Lease

lease reviewer 2011
CONTRACT OF LEASE a contract by which one person binds himself to grant temporarily, the use of a thing or the rendering of some service to another who undertakes to pay some rent, compensation, or price. CHARACTERISTICS: (lease of things) 1. Consensual 2. Principal contract 3. Nominate 4. Subject matter must be within the commerce of man 5. Purpose should not be minimal 6. Onerous 7. Period is temporary 8. Period may be definite or indefinite 9. Lessor need not be the owner RENT The compensation either in money, provisions, chattels or labor, received by the lessor from the lessee.
Sales and lease comments and cases by hector de leon, UP, Ateneo and San beda civil law reviewer | jen_biltz_albano/2011
lease reviewer 2011

REQUISITES: 1. Must not be fictitious or nominal otherwise the contract is considered essentially gratuitous 2. Must be capable of determination 3. May be in the form of products, fruits, construction; as long as it has value
WHEN LEASE OF REAL PROPERTY IS REAL RIGHT Generally, a lease of real property is a personal right. Exceptions: 1. If it is for more than one year and to be enforceable it must be in writing 2. If it is registered with Registry of Property, regardless of its period EFFECTS IF LEASE OF REAL PROPERTY IS NOT REGISTERED: 1. The lease is not binding on third persons; 2. Such third person is allowed to terminate the lease in case he buys the property from the owner-lessor; 3. Actual knowledge of existence and duration of lease, is equivalent to registration; 4. Stranger knows of the existence of the lease, but was led to believe that the lease would expire soon or before the new lease in favor of him begins, the stranger can still be considered innocent.
lease reviewer 2011

KINDS OF LEASE 1. Lease of things or properties whether immovable or movable property one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain for a period which may be definite or indefinite But in no case will the period exceed 99 years. WHAT CAN BE THE SUBJECT OF A LEASE - Only things which are within the commerce of man; lease of properties belonging to the public domain cannot be proper subjects of lease; such contracts are void. PERSONS DISQUALIFIED TO BECOME LESSEES: (a) Husband and wife cannot lease to each other their separate properties (exception: separation of property) (b) Those disqualified due to fiduciary relationship - Guardian: ward - Agent: principal - Executor & administrators - Public officer: state property - Justices, judges: property under litigation - Others disqualified by law LEASE BY FILIPINOS - may lease lands of public domain with an area of 500 has. and may acquire not more than 12 has. LEASE BY CORPORATIONS - at least 60% Filipino-owned, may lease lands of public domain for a period of 25 years, renewable for not more than 25 years; the area not to exceed more than 1,000 has. [One thousand Hectares]
lease reviewer 2011

RULE ON LEASE OF THINGS WHEN LESSEE IS AN ALIEN (a) 99-year limit applies to aliens as long as it is a lease of personal property (b) Aliens CANNOT lease public lands, and cannot acquire private lands except through succession (c) If lease of real property (private lands), maximum of 25 years renewable for another 25 years (P.D.713) (d) Under the Investors Lease Act of 1995, the 25-year period was extended to 50 years renewable for another 25 years provided the following conditions are met: lessee must make investments lease is approved by DTI if terms are violated, DTI can terminate it NOTE: the ILA did not do away with P.D. 713, under ILA the consent of DTI is required while in P.D. 713 it is not. FORM OF CONTRACT OF LEASE OF THINGS - may be made orally but if the lease of real property is for more than one year, it must be in writing under the statue of frauds [still valid but unenforceable] NOTE: - Owner has the right t fix the rent because the contract is consensual and not imposed by law - Increasing the rent is NOT an absolute right of the lessor - If the rent is fixed for the first time, courts cannot interfere; but if it is a renewal, the courts can settle the disagreements
lease reviewer 2011

Lease of work which refers to contract for a piece of work - one of the parties binds himself to produce a result out of his work or labor and the other party binds himself to pay a remuneration therefor. DUTIES OF MATERIAL: CONTRACTOR WHO FURNISHES WORK &
(a) duty to deliver (b) duty to transfer ownership (c) duty to warrant eviction and hidden defects REMEDY OF EMPLOYER IN CASE OF DEFECTS: - ask contractor to remove the defect or to execute another work; if contractor fails or refuses, employer can ask another at the contractors expense Lease of service -one party binds himself to render some service to the other party consisting his own free activity of labor, and not its result and the other party binds himself to pay a remuneration therefor. 3 KINDS: a. household b. contract of labor c. common carriers
Lease of things (1) Concept Art. 1643. In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing
lease reviewer 2011

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. (2) Consumable things cannot be the subject matter of lease, Except (a) Consumables only for display or advertising. e. g. Wedding cakes for display in Goldilocks, wine in a showcase of a store (b) Goods are accessory to an industrial establishment e.g., coal in a factory (3) Special characteristics of lease of things; (a) Essential purpose is to transmit the use and enjoyment of a thing (b) Consensual (c) Onerous (d) Price fixed in relation to period of use or enjoyment (e) Temporary
lease reviewer 2011

LEASE OF SERVICE DISTINGUISHED FROM PIECE OF WORK
LEASE OF SERVICE
Contract for a PIECE OF WORK
The important object is the The important object is the labor performed by the lessor work done The result is generally not important, hence the laborer is entitled to be paid even if there is destruction of the work through fortuitous event The result is generally important; generally, the price is not payable until the work is completed, and said price cannot be lawfully demanded if the work is destroyed before it is finished and accepted LEASE OF THINGS DISTINGUISHED FROM SERVICES:
LEASE OF THINGS
LEASE OF SERVICES
Object of the contract is a Object is some work thing Lessor has to deliver the Lessor has to perform some thing leased work or service In case of breach, there can In case of breach, no action be an action can be taken
lease reviewer 2011

LEASE OF SERVICES DISTINGUISHED FROM AGENCY
LEASE OF SERVICES
AGENCY
It is based on employment It is based on representation The lessor of services does Agent represents his principal not represent his employer and enters into juridical acts nor does he execute juridical acts Principal contract Preparatory contract
LEASE DISTINGUISHED FROM SALE:
LEASE
SALE
Only the enjoyment or use is Ownership is transferred transferred Transfer is temporary Transfer is permanent The lessor need not be the Seller must be the owner or owner at least authorized by the owner at the time it is delivered Price of the matter is not Price of the thing is usually usually mentioned, being fixed in the contract immaterial
lease reviewer 2011

**In case of doubt, the intention of the parties is an important factor in determining the contract entered into. LEASE DISTINGUISHED FROM COMMODATUM: LEASE COMMODATUM
Consist of cession of the use Consist of cession of the use of a thing to another of a thing to another
It is onerous
Essentially gratuitous
LEASE DISTINGUISHED FROM USUFRUCT LEASE USUFRUCT
Ownership is not necessary
Ownership is necessary
It is generally a personal It is always a real right right and is a real right only by exception It is limited to the use it includes all possible uses specified in the contract and enjoyment of the thing
lease reviewer 2011

Lessor places and maintains Owner allows the the lessee in the peaceful usufructuary to use and enjoyment of the thing enjoy the property
Its term is generally for a definite period
Its term may be for an indefinite period
It may be created by contract as a general rule Lessee has no duty to make repairs Lessee has no duty to pay taxes Lessee cannot constitute a usufruct of the property leased
It may be created by law, contract, last will or prescription Usufructuary has duty to make repairs Usufructuary has duty to pay taxes Usufructuary may constitute a sublease
lease reviewer 2011

LEASE DISTINGUISHED FROM MUTUUM LEASE MUTUUM
Owner does not lose his Loses ownership of the thing ownership loaned which becomes the property of the borrower or debtor Lessor lessee relationship Real or personal property Governed by frauds Not governed statute Creditor/ debtor or obligee /obligor relationship Only money or any other fungible things of Not governed Governed by usury law
**Simple loan may be gratuitous or with a stipulation (art.1933) ** PRICE IN LEASE: ts, or in some other useful things; some other prestation - when the price consists of a certain percentage of the fruits obtained from the thing. But is regarded as having the character more of a partnership rather than a lease.
lease reviewer 2011

Amount of Rent the parties are not able to fix the price, or the basis for its determination, the contract is ABSOLUTELY VOID. If the lessee has entered upon the possession and enjoyment of the thing, he will be liable for the damages for the occupation of the thing. PERIOD OF LEASE: When the lease is for such time as the lessor or lessee may please, it is considered as on for life, ending upon the death of the party who would have terminated the contract. CANNOT be perpetual- there must always be a period, which may be definite or indefinite If the period is indefinite, and the thing leased is rural land, art.1682 shall apply; if it is urban land art. 1687 governs. If the thing is neither rural nor urban land, the provisions of the two articles should be applied by analogy. RURAL LAND 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
lease reviewer 2011

may yield once, although two or more years have to elapse for the purpose. URBAN LAND 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. Rent Monthly Weekly Daily Courts can fix a longer term lessee occupied premises for more than a year lessee has been in possession for over six months lessee has stayed in the place for over one month
CAPACITY OF LESSEE Those who are disqualified to buy certain things cannot lease such things. (ART.1646, 1490,1491) Lease of Real Estate Every lease of real estate may be recorded in the Registry of Property to be binding upon 3rd persons.
lease reviewer 2011

Purchase of Leased Land here a purchaser of land at the time of the purchase has FULL KNOWLEDGE of the fact that the land has been leased to a third person, he is BOUND to respect said lease, although it is not recorded upon the certificate of title. ASSIGNMENT OF LEASE Art. 1649. The lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary. However, a mere transfer of rights of the lessee, and not of the contract itself, would not require the lessors consent, unless there is an express stipulation to the contrary. SUBLEASE 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.
lease reviewer 2011

ASSIGNMENT OF LEASE VS. SUBLEASE: Assignment of lease There is a transfer to a third person of the rights and obligations arising from the lease contract A sale of the lessees rights, and when the lessor gives his consent, the original lessee is released Sublease
Merely another contract of lease, where the original lessee becomes in turn a lessor Even when the lessor consents to the sub-lease, the original lease contract subsists and is binding on the lessee Succession by particular Juxtaposition of 2 leases title to one contract of lease Lessee remains a party in Lessee is disassociated from the contract the original contract of lease Sublessee does not have any Assignee has a direct action direct action against the against the lessor, there lessor being novation Subleasing is allowed unless Assignment is not allowed there is an express unless the lessor gives his prohibition consent
(1) Remedy when property is subleased despite prohibition: rescission and damages, or damages only. (2) When in the contract of lease, there is no express prohibition; the lessee may sublet the thing leased, in
lease reviewer 2011

whole or in part, without prejudice to his responsibility for the performance of the contract toward the lessor. (a) House Rental Law (RA 877) there is a presumption that there would be no sublease unless the lessor allows it (b) obligation of sublessee to lessor
SUBLEASE - a lessee may sublease the thing unless there is an express prohibition to do so - if the prohibition to sublease is not express but only implied, the sublease will still be allowed - remedy of lessor if lessee violates prohibition: action for rescission of the lease and may seek for damages - duration of sublease cannot be longer than that of the lease to which it is dependent RESPONSIBILITIES OF A SUBLESSEE TO THE LESSOR: 1. for all acts which affect the use and preservation of the thing leased 2. for any rent due to the lessor from the lessee which the latter failed to pay - the lessor must collect first form the lessee - if the lessee is insolvent, the sublessee becomes liable (subsidiary liability)
LEASE DISTINGUISHED FROM DEPOSIT: LEASE Enjoyment or use of thing leased is the essential purpose The lessor cannot demand the thing leased before the expiration of the contract DEPOSIT the safekeeping of the thing delivered is the principal purpose The depositor can demand the return of the subject matter at will
lease reviewer 2011

Both movable and Only movable may be the immovable may be the object object Onerous Gratuitous Consensual Real contract perfected upon the delivery of the object thereof
LEASE OF CHATTELS DISTINGUISHED FROM EMPLOYMENT:
LEASE OF CHATTELS Lessor and lessee relationship Loses control or management of the chattel No control or supervision over the lessee Lessee pays rent to the lessor for the enjoyment or use of the chattel
EMPLOYMENT Employee employer relationship Retains control or management over his chattel Exercises control and supervision over his employee Employer pays wage or salary for the services of the employee
LEASE OF WORK/SERVICE DISTINGUISHED FROM PARTNERSHIP:
LEASE OF WORK No principle of representation
PARTNERSHIP
Every partner is an agent of the partnership for the purpose of its business Lessor performs a material act Partners enter into commercial for the benefit of the employer or business transactions for the realization of profits Only 2 persons are involved Juridical personality separate and distinct from that of each of the partner is formed Work/service is dependent upon Partners perform acts conducive the ends or purpose of the lessee to their own business purposes
lease reviewer 2011

OBLIGATIONS OF THE LESSOR (Art. 1654) 1. to deliver the thing which is the object of the contract in such 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. 4. Not to alter the form o REPAIRS implies the putting back of something in the condition in which it was originally o IMPROVEMENT is the adding of something new thereto, hence, the filling of a vacant lot is not a repair nor the constructions of a house. - It is the duty of the lessee to give NOTICE of the need of repairs to the lessor, and he shall be liable for the damages which by his neglect may be suffered by the owner. - lessor is NOT bound to make repairs caused by the lessee himself. Effect of Urgent Repairs 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. If the repair lasts for more than 40 days, the rent shall be reduced in proportion to the time-including the 40 daysSales and lease comments and cases by hector de leon, UP, Ateneo and San beda civil law reviewer | jen_biltz_albano/2011
lease reviewer 2011

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 for the lessee. If after having been notified, the lessor fails to make urgent repairs, the lessee, to avoid imminent danger, may order the repairs at the lessors expense. Dangerous Conditions: 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 the condition. Alteration 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. TRESPASS IN LEASE o Trespass in fact (perturbacion de mere hecho) - Physical enjoyment is reduced - Lessor will not be held liable o Trespass in law (perturbacion de derecho) - A third person claims legal right to enjoy the premises - Lessor will be held liable
lease reviewer 2011

OBLIGATIONS OF THE LESSEE (Art. 1657) 1. pay the price of the lease according to the terms stipulated; 2. 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. pay the expenses for the deed of lease. Pay Rent ises only when the contract has been actually carried into effect by the delivery of the thing leased to the lessee for the purpose stipulated in the contract. Increase and Decrease of Rent net of the assessed violation of the property Failure to Pay for Rent ction, recover the unpaid rent, plus accrued legal interest thereon at the rate of 6% per year. Place and Time ayment of rent shall be made at the domicile of the lessee; and with respect to the time, the custom of the place shall be followed.
lease reviewer 2011

Use the Thing Leased as a Diligent Father o Standard: diligent father of a family, 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. o The lessee is responsible for the deterioration of the thing leased, unless he proves that it took place without his fault. o The lessee is liable for any deterioration caused by members of his household and by his guest and visitors. Pay Expenses for the Deed of Lease (Art. 1662-1667) o Right of lessee to suspend payment of rentals 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. o Right to ask for rescission Liability for Breach of Duties o If the lessor or lessee should not comply with the obligation set forth in ART 1654 and 1657, the aggrieved party may ask for: (1) rescission of the contract; (2) indemnification for damages; (3) only damages, allowing the contract to remain in force o The lessor cannot be held responsible for damages from defects unknown to both parties.
lease reviewer 2011

Alternative Remedies o Performance of the contract and rescission o In either case, the aggrieved party is entitled to such damages but may not upon rescission of the contract recover the damages that are appropriate only where the performance is demanded. Rescission of the Contract Where the plaintiff alleges and submits proof that the defendant is in possession of a parcel of land as lessee, and the latter has not paid the proper rents, he may be compelled, by reason of his inability to pay to: (1) return the leased property; (2) the lessor has a right to rescind the contract; (3) recover the unpaid rents (4) eject the tenant from the land o The execution of the deed shall be equivalent to delivery but this is a rebuttable presumption. o If the thing leased has never been placed in possession of the lessee, he has the remedy of rescission. Enforcement of Lease o Where the lessor resumes possession of his leased property for its protection after the lessee has abandoned the same, the lessor has still the right to hold the lessee responsible until the termination of the lease.
lease reviewer 2011

Termination of Lease (1) by the expiration of the period; (2) by the total loss of the thing; (3) by the resolution of the right of the lessor, such as when the lessor is usufruct is terminated; (4) by the will of the purchaser or transferee of the things; (5) by rescission due to non-performance of the obligation of one of the parties. Period o 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 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 art. 1682(rural) and 1687(urban) o When the parties have made no agreement and the tenant remains in possession with the acquiescence of the lessor for 15 days after the expiration of the term, the duration of the tenancy is governed by article 1682 and 1687. GROUNDS FOR EJECTMENT 1. when the period agreed upon or that which is fixed for the duration of leases (see 1682, 1687) has expired; 2. lack of payment of the price stipulated;
lease reviewer 2011

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. 5. (1657, par. 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; Warranty of Lessor: 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. Art. 1547, 1555, 1561, 1566, 1567, 1568, 1569 Liability for the warranty is not equivalent to liability in damages. The lessor is liable for the warranty of the thing leased against any hidden defects it may have, even when UNKNOWN to said lessor. But this liability for warranty of the thing leased does not amount to an obligation to indemnify the tenant for damages, which is only to be allowed, when lessor acted with fraud and in bad faith by concealing the defect and not revealing it to the lessee. Tacit Renewal o The fifteen-day period which brings about a tacit renewal of the lease, is not applicable to successive renewals.
lease reviewer 2011

Judicial Ejectment o 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 Art 1682 (rural) and 1687(urban), 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 due diligence in its use. o When the lease contract does not have a definite period, but is terminable upon 30 days notice, the lease will terminate upon the expiration of 30 days from the receipt of notice, whether the termination coincides with the rent day or not. o The landlord has the right to increase the rent after the expiration of the stipulated period. And if no period is stipulated, in a lease of urban property, notice by the lessor of an increase in rent is equivalent to notice of termination of the original agreement. PROPERTY

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lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

Contract for a PIECE OF WORK

lease reviewer 2011

LEASE DISTINGUISHED FROM SALE:

lease reviewer 2011

LEASE DISTINGUISHED FROM USUFRUCT LEASE USUFRUCT

Ownership is not necessary

lease reviewer 2011

Its term is generally for a definite period

Its term may be for an indefinite period

lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

LEASE OF WORK/SERVICE DISTINGUISHED FROM PARTNERSHIP:

LEASE OF WORK No principle of representation

lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

lease reviewer 2011

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