount paid for the use or occupancy of a residential unit whether payment is made on a monthly or other basis (Section 3).
- “Residential unit” refers to an apartment, house, and/or land on which another’s dwelling is located and used for residential purposes, including building houses, dormitories, rooms, and bedspaces offered for rent by owners, but excluding motels, motel rooms, hotels, hotel rooms (Section 3).
- “Residential unit” also covers 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 (Section 3).
- “Immediate members of family of the lessee or lessor” for purposes of repossessing the leased premises is limited to the spouse and direct descendants or ascendants, by consanguinity or affinity (Section 3).
- “Lessee” means the person renting a residential unit (Section 3).
- “Owner/Lessor” includes the owner or administrator or agent of the owner of the residential unit (Section 3).
- “Sublessor” means the person who leases or rents out a residential unit leased to him by an owner; “Sublessee” means the person who leases or rents out a residential unit leased to him by an owner (Section 3).
Coverage and rental limits
- Section 4 imposes a one-year rent-increase freeze: for one (1) year from effectivity, no increase shall be imposed upon the rent of any residential unit covered by the Act.
- After the one-year freeze and until December 31, 2013, rent increases shall not exceed seven percent (7%) annually for covered units 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 (Section 4).
- For boarding houses, dormitories, rooms, and bedspaces offered for rent to students, rent cannot be increased more than once per year (Section 4).
- Section 5 covers:
- Residential units in the National Capital Region and other highly urbanized cities with total monthly rent ranging from One peso (P1.00) to Ten thousand pesos (P10,000.00) as of the Act’s effectivity date; and
- Residential units in all other areas with total monthly rent ranging from One peso (P1.00) to Five thousand pesos (P5,000.00) as of the Act’s effectivity date.
- Section 5 preserves existing contracts by stating coverage is without prejudice to existing contracts.
Continued regulation by HUDCC
- Section 6 grants the Housing and Urban Development Coordinating Council (HUDCC) authority to continue the regulation of rental of certain residential units notwithstanding the lapse of the period in Section 4.
- Section 6 authorizes HUDCC to determine the period of regulation and subsequent extensions if warranted.
- Section 6 authorizes HUDCC to determine which residential units are covered.
- Section 6 authorizes HUDCC to adjust the allowable limit on rental increases per annum based on, among others: 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 rules and deposits
- Section 7 requires rent to 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.
- Section 7 prohibits the lessor from demanding more than one (1) month advance rent.
- Section 7 prohibits the lessor from demanding more than two (2) months deposit.
- Section 7 requires the deposit to be kept in a bank under the lessor’s account name during the entire duration of the lease agreement.
- Section 7 requires all interest accruing on the deposit to be returned to the lessee upon expiration of the lease contract.
- Section 7 provides forfeiture rules: if the lessee fails to settle rent, electric, telephone, water, or other utility bills, or destroys house components and accessories, the deposits and interests are forfeited in an amount commensurate to the pecuniary damage done by the lessee.
Prohibitions on assignment and subleasing
- Section 8 prohibits assignment of lease or subleasing of the whole or any portion of the residential unit, including acceptance of boarders or bedspacers, without the written consent of the owner/lessor.
Grounds for judicial ejectment
- Section 9 allows ejectment 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 payment of rent for a total of three (3) months.
- Legitimate need of the owner/lessor to repossess the property for personal use or for the use of an immediate member of the family as a residential unit.
- Need of the lessor to make necessary repairs of the leased premises subject of an existing order of condemnation by appropriate authorities to make the premises safe and habitable.
- Expiration of the period of the lease contract.
- For arrears where the lessor refuses to accept agreed rent, Section 9 allows the lessee, within one (1) month after refusal, to:
- 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
- deposit in a bank in the name of and with notice to the lessor.
- After a refusal deposit/con-signation, Section 9 requires the lessee to deposit rent within ten (10) days of every current month.
- Section 9 provides that failure to deposit rent for three (3) months constitutes a ground for ejectment.
- Section 9 allows the lessor to withdraw deposits:
- upon authority of the court in case of consignation, or
- upon joint affidavit by the lessor and lessee submitted to the city or municipal treasurer or barangay chairman and to the bank where deposit was made.
- For repossession due to legitimate need, Section 9 requires that:
- the lease for a definite period has expired,
- the lessor gave formal notice three (3) months in advance of intention to repossess, and
- the lessor is prohibited from leasing the residential unit or allowing use by a third party for at least one (1) year from repossession.
- For ejectment to conduct necessary repairs, Section 9 requires that after repair, the ejected lessee shall have first preference to lease the premises.
- Section 9 requires that the new rent after repairs be reasonably commensurate with expenses incurred for the repair.
- Section 9 provides that 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 that subsection.
No ejectment for sale or mortgage
- Section 10 prohibits a lessor or successor-in-interest from ejecting a lessee on the ground that the leased premises have been sold or mortgaged to a third person, whether or not the lease or mortgage is registered.
Rent-to-own agreements
- Section 11 allows the lessor, at the lessor’s option, to engage the lessee in a written rent-to-own agreement resulting in transfer of ownership of the dwelling to the lessee.
- Section 11 exempts rent-to-own agreements from the coverage of Section 5 of the Act.
Civil Code suspension for residential leases
- Section 12 suspends, during the effectivity of the Act, the application (for residential units covered) of paragraph (1) of Article 1673 of the Civil Code of the Philippines insofar as it refers to residential units covered by the Act.
- Section 12 keeps other Civil Code provisions and Rules of Court on lease contracts operative when not in conflict with the Act.
- Section 12 applies the suspension except when the lease is for a definite period.
Criminal penalties for violations
- Section 13 imposes a fine of not less than PHP 25,000.00 nor more than PHP 50,000.00 or imprisonment of not less than one (1) month and one (1) day to not more than six (6) months, or both, on any person, natural or judicial, found guilty of violating any provision of the Act.
Information drive and public posting
- Section 14 mandates the Department of the Interior and Local Government and the HUDCC, in coordination with other concerned agencies, to conduct a continuing information drive about the Act.
- Section 14 requires translation of the Act into major regional dialects and making it available in accessible formats.
- Section 14 requires posting in conspicuous public places, including barangay halls.
HUDCC review and studies
- Section 15 mandates HUDCC to conduct every three (3) years from the Act’s effectivity a review of implementation and a study on rental regulation.
- Section 15 requires HUDCC to submit to Congress recommendations on whether continuing regulation is still necessary or deregulation is already warranted.
Two-year transition cushion program
- Section 16 mandates HUDCC and its attached agencies to formulate and implement a two (2)-year transition program providing safety measures to cushion the impact in the event of a regulation-free housing market.
Separability, repeals, and effectivity
- Section 17 provides a separability rule: invalidity of any portion does not affect the remaining provisions.
- Section 18 repeals, modifies, or amends any law, presidential decree or issuance, executive order, letter of instruction, administrative order, rule, or regulation contrary to or inconsistent with the Act.
- Section 19 fixes effectivity at fifteen (15) days after complete publication in at least two (2) newspapers of general circulation.