Home » Real Estate Laws » RA 9653 - Rent Control Act 2009 » Rent control law exempts rent-to-own agreements in the Philippines

Rent control law exempts rent-to-own agreements in the Philippines

*The full text of The Rent Control Act of 2009 can be found here.

Republic Act (RA) No. 9653, also known as the Rent Control Act of 2009, was signed into law by President Gloria Macapagal-Arroyo at the Rizal Ceremonial Hall last Tuesday, July 14, 2009, and exempts rent-to-own agreements from its coverage.

This was mentioned in this article from the Philippine Daily Inquirer. I’m quite sure a lot of real estate investors engaged in the business of rentals and rent-to-own have been waiting for updates with regard to the new rent control law.

However, I believe rent-to-own agreements would not have been affected by the new law even if they were to become covered because most lease option contracts often have a fixed monthly rental rate all throughout the lease term. Still, having rent-to-own agreements exempted from the new law offers greater flexibility to landlords and real estate investors in general. For rentals however, in my opinion, the new law helps establish a very clear basis on when rentals should be paid, how much advanced rent and deposit a landlord can ask from their tenants, what are the grounds for judicial ejection, etc.

According to the new rent control law, rent will have to be paid in advance within the first five days of every month, or at the beginning of the lease agreement, unless the contract of lease provides for a later date of payment. It also allows the owner to ask for a maximum of one month advance rent and two months deposit. Deposits will be forfeited in favor of the unit owner to cover any arrears and/or cost to repair damages just in case the tenant fails to pay rent or utility bills like water and electricity, or damages the property.

Do take note that the new law prohibits the ejection of tenants on the grounds that a rental unit has been sold or mortgaged to a third person. For example, if you purchased a foreclosed property that has existing tenants, the tenants cannot be ejected and the new owner will have to honor the existing lease agreement. However, failure to pay rent for three months, sub-leasing of the rental unit without the consent of the unit owner, and the owner’s need to repossess the property or make necessary repairs to make it more safe and habitable, are grounds for judicial ejection.

In summary, RA 9653 will not allow any increase on the rent of any residential unit for the next year and after this, the maximum rent increase will be seven percent each year and this covers all residential units in Metro Manila with a monthly rent of Php1.00 to Php10,000.00 and all units in urban cities with a monthly rent of Php1.00 to Php5,000.00. Violators face a fine of Php25,000.00 to Php50,000.00, or imprisonment of one month and a day up to six months, or both.

As I have stated in my post about the old rent control law that expired, market forces basically dictate the rental rates. With or without rent control, landlords can’t just dictate rates if the rental rates in the area are low. They’ll end up with no tenants for sure.  At the end of the day, a landlord needs tenants in the same way that tenants need landlords, so the landlord should not be too greedy and should only ask for rental rates that are fair and just under the circumstances, and as prescribed by the new rent control law.

The full text of The Rent Control Act of 2009 can be found here.

Here’s a tip: whether you are a landlord or a tenant, make sure you have a valid lease agreement in writing!

To our financial freedom!

Jay Castillo
Real Estate Investor
REBL#: 20056
Blog:
https://www.foreclosurephilippines.com
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Text by Jay Castillo. Copyright © 2009 All rights reserved.

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People encounter problems and make mistakes when buying foreclosed properties, and Jay wants to help people avoid those problems/ mistakes. Jay encountered a lot of those, which is why he started this blog in 2008 to serve as a guide where he shares lessons learned, and how to overcome challenges you may encounter when investing foreclosed properties in the Philippines … [Read more]
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10 thoughts on “Rent control law exempts rent-to-own agreements in the Philippines”

  1. When you make a lease contract, do you have to have it notarized? Extra expense pa kasi of 1000pesos ang notary na hinihingi ng lawyer in our area. Imagine if you have 3 units for rent, that’s already 3k na kukunin for the notary alone.

    Reply
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  3. Hi Jay,

    I have a question. We have a 2 BR unit that is for rent to own. we decided not to pursue it and just wants to leave because of the many faults that we found in the unit.

    We failed to fail to pay the last three months and just want to leave. The developers said that we can leave but they have to hold our stuff. Is this legal for them to hold our stuffs?
    since if we leave, they will forfeit our past payments and they the developer is still is the winning end.

    thanks,

    Leomil

    Reply
  4. We’re renting a cndo unit for almost 3 yrs for 15,400 a month. We decided to move out and asked the lessor for the 28k 2 mos deposit refund. She told us that it will be returned minus repairs then later on she told us that it will not be returned w/o assessing the unit for damage. Furthermore, she is asking us to pay for the elec and water bill which we don’t want to pay anymore since we’re living and the fact that she’s not going to give back our 2 mos deposit. Can we file a complaint against this broker? We badly need your advice

    Reply
  5. we are leaving in 2 months time here in tour rented apartment< we would like to use our 2mos advance deposit for our remaining 2 months stay here. The landlord will not allow us to do that and we still pay the monthly rental up until we go, however, according to them, they will refund the 2mos advance and 1mo deposit once we go. Is this legal? 

    Reply
  6. hi,

    just want to know if my lessor can increase a 10% increase on my rent if my rent is over 10,000.00/monthly.

    wanto your response asap.

    judy
     

    Reply
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  8. Hello,

    Just a quick question regarding the RA 9653. If violated, where do we submit our complaints? which agency?

    Really appreciate your reply.
    thanks!

    Reply
  9. Hi,

    This is very informative. I just have few questions and I hope you can help. Pls. email me at scbautista@af2100.com

    1) Rental Deposit – the Contract I signed says that if I vacated the unit before the expiration of the 1 year contract, the deposit shall be forfeited in favor of the landlord. Is this legal? Does the fact that I signed the Contract made it legal?
    2) Interest on Late Payment – the Contract says that my rent is due every 5th of the month with a 5-day grace period (up to the 10th) otherwise I have to pay 10% interest. I paid on the 18th and just added 10% to the total due (example, if rent is 4thousand, i paid 4400). The landlord is insisting that it should be 400/daily from the 11th to 19th. The Contract does not indicate that it is a daily interest. To what agency I should complain? Does the Barangay have instant jurisdiction on this case?

    Appreciate your advice.

    Thanks,

    Sam

    Reply
    • signing a contract implies that you agree with the stated conditions. however, if the conditions are contrary to law, they are void. so your first action should be to consult a lawyer about that provision in the contract. as to where you can get relief, try to settle things through the baranggay first. if that doesn’t work, then prepare for a court battle.

      Reply

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