Are you covered by the rent control law?

Are you aware that based on the 2015 Census of Population, about 1.75 million families or 99.5 percent of all Filipino families pay monthly rent of P10,000 or less, according to the Philippine Statistical Research and Training Institute (PSRTI)? It is not surprising that the government has imposed rent control to protect this vulnerable group from rent increase.

Background

The current Rent Control Act dates back to 2009 when Republic Act (RA) No. 9653 was enacted. Covered are residential units defined as “apartment, house and/or land on which another’s dwelling is located and used for residential purposes and shall include not only building houses, dormitories, rooms and bedspaces offered for rent by their owners,… but also those used for home industries, retail stores or other business purposes if the owner thereof and his or her family actually live therein and use it principally for dwelling purposes.”

Aside from limiting the annual rent increase, the law prescribes deposit requirements, assignment of lease and subletting, and the grounds for ejectment.

Unlike previous laws which had to be re-enacted after their expirations, the 2009 RA designated the Housing and Urban Development Coordinating Council (HUDCC) to regulate rentals, including any extension. With the creation of the Department of Human Settlements and Urban Development (DHSUD), HUDCC’s authority and mandates were transferred to DHSUD.

Rent increase limits

To be covered by the Act, monthly rents in Metro Manila and other highly urbanized cities should not exceed P10,000.  

Outside of these areas, rental rates are capped at P5,000 per month. Based on the latest resolution, monthly rents are allowed the following maximum annual rate increases provided the unit is leased by the same lessee:

a. Below P5,000 – two percent

b. Between P5,000 and P8,999 – seven percent  

c. Between P9,000 and P10,000 – eleven percent 

Furthermore, rents in boarding houses, dormitories, rooms and bedspaces offered to students may only be increased once a year.

Tenants’ obligations and rights

Unless provided in the lease contract to the contrary, rent should be paid in advance within the first five days of every month or the beginning of the lease agreement. Lessors cannot ask for more than a month’s advance rent nor more than two months’ security deposit. Any interest earned from the deposit should be returned to the tenant at the end of the contract unless there are any unpaid bills or the property was damaged by the tenant. 

Likewise, a tenant is not allowed to assign his lease or sublet in whole or in part, including accepting boarders or bed spacers, unless the lessor’s written consent is secured. Without such consent, the tenant’s action shall be a ground for ejectment.

Meanwhile, a tenant cannot be unilaterally ejected even if the property had been sold or mortgaged as the new owner is required to honor the existing lease contract.  

As a reprieve during the early pandemic period and for a limited time, rents were allowed to be paid after a 30-day grace period from the last due date without incurring interests, penalties, fees, and other charges.

Lessor’s right to repossess property

A lessor may however, repossess his property if he has a legitimate need like for his own use or that of an immediate family member.  It can only be effected after the lease has expired and upon three months advance formal notice. To eliminate the lessor from taking undue advantage, he is prohibited from leasing out the residential unit within a year from repossession of the unit.

A lessor who needs to make necessary property repair subject of a condemnation order may also repossess it, provided the tenant will be given the first preference to lease back based on an adjusted rent commensurate with the repair’s expenses. Nevertheless, a tenant cannot be given any preference if the residential unit is completely demolished.

Judicial Ejectment

Except for specific instances that were covered by the Department of Trade and Industry (DTI) Memorandum Circulars on the Guidelines on the Concessions on Residential Rents during the early days of the pandemic, the non-payment of three months accumulated rent is a ground for ejectment. However, before an ejectment can happen, the lessor is required to comply with the following:

1. Tenant should be provided with at least two Demand Letters to Pay.

2. If the tenant still fails to pay, a Third and Final Demand to Pay with Notice to Pay and Vacate should be given to the tenant.

3. If the tenant still does not pay, the lessor may file a complaint with the Barangay Chairman’s Office so the parties can undergo mediation. 

4. If there remains no agreement, the Barangay Chairman should issue a Certificate to File Action to document the failed mediation process. 

5. Only after these steps had been taken can the lessor/owner file for judicial ejectment.

Be well informed about the Rent Control Act so you can exercise your rights properly.

(References used include Republic Act No. 9653 or Rent Control Act of 2009, National Human Settlements Board Resolution No. 2020-04 Extending the Rent Control from January 1, 2021 to December 31, 2021, National Human Settlements Board Resolution No. 2021-02 Extending the Rent Control from January 1, 2022 to December 31, 2022) 

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Henry L. Yap is an architect, environmental planner, real estate practitioner and former professorial lecturer.

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