CRISOSTOMO, Jessica Ida Clarisa Magsaysay

LEASE

GENERAL PROVISIONS

Art. 1642. The contract of lease may be of things, or of work and service. (1542)

Concept and Nature of Contract of Lease

Agreement whereby one person (lessor) binds himself to GRANT TEMPORARILY
o the ENJOYMENT or USE of a thing or
o SERVICE to another
TO ANOTHER (lessee) Who undertakes to pay rent, compensation or price therefor

Only a PERSONAL RIGHT

o Only a real right in exception in case of real estate in the registry of property
(binding upon third parties like a purchaser)
In the absence if registration the purchaser may terminate the lease (save
when there is a stipulation in the contract),( or Article 1676 when the
purchaser knows the existence of the lease), (Art 1648, actual knowledge
being equivalent to registration)

Not Essentially Personal, Therefore LEASE SURVIVES THE DEATH of the parties and
CONTINUE to BIND THE HEIRS, Except if the contract says otherwise
o Death of the party does not excuse non performance of a contract
o Passes to the heirs

Kinds of lease according to subject matter

1.) Lease of Things
Whether Real or Personal
Obligation of the Lessor to deliver the thing which is the object
Correlative Right of the lessee to the Peaceful and Adequate enjoyment thereof for a
Price Certain

2.) Lease of Work

Refers to the Contract for a Piece of Work
o Obligation on the part of the independent contractor (lessor) to Execute a piece
of work for the employer (lessee) in consideration of a certain price or
compensation (Article 1713)

3.) Lease of Service

Involving an Obligation on the part of the housekeeper (1989), laborer or employee (Art
1700) TO DO or PERFORM a service for the head of the family or master, employer or
passenger or shipper of goods, respectively, IN CONSIDERATION OF COMPENSATION

Lease of WORK and SERVICE

Cover Household services (art 1689-1699), Contract of Labor (Arti 1700-1712) and
Contract for a piece of work ( article 1713- 1731) and common carriers ( art 1732
1766)

Characteristics and Elements of the Contract

Consensual, Bilateral, Onerous, Commutative, Nominate, Principal
CRISOSTOMO, Jessica Ida Clarisa Magsaysay

There is exchange of equivalent values

o Use of the thing, work, or service is Equivalent to the Rent, Compensation, or
price paid to the lessor

Has 3 elements of Contract

o Consent, Object Certain, Cause of obligation ( Article 1318)

Art. 1643. In the lease of things, one of the parties binds himself to give to another the enjoyment or use of
a thing 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. (1543a)

Lease of things
Landlord means Lessor or Owner
Tenant means Lessee

1. Essence of Lease
Is the transmission of the TEMPORARY ENJOYMENT or USE by the lessee of a thing for a
certain period in consideration of the undertaking to pay rent therefor
Examples:
Pays a fee to park car in available parking lot, taking his keys and not
transmitting ownership of car.
Lease of building includes the lease of the lot which it stands, and the
rentals of a building include of those land.

2. Subject Matter Of Lease

Applies to Movable or Immovable
In lease of Chattels, the lessor losses complete control over chattel leased
o Although the Lessee would be responsible to the lessor should make
bad use thereof
Object of lease MUST BE within the COMMERCE OF MAN
o Otherwise it is VOID
Cannot be of Public dominion

3. Ownership of a thing
Lessor NEED NOT BE OWNER OF THE THING as long as he CAN TRANSMIT its enjoyment
or the use to the lessee. SINCE Ownership is not being transferred
Example in Usufruct
o May enjoy it or lease it to another but lease will terminate on the
expiration of the usufruct, saving only leases of rural lands.
o Easement may not be leased independently of the estate to which it
actively belongs to which shall be considered as subsisting during
agricultural year ( art 572)

Lessee may sublease (Article 1650)

4. Consideration of Lease
Cause must be a PRICE CERTAIN generally called Rent or Rental in money or its
equivalent

Regards the LESSEE, the Cause is ENJOYMENT OF THE THING LEASED

CRISOSTOMO, Jessica Ida Clarisa Magsaysay

PRICE CERTAIN= means that the price of the lease or rent has been determined
or at least capable of determination under the contract.
Must not be nominal or insignificant as to indicate intention to enter a contract
of commodatum (gratuitious)
In the absence of a law fixing a ceiling on rentals, Lessor has the right to fix the
amount of the rent
o And upon expiration, to demand an increase.
Within the fixed period the lessor cannot, w/o the consent of the lessee,
increase the stipulated rent

5. Period of Lease
May be Definite or Indefinite. The period is TEMPORARY, not perpetual
When period is DEFINITE or FIXED
o Longest is 99 years

When period if more than 99 years

o The lease should be considered as having expired after the end of said
term.
o Where there is an implied new lease, the lease will be for an indefinite
time
Term is fixed but is INDEFINITE, but from the circumstances it can be inferred
that a period was intended, the court may fix the duration thereof ( Art 1196)
o A contract of lease CAN ONLY BE FOR A DETERMINATE PERIOD FOR A
LEASE,
o Must be temporary

If no term is fixed
o Article 1682 Applies for leases of rural lands
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 may yield once,
although two or more years have to elapse for the purpose.

o Article 1687 for leases of urban land

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. However, even though a monthly rent is paid, and no
period for the lease has been set, the courts may fix a longer
term for the lease after the lessee has occupied the premises
for over one year. If the rent is weekly, the courts may likewise
determine a longer period after the lessee has been in
possession for over six months. In case of daily rent, the courts
may also fix a longer period after the lessee has stayed in the
place for over one month. (1581a)

A VERBAL contract of lease, for as long as the leesees are doing business and
as long as they can pay just rents
CRISOSTOMO, Jessica Ida Clarisa Magsaysay

o Lease from month to month, article 1687, and not one of indefinite
duration, terminable without necessity of a special notice upon the
expiration of any month

Lease DURING THE LIFETIME OF ONE OF THE PARTIES

o INDEFINITE period

The Continuance and Fulfillment of a lease of a house

o Cannot be made to depend solely upon the choice of the Lessee,
whether or not the lessee would pay the rentals
o However if the lessor continues, the lessee could stop by not paying
the rentals
o Contrary to article 1308 which prohibits the validity or compliance
with a contract to be left to the will of one of the parties

Examples:
Contract contains may be renewed for a like term at the option of the
lessee
o Valid
o Lessor has conceded to the lessee
o Express agreement given to the lessee, is fundamentally part
of the consideration in the contract, it is no different from any
other provision of the lease carrying an undertaking on the
part of the lessor to act conditioned on the performance of the
lessee
o The right of renewal constitutes part of the lessees interest in
the land and forms a substantial and integral part of the
agreement.
o There is mutuality because the lessor has given the lessee the
option of renewal in the agreement

The lease period x x x shall continue for an indefinite period provided

the lesee is up to date in the payment of his monthly rentals.
o Is not indefinite b/c in the case in the example the respondents
were up to date with the condition imposed for the period
which is the payment of their rentals therefore they are in
compliance with the lease

Estoppel against lessee

Lessee is STOPPED from
ASSERTING TITLE TO THE THING LEASED as against the lessor (Article 1436)
DENY the lessors title
ASSERT a better title or right of possession not only in himself, but also in some
third person, including the state
(while he remains in the possession of the leased property and until he
surrenders possession to the lessor)
CRISOSTOMO, Jessica Ida Clarisa Magsaysay

1.) Lessor WITHOUT TITLE or his TITLE INVALID

Estoppel against lessor applies even though Lessor had no valid title at the time the
relation of lessor and lessee was created.
May BE ASSERTED BY Lessor and those who SUCCEED HIS TITLE

2.) Relation of Lessor and Lessee not dependent on Lessors Title

But Depends on the AGREEMENT between the parties as long as the lessee
remains in undisturbed possession, it is immaterial whether Lessor has a
valid title- or any title at all. AT THE TIME THE RELATION WAS ENTERED IN
TO
However this principle is loosened in order to avoid UNJUST ENRICHMENT
of lessor
3.) Conclusive Presumption not applicable to title acquired subsequent to commencement
of relation
Under rules of court Conclusive Presumption includes
o b. The tenant is not permitted to deny the title of his landlord at the time
of the commencement of the relation of landlord and tenant between
them
If Title acquired SUBSEQUENT to the commencement of the relation =
PRESUMPTION WILL NOT APPLY
o Tenant may show that the landlords title has expired or been conveyed to
another, and not estopped to deny claim for rent if he is ousted or evicted
by title
Judgement rendered in EJECTMENT CASES
o NOT BAR action between parties respecting title to land
o Not be conclusive as to the facts found therein in case, if case between
parties is of DIFFERENT CAUSE OF ACTION

Lease Distinguished from Sale

Lease
Enjoyment/ Use is Transferred
Transfer is Temporary
Lessor need not be the Owner
Price usually not mentioned/ Immaterial
Sale
Ownership is Transferred
Transfer is Permanent
Seller must be the Owner
Price is usually fixed in the contract

In case of doubt INTENTION of the parties is an important factor to determine Contract.

Conditional Sales of Goods

A lease with option to buy is an installment sale, NOT A LEASE
o These are leases ONLY IN NAME
o The so-called rent is regards as payment of the prince in installment.
CRISOSTOMO, Jessica Ida Clarisa Magsaysay

Lease Distinguished from Commodatum

By Contract of Loan a COMMADATUM
o One of the parties delivers to another
o Either something NOT CONSUMABLE, so latter may use for a certain time and
return it

Loan/ Mutuum
o Money/ other consumable thing
o Condition that the same amount of the same kin fang quality shall be paid

Lease Commodatum
Onerous (although rent may be condoned Gratuitous
or remitted)
Not Essentially personal, May be Purely Personal (Death of Bailor or Bailee
transmitted to heirs extinguishes the contract)
Consensual Contract Real Contract (perfected only upon delivery

Both contracts involve transmission of the Enjoyment or Use of a thing to another (Article 1933)

Lease distinguished from Mutuum

Lease
Owner doesnt lose his ownership
Relationship: Lessor and Lessee
May be Real or Personal Property
Governed by Statute of Frauds- where
thing leased is real property for more than
1 year
Not governed by Usury Law
Mutuum
Lender/ Creditor Loses his ownership
Relationship : Creditor/Obligeee and Debtor/
Obligor
Only Money or other Fungible thing
Not Governed by Statute of Frauds
Governed by Usury Law

Simple Loan may be Gratuitous or with a stipulation

Lease distinguished from Usufruct

Usufruct Gives a right to enjoy the property of another with the obligation of Preserving its
form and substance
o Unless otherwise stated

Lease
Real right only when Lease of real
property where LEASE IS REGISTERED
Lessor may or may not be the Owner
Lessor has ACTIVE OBLIGATION to
maintain the lessee in the enjoyment or
use of the property
Lessee doesnt pay taxes
Lessee has no obligation to pay for repairs
Lessee cannot constitute a usufruct on
the property
Usufruct
Always a REAL RIGHT
Must be the OWNER
Owner has a PASSIVE duty to allow the usufructuary
to Enjoy or Use the same
Pays annual taxes on fruits
Obliged to make ordinary repairs
Usufructuary may lease the thing to another
CRISOSTOMO, Jessica Ida Clarisa Magsaysay

May only be created by CONTRACT Created by LAW, CONTRACT, LAST WILL and
TESTAMENT, or PRESCRIPTION
Covers particular uses limited by the Covers all possible uses of the property
contract

Lease distinguished from Deposit

Deposit constituted moment a person RECEIVES a thing belonging to another
o with the Obligation of Safely Keeping it and Returning the same
If safekeeping and returning is not the principal purpose= it is NOT DEPOSIT

Lease Deposit
Essential purpose is to lease Enjoyment or Use Essential Purpose is the Safekeeping of the
of thing thing purpose
Lessor cannot demand thing before expiration Depositor can demand thing before expiration
of the contract
Object may be Movable or Immovable If it is extrajudicial ONLY movable
Onerous May be Gratuitous
Consensual Real contract perfected only upon delivery of
the object

Lease distinguished from Employment

Lease of Chattels Employment

Relationship: Lessor and Lessee
Lessor losses control or management over the
chattels
Lessor no control/ supervision over the lessee
Lessee pays rent to the lessor for the enjoyment
and use
Employer and Employee
Employer retains control or management
Employer exercises control and supervision
over his employee
Employer pays wages or salaries

Art. 1644. In the lease of work or service, one of the parties binds himself to execute a piece of work or to
render to the other some service for a price certain, but the relation of principal and agent does not exist
between them. (1544a)

Lease of Work and Service

Lease of Work = OBJECT is the execution of a piece of work for an employer by an
independent contractor (Art 1713)
Lease of Service = OBJECT is the performance of some service or an employer by a house
helper
In BOTH
o The employer/ passenger/ owner BINDS himself to pay some remuneration or
compensation in favor of the independent contractor/ employee/ or common
carrier
o RELATION DOES NOT EXIST between parties
CRISOSTOMO, Jessica Ida Clarisa Magsaysay

Lease of Work or Service distinguished from Agency

Contract of Agency, Person binds himself to render some service or to do something in
representation or on behalf of another, W/ Consent/Authority of the latter

Lease of Work/ Service Agency

Basis is EMPLOYMENT
Lessor performs a MATERIAL ACT for the
benefit of his employer w/o representation of
employer
Work/ Service must be for a price/
compensation
WILL of both parties NECESSARY
Only 2 persons are involved
Lease of Work : Risk of loss before delivery
borne by INDEPENDENT CONTRACTOR
Lease of Work: independent contractor is
personally liable for his contracts with 3rd
persons
Lessor ordinarily performs only ministerial
duties
Representation
Agent EXECUTES a JURIDICAL ACT for and in
behalf of his principal
Presumed for a compensation
Will of one is sufficient
3 persons involved (principal, agent, person
contracted)
Risk of loss before delivery borne by the
Principal, since agent is merely a representative
Agent not liable
Agent exercises discretionary powers

Lease of Work or Service distinguished from Partnership

Contract of Partnership is where 2 or more persons BIND themselves to contribute Money, Property
or Industry to a common fund, with the INTENTION of DIVIDING the profits among themselves.

Lease of Work/ Service Partnership

No Principle of representation
Lessor performs act for Employer
2 persons are involved
Work/ Service is dependent upon the ends or
purposes of the lessee
Work/ Service must be FOR PRICE/
Compensation
Will of BOTH PARTIES are necessary for the
Extinguishment
Lease of Work: Independent contractor is
LIABLE for his contracts with 3rd parties
Lease of Service: Lessor performs only
ministerial Duties
Every partner is an agent of the partnership
Partner enters into commercial/ business
transactions for the realization of profits
Partnerships juridical personality is separate
and distinct from each partner
Partners act conductive to their own BUSINESS
PURPOSES
Partners share in the profits or losses
Will of any party sufficient for Extinguishment
Partner is not generally not Liable for contracts
with 3rd parties
All partners exercise Discretionary Powers

Compensation in Lease of Work/ Service

1.) Where there is an agreement
Lessee is COMPELLED to pay the agreed price
o Unless it is found to be iniquitous or unreasonable
o Courts will fix a reasonable and just remuneration
CRISOSTOMO, Jessica Ida Clarisa Magsaysay

o Compensation is Renounced after payment

o Still Lease of Work/ Service but has become Gratuitous

2.) Where the agreement may be implied

One performs Work/ Service in favor of Another, WHO IMPLIEDLY CONSENTS thereto
and BENEFITS thereby
o IS ENTITLED TO COMPENSATION by virtue of
an innominate contract
Facio ut des (I give that you may do)
Case of services tacitly contracted in which case the courts will fix the
reasonable worth of services
o No one shall be unjustly enriched unless services are expressly stated to be
gratuitous
Tacit Agreement between the both parties
o Best evidence that there was an implied contract
When vessel has been disabled by the breaking of its shaft at sea and hoists
o Another vessel goes to its relief and takes it in tow
o Service is of salvage and must be remunerated

3.) Where No Rate or Amount is fixed in the contract

Contract is still Valid if the amount can be ascertained in the light of the customs and
usages of the place, or by findings of fact on the basis of evidence submitted
o A price certain exists when the same can be ascertained according to the
customs and usages of the place
When no rate has been fixed, court shall determine, in case of disagreement
Services in different occasions= FIRST IS MOST IMPORTANT
o As no salary was fixed when services was accepted
o Court is to determine
o Time accepted, consideration was capable of being made certain

Where he/she will be provided for maintenance(pinapakain etc.) during service, and
Exact amount to be paid for the hired services not precisely fixed
o DOES NOT BAR an action to recover, as long as contract provides a Basis or
Measure of ascertaining the amount agreed upon

Service as Driver under the Boundary System

Relation is Employer- Employee
The owner/ operator exercises control and supervision over the driver
The management of the business is still in the hands of the owner/ operator
o Holder of the certificate of Public convenience
o Must see to it that the driver follows the routes and rules prescribed by law
Fact that driver doesnt have fixed wages is not sufficient to change the relationship
between them

Art. 1645. Consumable goods cannot be the subject matter of a contract of lease, except when they are
merely to be exhibited or when they are accessory to an industrial establishment. (1545a)

Lease of Consumable Goods

FUNGIBLE goods
CRISOSTOMO, Jessica Ida Clarisa Magsaysay

o Cannot be subject of lease

o UNLESS merely to be EXHIBITED or when they are ACCESSORY to and Industrial
establishment
Lease is the transfer of use with the obligation to return thing
o and Fungible things cannot be used without it being consumed
o Therefore Fungible thing cannot be object of Loan

CHAPTER 2
LEASE OF RURAL AND URBAN LANDS
SECTION 1. - General Provisions

Art. 1646. The persons disqualified to buy referred to in Articles 1490 and 1491, are also disqualified to
become lessees of the things mentioned therein. (n)

Rural lands distinguished from Urban Lands

Rural refers to Country
Land adopted and used for Agricultural/ Pastoral purposes
Principally used for the purpose of obtaining products from the soil as opposed to urban
lands

Urban Principally for the purpose of residence

Persons DISQUALIFIED to become Lessees

Article 1646:
Article 1490
Husband and Wife cannot sell property to each other
Article 1491
Guardian, Agents, Executors, Public Office and Employee, Justice, Judges, Prosecuting
Attorneys, clerks for superior and inferior courts, and other officers and employees
connected with the administration of justice

Prohibition adopted in 1646 because of similarity between lease and that of sale

Lease of Real Property by ALIENS

They can lease

1. Ownership preserved in Lessor

Lessee enjoys use of immovable thing and nothing more, he has no proprietary right
Lessee doesn't not obtain more than the possession or use of the land, there is no danger
that a lessee be converted into the owner

2. Where lease contracts amounts to virtual transfer of ownership

Parties are not allowed another transaction for the purpose of disguising the transfer in
violation of the constitution
Like Lease to Alien with option to buy

3. Maximum period of lease to aliens

PD 471
25 years renewable for another 25 years
CRISOSTOMO, Jessica Ida Clarisa Magsaysay

4. Lease to Foreign Investors

RA 6752 Investors Lease Act
Foreign investors may lease private lands subject to:
o Not exceed 50 years, renewable for 25 years
o Used solely for purpose of investment
o Area reasonable be required for the purpose of investment
o May be further sold, transferred or assigned
If one who receives is a foreigner, RA 6752 will still apply
o If renewable at the option of the lessee understood as renewable upon mutual
agreement
o Foreign Investor : one who has made equity investment in the Philippines through
actual remittance of foreign exchange or transfer of assets, upon registration with
the Securities and Exchange Commission

Art. 1647. If a lease is to be recorded in the Registry of Property, the following persons cannot constitute
the same without proper authority: the husband with respect to the wife's paraphernal real estate, the
father or guardian as to the property of the minor or ward, and the manager without special power.
(1548a)

Proper Authority Required if leased to be recorded in Registry of Property

1. Persons required to secure special power

Persons mentioned cannot constitute the same without proper authority ( Power of
Attorney) to constitute the same
Accd to the OLD CIVIL CODE: they cannot lease for a term more than 6 years without
special power of attorney

2. Reason for Requirement

Because registration of the lease is AN ACT OF STRICT OWNERSHIP hence special power
of attorney is necessary.
But if not recorded, the lease is still valid even without special power

3. Lease for more than a year

Special power of attorney is NECESSARY to lease any real property to another person
for more than one year
o Required whether or not lease will be recorded
o Without special power of attorney, a lease for more than 1 year, will only be
valid for 1 year and void in the excess.

Administrator in old civil code is changed to manager

Apply to administrator of conjugal property

Art. 1648. Every lease of real estate may be recorded in the Registry of Property. Unless a lease is recorded,
it shall not be binding upon third persons. (1549a)

Effect of Registration of Lease of Real Estate

1. As against 3rd persons
A lease is valid and binding between the parties, their privies and their hers
o Unless it be an oral lease for a longer period than 1 year in which case it cannot
be enforced by action for noncompliance with the statute of frauds
CRISOSTOMO, Jessica Ida Clarisa Magsaysay

To bind 3rd parties must be registered and public document

o Unless innocent purchaser for value

Accd to Code of Commission Article 1648

o intended to protect the lessee, who cannot be ousted by the buyer if the lease
is recorded
The lessor may be compelled by the court to deliver the title over the property leased so
that lease may be annotated therein

2. As between the parties

Lease is a mere PERSONAL RIGHT
Registration does not alter the rights of the contracting parties
o Registration doesnt make an invalid contract valid
Lease becomes Real right when it is recorded on the title of the lessor

Leases of Personal Property

1648 ONLY APPLIES TO LEASE OF REAL ESTATE
o Lease of personal property cannot be registered

Article 1621 part 1

o Leases of personal property shall be binding on 3rd parties if they appear in a public
instrument

Effect of actual notice of unregistered lease by Purchaser

RULE: if lease not registered, cannot be binding upon a purchaser of the property

1. If buyer knows of existence, even though it is not entered upon the certificate title, HE
MUST RESPECT the lease

Art. 1649. The lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation
to the contrary. (n)

Assignment of Lease by Lessee

1. Effect
In assignment of lease, the personality of the Lessee (assignor/ debtor) disappears
Makes an absolute transfer of his lease also obligations as such lease and thus dissociates
himself from the original contract of lease.
In effect a novation by substituting

2. Consent of Lessor
Lessee cannot assign without consent of the Lessor
o UNLESS there is a stipulation granting him the right
To protect the lessor/ owner of the leased property
Without the consent of the Lessor= GROUND FOR RESCISSION
What is contemplated is the TRANSFER OF THE WHOLE CONTRACT

3. Sublease arrangement not covered

Sublessee becomes liable to pay rentals to the original lessee
However their relation is not dissolved, still bound by the original contract.
CRISOSTOMO, Jessica Ida Clarisa Magsaysay

In sublease agreement, there are 3 parties , 2 distinct juridical relations.

Art. 1650. When in the contract of lease of things there is no 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. (1550)

Sublease by Lessee of thing leased

1. Allowed in absence of express prohibition
Unlike assignment of lease, Lessee may SUBLEASE IN absence of EXPRESS PROHIBITION
A violation entitles the lessor to rescission of the contract and indemnification for
damages or only the latter allowing the contrant to remain in force
If prohibition merely implied, Sublease is still allowed
Use the premises as a dwelling or as lodging house gives the lessee the right to
sublease the premises

2. Lessee remains a party

The personality of the Lessee does not disappear
There are 2 leases and 2 distinct juridical relation
o Between lessor and the lessee
o Between Sublessor and sublessee
The sublessee doesnt have any direct action against the lessor to require compliance
with his or lessees obligation (and vice versa)

3. Contract of lease not affected by the sublease

Lease subsists with all its legal consequences nothwithstanding said sublease
By express provision of article 1650, the lessee still responsible for the performance
of his obligation
A judgement eviction against lessee affects the sublessee
o Because sublessor can invoke no right superior to that of lessor

Examples:
Sublessors are not the same as boarders

Art. 1651. Without prejudice to his obligation toward the sublessor, the sublessee is bound to the lessor for
all acts which refer to the use and preservation of the thing leased in the manner stipulated between the
lessor and the lessee. (1551)

Direct Liability of Sublessor to Lessor

Generally: The sublessee can only be held liable directly to the sublessor
Article 1651 is the Exception
o The lessor may bring action directly against the sublessee IF HE DOESNT USE
and PRESERVE the thing leased in accordance with the agreement between the
lessor and the lessee
Not necessary that sublessor be joined as defendant

Art. 1652. The sublessee is subsidiarily liable to the lessor for any rent due from the lessee. However, the
sublessee shall not be responsible beyond the amount of rent due from him, in accordance with the terms
of the sublease, at the time of the extrajudicial demand by the lessor
CRISOSTOMO, Jessica Ida Clarisa Magsaysay

Payments of rent in advance by the sublessee shall be deemed not to have been made, so far as the
lessor's claim is concerned, unless said payments were effected in virtue of the custom of the place.
(1552a)

Subsidiary liability of Sublessee to Lessor

The lessee's rights and obligations vis--vis the lessor are not passed on the sublessee

1. Remedy to collect rents from the sublessee

Although Sublessee has no direct obligation to answer for rents due from the lessee to
the lessor
Article 1652 GRANTS the LESSOR the RIGHT TO DEMAND PAYMENT FROM THE
SUBLESSEE the rents which the sublessor failed to pay
o PURPOSE: prevent lessee from collecting from sublessee and not paying lessor

Article 1652 DOES NOT Annul the contractual relations between Lessee and Sublesse, but
HELPS COLLECT the rentals on the same.
The demand to pay rents made by lessor to the sublesse doesnt exempt sublessee to
pay to sublessor the rents failed to pay to lessor

2. Amount of rent recoverable

LIMITED to the AMOUNT OF RENT DUE FROM HIM TO THE SUBLESSOR
o Under the terms of the sublease at the time of the extrajudicial demand of
the lessor
Future rents cannot be recovered
Sublessee is only liable to the amount the Lessee has failed to pay the Lessor
There must be a JUDGEMENT CANCELLING the lessees principal lease contract or
ousting the lessee from the premises before the sublessee becomes secondarily liable.

3. Liability for rents paid in advance

Rents paid in advanced by sublessee shall be deemed to not to have been paid as far
Lessee is concerned
The sublessee continues to be subsidiary liable to the lessor for any unpaid rent by the
lessee

Art. 1653. The provisions governing warranty, contained in the Title on Sales, shall be applicable to the
contract of lease.

In the cases where the return of the price is required, reduction shall be made in proportion to the time
during which the lessee enjoyed the thing. (1553)

Warranty of the Lessor

Warranty of sales apply to leases, Lessor warrants:
Rights to lease the thing
Lessee shall enjoy the legal and peaceful possession of the thing
The thing is fit for the use for which it is intended and free from any hidden fault or defect.
CRISOSTOMO, Jessica Ida Clarisa Magsaysay

In case of eviction of the Lessee, RETURN of the rents paid is REQUIRED

A REDUCTION WILL BE MADE TAKING INTO ACCOUNT the period during which lessee
enjoyed the thing.
The lessee also has right to ask PROPORTIONATE REDUCTION of the rents agreed upon
where there are or number of the object of the lease is less than that stated in the contract

Lessors warranty Distinct from his liability for Damages

When law declares lessor to warrant thing, NOT TO BE UNDERSTOOD that he must also
indemnify the lessee
Liability for warrant thing NOT EQUIVALENT to Liability in Damages
o In warranty fraud, bad faith are not a necessary element.

SECTION 2. - Rights and Obligations of the Lessor and the Lessee

Art. 1654. The lessor is obliged:

(1) To deliver the thing which is the object of the contract in such a condition as to render it fit for the use
intended;

(2) To make on the same during the lease all the necessary repairs in order 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 of the lease for the entire duration of
the contract. (1554a)

Obligations of the Lessor

The 3 listed +
4. He cannot alter the form of the thing leased.
Failure to fulfill any of these obligations = LIABLE FOR DAMAGES.

1. Delivery of the Property

Must be delivered in order lessee may Enjoy or Use the same. (Actual/ Constructive)
At time of delivery, Thing must be in condition fir for the use intended.
o Parties may stipulate regarding the fitness of the thing and the particular
use
Lessee finds out that the is a person in the building
o Lessee has an action against the Lessor for failure to comply with his
obligation to deliver
o No action against the possessor

2. Making Necessary Repairs

To make it suitable for the use to which it has been devoted, unless stipulation to the
contrary, and customs of the place
Lessor fails in performance = Lessee May SUSPEND the payment for rent (Art 1658)
o Or avail himself of other Remedies
o Lessor not liable for repairs/ deterioration caused by lessee himself

Lessee may agree to do repairs and relieve Lessor of duty

o As where lessee is to pay nominal amount

Repairs putting back of something in the condition in which it was originally

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o to apply to the restoration of things after injury or partial destruction, w/o

complete loss of identity in the thing repaired
o
Improvement adding something new thereto
Obligation to make repair is different from reconstruction
The lessee should call upon the owner to make the necessary expenses

3. Keeping Lessee in peaceful and adequate enjoyment

Arises when Legal trespass disturb, dispute, or place difficulties in the lessees
peaceful and adequate enjoyment of the of the leased premises.
o That it casts doubt upon the right of the lessor to execute the lease
o Lessor answer for legal trespass

Lessor who fails = shall be subject to INDEMNITY FOR THE LOSSES AND DAMAGES
caused thereby.
o True measure for damages = what the plaintiff has lost by the breach

Lessee has right to suspend payment, right to rescission and indemnification for
damages
o Or only indemnification if allow the contract to remain in force

Lessors warranty is that lessee will not be disturbed in his LEGAL POSSESSION, not
the physical possession
o Not liable to physical trespass
o Liable to eviction due to non-payment real estate tax

Only during the term of the contract

Where lease contract contains Right Of First Refusal

Lessor has a legal duty to the lessee to offer first to Lessee
Right of First Refusal is an Integral part and Indivisible part of the contract of lease and is
inseparable.
Lessor may sell if Lessee fail to use right of first refusal
Basis of the right must be the current offer to sell or offer to purchase of any prospective
buyer
AGGRIEVED PARTY = may file ACTION TO RESCIND SALE and compel the lessor/ owner to
EXECUTE the DEED OF SALE in his favor.

Art. 1655. If the thing leased is totally destroyed by a fortuitous event, the lease is extinguished. If the
destruction is partial, the lessee may choose between a proportional reduction of the rent and a rescission
of the lease. (n)

Effect of destruction of thing leased by fortuitous events

1. Destruction Total
Lease destroyed
2. Destruction Partial
Reduction of rent / Rescission
o Once chosen cannot be reduced
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Reduction of rent is retroactive to the date of partial destruction

Partial destruction must be important or substantial as to defeat the purpose of the
lessee to enter the contract of lease

Art. 1656. The lessor of a business or industrial establishment may continue engaging in the same business
or industry to which the lessee devotes the thing leased, unless there is a stipulation to the contrary. (n)

Right of lessor to continue same business or industry engaged in by lessee

Lease is no warranty that the lessors business would be successful.
o Even if lessee suffer losses, he is still liable to pay rent
Lease doesnt create a right to be free from competition offered by the lessor or other
persons
o Lessor may continue in the business

Art. 1657. The lessee is obliged:

(1) To pay the price of the lease according to the terms stipulated;

(2) To use the thing leased as a diligent father of a family, devoting it to the use stipulated; and in the
absence of stipulation, to that which may be inferred from the nature of the thing leased, according to the
custom of the place;

(3) To pay expenses for the deed of lease. (1555)

Obligations of the Lessee

Including:
TO NOTIFY THE LESSOR OF EVERY USURPATION OR UNTOWARD ACT BY ANY 3RD PERSON
and of the NECESSITY OF URGANT REPAIRS (Art 1663)

1. Payment of agreed price of lease

Only rises when the thing has been DELIVERED TO THE LESSEE
Only lessor has right to fix the rents and compel the lessor to conform.
o Error on the court to fix a monthly rental at an amount lower that what lessee is
willing to pay for the leased premises.
Lessor has right to terminate the lease upon expiration
o Lessor also has right to Increase the rent in case of renewal
o Lessee has to accept new rate or vacate the premises

When lessee was in continuous possession of the building and lot during pendency
o Lessee is required to compensate the lessor for such occupancy

Lessor having the right to repurchase is no excuse for the failure to pay for rents

Disagreement of parties on amount of rent cannot be decided on Consignation (art 1256)

o But Forcible entry and Unlawful detainer when lessee refuses to pay rents

Proper rate for back rentals is 12% per annum computed from the time of demand
o Back rentals in this case are equivalent to a loan or forbearance of money
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Payment of rentals is governed by the same rules regarding payment of obligations in

general

2. Proper use of the thing Leased

Diligence of a good father of a family
Devote thing to the use stipulated
o If none stipulated, to the use in which it may be inferred from the nature of the
thing.
o Use of thing which is illegal entitles lessor to terminate the contract.
If various purposes = may use it for any of the purposes for which it may be usable.
If pre-termination is allowed in the contract
o May only be allowed on the ground/ grounds that are provided in the contract.
o Due process: party in the contract needs to be fully appraised of reason, if not,
it will not be considered

3. Payment of expenses for deed of lease

Bear on the Lessee
By agreement may be borne by the Vendor

Art. 1658. The lessee may suspend the payment of the rent in case the lessor fails to make the necessary
repairs or to maintain the lessee in peaceful and adequate enjoyment of the property leased. (n)

Suspension of the payment

Usually lessee is not deprived of possession and enjoyment except in:
In case of repairs
o May suspend from the time demand is made upon the lessor (fails)
In case of eviction
o lessee is released from the obligation to pay rents from the time he is
unlawfully deprived

Once cause has ceased to exist

The lessee is not obliged to pay rent for the intervening period

Art. 1659. If the lessor or the lessee should not comply with the obligations set forth in Articles 1654 and
1657, the aggrieved party may ask for the rescission of the contract and indemnification for damages, or
only the latter, allowing the contract to remain in force. (1556)

Alternative remedies of the Aggrieved party

Innocent party may Demand the RESCISSION, or FULFILLMENT with damages

Courts are not granted power to grant additional time for performance
Violation of lease contract entitles the aggrieved to Demand Indemnity for damages
o Action for recovery for damages is different from action for ejectment (object is the
recovery of the possession of the leased property
AMOUNT OF DAMAGES recoverable = Difference between renal actually obtained and that
is stipulated in the contract
o Indemnity doesnt include future rent, future rent liability
Lessee fails to pay
o Lessor right to rescind, recover unpaid rents, and eject lessee
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Rescission of Lease Contract

1.) For breach of any statutory obligation
Non payment of lessor = Lessor may treat contract rescinded
o Has right to recover for possession thru UNLAWFUL DETAINER
Not necessary to file rescission of contract first

If lessor doesnt accept the payment

o Lessees remedy is to Tender Payment and Consignation
o Different from automatic rescission
Lessee making deposit, the lessee PREVENTS the automatic cancellation
BUT lessor may still sue for rescission of the sale.

Judgement rescission must order lease to vacate and return the premises
o Have no authority to extend
o Lessee should pay the accrued rent

Lessee cannot refuse to pay rent and Rescind the sale

o Rescission is only granted upon an injured party, cannot be availed by the wrong
doer
Lessor takes possession of the leased land for non payment & Lessee Voluntarily Surrenders
it
o Lessor has no right to recover the rent Accruing subsequently

2.) Action and ground for annulment of lease SHOULD NOT BE CONFUSED with action and ground
for Rescission
Failure to comply gives injured party the right to rescind NOT annul

3.) In an action for rescission of a contract of lease and indemnity for losses and damages
The withdrawal made by the Lessor of the amounts deposited with the clerk of court
(consignated payment) DO NOT CONSTITUTE AS A WAIVER of the right for action of
ejectment

4.) Rescission NOT BE PERMITTED for Slight or Casual Breach

Where time is not of the essence, slight delay is not a sufficient ground.

Art. 1660. If a dwelling place or any other building intended for human habitation is in such a condition
that its use brings imminent and serious danger to life or health, the lessee may terminate the lease at
once by notifying the lessor, even if at the time the contract was perfected the former knew of the
dangerous condition or waived the right to rescind the lease on account of this condition. (n)

Dwelling place or building dangerous to life or health

May TERMINATE the lease at once by notice to the lessor in case dwelling place/or any other
building is unfit for human habitation even if he/she knew of the conditions or waived the right to
rescind the contract
For public safety

Art. 1661. The lessor cannot alter the form of the thing leased in such a way as to impair the use to which
the thing is devoted under the terms of the lease. (1557a)
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Alteration of form of Lease

1. By the Lessor
Can alter the form of the lease as long as there is no impairment

2. By the Lessee
May alter the form of the lease so long as the value of the property is not impaired

Art. 1662. If during the lease it should become necessary to make some urgent repairs upon the thing
leased, which cannot be deferred until the termination of the lease, the lessee is obliged to tolerate the
work, although it may be very annoying to him, and although during the same, he may be deprived of a
part of the premises.

If the repairs last more than forty days the rent shall be reduced in proportion to the time - including the
first forty days - and the part of the property of which the lessee has been deprived.

When the work is of such a nature that the portion which the lessee and his family need for their dwelling
becomes uninhabitable, he may rescind the contract if the main purpose of the lease is to provide a
dwelling place for the lessee. (1558a)

Rule in case of Urgent Repairs

1. Need to make the repairs
The Lessor has the obligation to make necessary repairs
Lessee is obliged to NOTIFY the lessor of the urgency of such repair
o If the repair is not urgent, lessee can refuse to
o If urgent, cannot refuse

2. Length of time for the repairs

Last for more than 40 years= lessee is entitled to a proportionate reduction
o Taking into account time and part of property which lessee has been deprived
If doesnt last for 40 days = lessee cannot ask for reduction, absent of stipulation

3. Rescission of the Lease

Regardless of the length of time, if dwelling has become inhabitable thru work = can rescind
contract.

Art. 1663. The lessee is obliged to bring to the knowledge of the proprietor, within the shortest possible
time, every usurpation or untoward act which any third person may have committed or may be openly
preparing to carry out upon the thing leased.

He is also obliged to advise the owner, with the same urgency, of the need of all repairs included in No. 2
of Article 1654.

In both cases the lessee shall be liable for the damages which, through his negligence, may be suffered by
the proprietor.

If the lessor fails to make urgent repairs, the lessee, in order to avoid an imminent danger, may order the
repairs at the lessor's cost. (1559a)
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Obligation of lessee to notify Lessor

Adds the obligation in Article 1663
TO NOTIFY THE LESSOR OG ANY USURPATION AND OF THE NEED FOR REPAIRS

1. Usurpation or untoward act by a third person

Enable the owner to maintain his civil possession, by suit if necessary
Owner entitled to defend his property from any aggression in order to prevent serious injury
to his interests

2. Need of Repairs
Lessee should call upon the lessor to make the necessary repairs
It is not the duty of the lessor to constantly inspect the premises to see if there is need for
repair
Lessee is not deprived of making measures to protect his interests and avoid losses and
damages to make them
o He can make a claim against the lessor for what he has spent for as long as having
advised him of the necessity of said repairs the lessor should fail to make them.

Art. 1664. The lessor is not obliged to answer for a mere act of trespass which a third person may cause on
the use of the thing leased; but the lessee shall have a direct action against the intruder.

There is a mere act of trespass when the third person claims no right whatever. (1560a)

Rule in case of Mere Act of Trespass

2 kinds of trespass (1) Mere act of Trespass (disturbance in fact)
(2) Trespass in Law (disturbance in law)

Mere trespass = lessor is not liable, lessee shall have direct action against the usurper/
intruder
In case of trespass in law or legal trespass
o Lessor becomes liable to the lessee
o The lessor may maintain an action to recover title or to establish better right

Art. 1665. The lessee shall return the thing leased, upon the termination of the lease, as he received it,
save what has been lost or impaired by the lapse of time, or by ordinary wear and tear, or from an
inevitable cause. (1561a)

Art. 1666. In the absence of a statement concerning the condition of the thing at the time the lease was
constituted, the law presumes that the lessee received it in good condition, unless there is proof to the
contrary. (1562)

Art. 1667. The lessee is responsible for the deterioration or loss of the thing leased, unless he proves that it
took place without his fault. This burden of proof on the lessee does not apply when the destruction is due
to earthquake, flood, storm or other natural calamity. (1563a)

Art. 1668. The lessee is liable for any deterioration caused by members of his household and by guests and
visitors. (1564a)
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Art. 1669. If the lease was made for a determinate time, it ceases upon the day fixed, without the need of a
demand. (1565)

Art. 1670. If at the end of the contract the lessee should continue enjoying the thing leased for fifteen days
with the acquiescence of the lessor, and unless a notice to the contrary by either party has previously been
given, it is understood that there is an implied new lease, not for the period of the original contract, but for
the time established in Articles 1682 and 1687. The other terms of the original contract shall be revived.
(1566a)

Art. 1671. If the lessee continues enjoying the thing after the expiration of the contract, over the lessor's
objection, the former shall be subject to the responsibilities of a possessor in bad faith. (n)

Art. 1672. In case of an implied new lease, the obligations contracted by a third person for the security of
the principal contract shall cease with respect to the new lease. (1567)

Art. 1673. The lessor may judicially eject the lessee for any of the following causes:

(1) When the period agreed upon, or that which is fixed for the duration of leases under Articles 1682 and
1687, has expired;

(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 service not stipulated which causes the
deterioration thereof; or if he does not observe the requirement in No. 2 of Article 1657, as regards the use
thereof.

The ejectment of tenants of agricultural lands is governed by special laws. (1569a)

Art. 1674. In ejectment cases where an appeal is taken the remedy granted in Article 539, second
paragraph, shall also apply, if the higher court is satisfied that the lessee's appeal is frivolous or dilatory, or
that the lessor's appeal is prima facie meritorious. The period of ten days referred to in said article shall be
counted from the time the appeal is perfected. (n)

Art. 1675. Except in cases stated in Article 1673, the lessee shall have a right to make use of the periods
established in Articles 1682 and 1687. (1570)

Art. 1676. The purchaser of a piece of land which is under a lease that is not recorded in the Registry of
Property may terminate the lease, save when there is a stipulation to the contrary in the contract of sale,
or when the purchaser knows of the existence of the lease.

If the buyer makes use of this right, the lessee may demand that he be allowed to gather the fruits of the
harvest which corresponds to the current agricultural year and that the vendor indemnify him for damages
suffered.

If the sale is fictitious, for the purpose of extinguishing the lease, the supposed vendee cannot make use of
the right granted in the first paragraph of this article. The sale is presumed to be fictitious if at the time the
supposed vendee demands the termination of the lease, the sale is not recorded in the Registry of
Property. (1571a)
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Art. 1677. The purchaser in a sale with the right of redemption cannot make use of the power to eject the
lessee until the end of the period for the redemption. (1572)

Art. 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which
the lease is intended, without altering the form or substance of the property leased, the lessor upon the
termination of the lease shall pay the lessee one-half of the value of the improvements at that time.
Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even
though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment
upon the property leased than is necessary.

With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may
remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does
not choose to retain them by paying their value at the time the lease is extinguished. (n)

Art. 1679. If nothing has been stipulated concerning the place and the time for the payment of the lease,
the provisions or Article 1251 shall be observed as regards the place; and with respect to the time, the
custom of the place shall be followed. (1574)

SECTION 3. - Special Provisions for Leases ofRural Lands

Art. 1680. The lessee shall have no right to a reduction of the rent on account of the sterility of the land
leased, or by reason of the loss of fruits due to ordinary fortuitous events; but he shall have such right in
case of the loss of more than one-half of the fruits through extraordinary and unforeseen fortuitous
events, save always when there is a specific stipulation to the contrary.
Extraordinary fortuitous events are understood to be: fire, war, pestilence, unusual flood, locusts,
earthquake, or others which are uncommon, and which the contracting parties could not have reasonably
foreseen. (1575)

Art. 1681. Neither does the lessee have any right to a reduction of the rent if the fruits are lost after they
have been separated from their stalk, root or trunk. (1576)

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 may yield once, although two or more years have to elapse for the purpose. (1577a)

Art. 1683. The outgoing lessee shall allow the incoming lessee or the lessor the use of the premises and
other means necessary for the preparatory labor for the following year; and, reciprocally, the incoming
lessee or the lessor is under obligation to permit the outgoing lessee to do whatever may be necessary for
the gathering or harvesting and utilization of the fruits, all in accordance with the custom of the place.
(1578a)

Art. 1684. Land tenancy on shares shall be governed by special laws, the stipulations of the parties, the
provisions on partnership and by the customs of the place. (1579a)

Art. 1685. The tenant on shares cannot be ejected except in cases specified by law. (n)

SECTION 4. - Special Provisions of the Lease ofUrban Lands

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Art. 1686. In default of a special stipulation, the custom of the place shall be observed with regard to the
kind of repairs on urban property for which the lessor shall be liable. In case of doubt it is understood that
the repairs are chargeable against him. (1580a)

Art. 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. However, even though a monthly rent is paid, and no period
for the lease has been set, the courts may fix a longer term for the lease after the lessee has occupied the
premises for over one year. If the rent is weekly, the courts may likewise determine a longer period after
the lessee has been in possession for over six months. In case of daily rent, the courts may also fix a longer
period after the lessee has stayed in the place for over one month. (1581a)

Art. 1688. When the lessor of a house, or part thereof, used as a dwelling for a family, or when the lessor
of a store, or industrial establishment, also leases the furniture, the lease of the latter shall be deemed to
be for the duration of the lease of the premises. (1582)

CHAPTER 3
WORK AND LABOR
SECTION 1. - Household Service (n)

Art. 1689. Household service shall always be reasonably compensated. Any stipulation that household
service is without compensation shall be void. Such compensation shall be in addition to the house helper's
lodging, food, and medical attendance.
Art. 1690. The head of the family shall furnish, free of charge, to the house helper, suitable and sanitary
quarters as well as adequate food and medical attendance.

Art. 1691. If the house helper is under the age of eighteen years, the head of the family shall give an
opportunity to the house helper for at least elementary education. The cost of such education shall be a
part of the house helper's compensation, unless there is a stipulation to the contrary.

Art. 1692. No contract for household service shall last for more than two years. However, such contract
may be renewed from year to year.

Art. 1693. The house helper's clothes shall be subject to stipulation. However, any contract for household
service shall be void if thereby the house helper cannot afford to acquire suitable clothing.

Art. 1694. The head of the family shall treat the house helper in a just and humane manner. In no case shall
physical violence be used upon the house helper.

Art. 1695. House helper shall not be required to work more than ten hours a day. Every house helper shall
be allowed four days' vacation each month, with pay.

Art. 1696. In case of death of the house helper, the head of the family shall bear the funeral expenses if the
house helper has no relatives in the place where the head of the family lives, with sufficient means
therefor.

Art. 1697. If the period for household service is fixed neither the head of the family nor the house helper
may terminate the contract before the expiration of the term, except for a just cause. If the house helper is
unjustly dismissed, he shall be paid the compensation already earned plus that for fifteen days by way of
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indemnity. If the house helper leaves without justifiable reason, he shall forfeit any salary due him and
unpaid, for not exceeding fifteen days.

Art. 1698. If the duration of the household service is not determined either by stipulation or by the nature
of the service, the head of the family or the house helper may give notice to put an end to the service
relation, according to the following rules:

(1) If the compensation is paid by the day, notice may be given on any day that the service shall end at the
close of the following day;

(2) If the compensation is paid by the week, notice may be given, at the latest on the first business day of
the week, that the service shall be terminated at the end of the seventh day from the beginning of the
week;

(3) If the compensation is paid by the month, notice may be given, at the latest, on the fifth day of the
month, that the service shall cease at the end of the month.

Art. 1699. Upon the extinguishment of the service relation, the house helper may demand from the head
of the family a written statement on the nature and duration of the service and the efficiency and conduct
of the house helper.