Law Summary
Controls on Rent and Increases
- Effective January 1, 2002, until December 31, 2004, rental rate increases are capped.
- In the National Capital Region (NCR) and highly urbanized cities, rentals up to Php 7,500 are subject to a maximum 10% annual increase.
- In other areas, rentals up to Php 4,000 are also subject to the same maximum annual increase of 10%.
- Existing contracts are respected but increases beyond these caps are prohibited during the period.
Definitions of Key Terms
- "Rental" means payment for residential unit use, irrespective of payment intervals.
- "Residential unit" includes apartments, houses, rooms, boarding houses, dormitories, and units used partly for business if owner/family resides there.
- Excluded are motels, hotels, and their rooms.
- Terms such as lessor (owner/agent), lessee (tenant), sublessor, sublessee, assignment of lease, and immediate family (spouse, direct ascendants/descendants) are defined for clarity.
Rental Payment and Deposit Limits
- Rent is due in advance within the first five days of each month or as per lease contract.
- Lessors cannot demand more than one month advance rent plus two months deposit.
Restrictions on Lease Assignment and Subleasing
- Assignment or subleasing of whole or partial residential units requires written consent from the owner/lessor.
- Unauthorized subleasing or acceptance of boarders/bedspacers is prohibited.
Legal Grounds for Ejectment
- Ejectment allowed for the following reasons:
- Unauthorized assignment or subleasing.
- Rent arrears totaling three months, with procedures allowing deposit if lessor refuses payment.
- Legitimate repossession needs of the owner or immediate family after expired fixed-term lease with three months' advance notice.
- Necessary repairs ordered by authorities, with preference rights for the lessee and rent adjustments.
- Expiration of lease period.
- Courts may order immediate vacation on motion.
- Lessors may withdraw deposited rents with court authority or mutual agreement.
Protection Against Ejectment Due to Sale or Mortgage
- Lessees cannot be ejected solely because of sale or mortgage of leased premises, regardless of registration.
Rent-to-Own Agreements
- Lessor may enter a written rent-to-own agreement transferring ownership to lessee.
- Such agreements are exempt from rental increase caps under Section 3.
Application of Existing Civil Code and Court Rules
- Paragraph 1 of Article 1673 Civil Code suspended for residential units under this Act unless lease is definite-period.
- Other Civil Code provisions and Court Rules apply unless conflicting.
Coverage Limits of the Act
- Applies to residential units in NCR and highly urbanized cities with monthly rent not exceeding Php 7,500.
- Applies to other areas with rents not exceeding Php 4,000.
- Coverage respects existing contracts.
Penalties for Violations
- Violations punishable by fines from Php 5,000 to Php 15,000.
- Imprisonment from one month and one day up to six months or both fine and imprisonment can be imposed.
Information Campaign Mandate
- DILG and HUDCC must conduct ongoing public information campaigns on the Act's provisions.
Transition Program
- HUDCC must develop a transition program within six months to mitigate the impact of moving toward a free rental market.
Separability Clause
- Invalidity of any provision does not affect the remainder of the law.
Repealing Clause
- Pre-existing laws, orders, issuances inconsistent with this Act are repealed or modified.
Effectivity
- The Act took effect on January 1, 2002, after publication in two newspapers of general circulation.