Does the Rent Control Act apply to commercial leases in the Philippines?

No. RA 9653 (the Rent Control Act, extended by RA 11571 until 31 December 2027) applies only to residential units in the Philippines with monthly rent up to ₱10,000 in Metro Manila and other highly urbanized cities, or up to ₱5,000 elsewhere. Commercial leases — for offices, retail, industrial, warehouse, BPO, or food and beverage premises — fall fully under Articles 1642-1688 of the Civil Code of the Philippines (RA 386) and the freedom-of-contract principle of Article 1306. Parties are free to agree on any deposit, advance rent, and rent-escalation formula, subject only to the Civil Code prohibition on stipulations contrary to law, morals, good customs, public order, or public policy.

How are commercial deposit and advance rent typically structured?

Philippine commercial market practice is two (2) to six (6) months security deposit and one (1) to three (3) months advance rent, with three months and three months being the most common formulation in Metro Manila prime office buildings. There is no statutory cap because RA 9653 does not apply. The deposit secures payment of unpaid rent, utility arrears, repair of damage beyond fair wear and tear, and any breakage of fit-out. Best practice in the Philippines is to provide for itemised deduction at termination and refund of any balance within thirty (30) to sixty (60) days, with interest at six percent (6%) per annum under BSP Circular 799 series of 2013 if the lessor delays return without justification.

How does VAT work on commercial rent in the Philippines?

If the Philippine lessor is VAT-registered, or annual gross rental receipts exceed ₱3,000,000, Section 105 of the NIRC requires charging twelve percent (12%) Value-Added Tax on rent. The VAT is added on top of the base rent — for example, a ₱100,000 monthly rent becomes ₱112,000 inclusive of VAT. The lessee may claim the input VAT as credit against output VAT on its own sales if it is itself VAT-registered. Below the threshold and not voluntarily VAT-registered, the lessor pays three percent (3%) percentage tax under Section 116 of the NIRC, and rent is not VAT-able. Every rent collection in the Philippines must be supported by a BIR-registered Official Receipt issued under the lessor's Authority to Print (ATP).

What is the 5% EWT and who pays it?

Under Revenue Regulations 11-2018, lessees who are designated top-20K corporations or government withholding agents must withhold five percent (5%) Expanded Withholding Tax (EWT) on rental payments, remit it monthly to the Bureau of Internal Revenue (BIR) via Form 1601-EQ, and issue BIR Form 2307 to the lessor at the end of each calendar quarter. The lessor credits the withheld EWT against its own income tax due. The five-percent rate applies to rent for the use of real property in the Philippines paid to natural persons; for juridical persons (corporations), the rate is also five percent for rentals exceeding ₱500,000 cumulatively per year. Smaller Philippine lessees who are not designated withholding agents are not required to withhold EWT.

Can the lessor increase rent during the term?

Yes, freely. Because the Rent Control Act (RA 9653) does not apply to commercial leases, parties to a Philippine commercial lease may agree on any escalation formula in the contract — fixed annual percentage (commonly 5%-10%), CPI-linked indexation tied to the Philippine Statistics Authority (PSA) Consumer Price Index, or step increases. Mid-term unilateral increases without contractual basis are unenforceable in Philippine courts and may amount to constructive eviction giving rise to damages under Articles 19, 20, and 21 of the Civil Code. The escalation clause should specify the trigger date, the calculation method, and the cap (if any) to avoid future disputes before the Regional Trial Court or PDRCi arbitration.

Who pays for permits — lessor or lessee?

In Philippine commercial leases, market practice allocates building-level permits to the lessor and tenant-specific permits to the lessee. The lessor warrants a valid Occupancy Permit from the Office of the Building Official under the National Building Code (PD 1096) and a Fire Safety Inspection Certificate from the Bureau of Fire Protection under the Fire Code (RA 9514). The lessee secures the Mayor's Permit (annual business permit) from the local-government unit, BIR Form 2303 Certificate of Registration, DTI or SEC business name registration, signage permit from the LGU or DPWH, and any industry-specific licences (FDA for food, Department of Tourism for hotels, etc.). The lease should expressly allocate cost and timing responsibility, particularly for renewals.

How do I terminate a commercial lease early?

Under Article 1673 of the Civil Code of the Philippines, the lessor may judicially eject the lessee for: (a) expiration of the period, (b) lack of payment of rent, (c) violation of any agreed condition, (d) use of the premises for a purpose other than agreed, and (e) lessor's legitimate need for own use. A written demand to pay or comply, and to vacate, served on the lessee is a precondition to filing an unlawful detainer action under Rule 70. The lessee may seek rescission under Article 1659 if the lessor fails the warranties of Article 1654 (delivery, repair, peaceful enjoyment). Best practice in the Philippines is to include an early-termination clause specifying the notice period (typically three to six months) and the termination penalty (often equal to the security deposit or unamortised fit-out contribution).

Rental & PropertyPH

Free Commercial Lease Agreement Template — Philippines

A commercial lease drafted in line with Philippine law for office, retail, industrial, and BPO premises. Compliant with Articles 1654-1688 of the Civil Code of the Philippines (RA 386) and the freedom-of-contract principle of Article 1306 — note that the Rent Control Act (RA 9653) does NOT apply to commercial leases. Configure rent, VAT treatment, CUSA, escalation, and fit-out terms, then download a professional PDF ready for signing.

Create Your Commercial Lease Agreement

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COMMERCIAL CONTRACT OF LEASE

LESSOR

Bayan Properties Holdings, Inc.

12F Net Park Building, 5th Avenue, Bonifacio Global City, Taguig 1634 · TIN 009-876-543-000 · SEC CS201234567

By: Roberto Santos, President

LESSEE

Bean and Brew Manila Coffee Corp.

8F The Trade and Financial Tower, 7th Avenue cor. 32nd Street, BGC, Taguig 1634 · TIN 008-765-432-000 · SEC/DTI CS202156789

By: Carla Mendoza, Chief Executive Officer

Commencement: June 1, 2026 · Expiry: May 31, 2029

Rent: 180,000.00 PHP/month + 12% VAT

This Commercial Contract of Lease (the "Agreement") is entered into on June 1, 2026 in Makati City, Republic of the Philippines, by and between Bayan Properties Holdings, Inc. ("Lessor") and Bean and Brew Manila Coffee Corp. ("Lessee"). The parties, having the legal capacity to contract pursuant to Article 1318 of the Civil Code of the Philippines (Republic Act No. 386), agree to be bound by the following terms, which shall be governed by Articles 1642 to 1688 of the Civil Code, the National Internal Revenue Code (NIRC) as amended by the TRAIN Law (RA 10963), and all applicable Philippine commercial laws and LGU regulations. The parties acknowledge that the Rent Control Act (RA 9653) applies only to residential leases and does not govern this commercial lease.

THE PREMISES

The Lessor leases unto the Lessee the commercial premises described as follows (the "Premises"):

Address	Ground Floor Unit 102, One Ayala Tower, Ayala Avenue, Makati City 1226
Description	Ground floor retail unit comprising approximately 120 sqm of net leasable area, with frontage along Ayala Avenue and access from the building lobby.
Floor Area	120 sqm (net leasable area)
Permitted Use	Retail coffee shop and food service operation under DTI registered name "Bean and Brew Manila"
Lease Term	3 years
Commencement	June 1, 2026
Expiry	May 31, 2029

TERM

The lease shall commence on June 1, 2026 and expire on May 31, 2029, a period of approximately 3 years (the "Term"). This is a fixed-period commercial lease under Article 1669 of the Civil Code. Upon expiry, the Lessee shall deliver vacant possession of the Premises to the Lessor in the reinstated condition required by this Agreement, unless the parties have agreed in writing to a renewal. Any holding over after expiry shall be deemed a tenancy at sufferance and the Lessor shall be entitled to recover the Premises by judicial action and to recover mesne profits at two (2) times the prevailing Monthly Rent per month or part thereof. A rent-free fit-out period of 6 weeks is granted at commencement, during which the Lessee shall not be liable for base rent but shall pay CUSA dues, utility charges, and other outgoings as they fall due.

RENT, VAT AND CUSA

The Lessee shall pay to the Lessor a monthly base rent of 180,000.00 PHP per month ("Monthly Rent"), payable in advance on or before the 5th day of each calendar month throughout the Term. Payment shall be made by bank transfer (BDO, BPI, Metrobank, or InstaPay/PESONet) or such other method as the Lessor may specify in writing. As the Lessor is a VAT-registered person under the NIRC, Value Added Tax (VAT) at 12% shall be added to and paid by the Lessee in addition to the Monthly Rent (21,600.00 PHP per month), pursuant to Section 108 of the NIRC. The Lessor shall issue a duly numbered BIR-registered VAT Sales Invoice / Official Receipt for each rental payment. If the VAT rate is amended by legislation, the new rate shall apply from the effectivity date. In addition, the Lessee shall pay a monthly CUSA / Common Dues of 25,000.00 PHP, covering shared building services such as common-area air-conditioning, security, cleaning, lobby maintenance, and parking management. The Monthly Rent shall be subject to an annual escalation of 5% per year, taking effect on each anniversary of the Commencement Date, in line with prevailing Philippine commercial practice and as agreed under Article 1306 of the Civil Code. The total monthly outflow (rent + tax + CUSA) is 226,600.00 PHP for the first lease year.

Base Rent (monthly)	180,000.00 PHP
VAT 12% (Sec. 108 NIRC)	21,600.00 PHP
CUSA / Common Dues	25,000.00 PHP
Total Monthly Payment	226,600.00 PHP

ADVANCE RENT AND SECURITY DEPOSIT

Upon execution of this Agreement, the Lessee shall pay to the Lessor: (a) 2 months advance rent equivalent to 360,000.00 PHP, applied as rent for the first 2 months of the Term; and (b) a security deposit equivalent to 3 months' rent in the amount of 540,000.00 PHP (the "Security Deposit"). The Security Deposit secures the Lessee's faithful performance and may be drawn upon by the Lessor to cure any breach (including unpaid rent, unpaid utilities, damage beyond fair wear and tear, and reinstatement costs). The Lessee shall replenish any drawdown within seven (7) calendar days of written demand. The Security Deposit (less permitted deductions) shall be returned to the Lessee within thirty (30) days after expiry or termination, vacate, joint inspection, and presentation of all clearances (utilities, BIR, LGU). No interest shall accrue on the Security Deposit.

PERMITTED USE

The Lessee shall use the Premises solely for the Permitted Use specified in this Agreement, namely: "Retail coffee shop and food service operation under DTI registered name "Bean and Brew Manila"". The Lessee shall not use the Premises for any purpose other than the Permitted Use without the prior written consent of the Lessor and any required regulatory approvals. The Lessee shall conduct its business in compliance with all applicable Philippine laws and regulations, including the Civil Code, the NIRC (TRAIN Law), the Local Government Code (RA 7160), the Fire Code (RA 9514), the Building Code (PD 1096), and the rules of the relevant LGU and condominium corporation (where the Premises form part of a condominium under RA 4726).

PERMITS AND LICENCES

The Lessee shall, at the Lessee's own cost, secure and maintain throughout the Term all permits and licences required for the conduct of the Permitted Use, including but not limited to the Mayor's Permit (Business Permit) of the relevant LGU, Sanitary Permit, Fire Safety Inspection Certificate (Bureau of Fire Protection), DTI/SEC registration, BIR registration (Form 2303 / ATP / Books of Accounts), and any sector-specific permits. Each party shall provide reasonable cooperation, signatures, and certifications required by the other party to apply for and maintain such permits. Failure to maintain required permits is a material breach. The Lessee shall, within thirty (30) days of commencement, furnish the Lessor with a copy of the current Mayor's Permit (Business Permit) and BIR Certificate of Registration (Form 2303) for the Premises.

TAXES AND OUTGOINGS

Real property tax (RPT) on the building and Premises under the Local Government Code (RA 7160) shall be borne by the Lessor. Local business taxes, income tax, VAT or percentage tax on the Lessee's business operations, and any taxes specifically attributable to the Lessee's use shall be borne by the Lessee. Documentary stamp tax (DST) under Sec. 194 of the NIRC on this lease shall be borne by the Lessee. The Lessee shall be responsible for all utilities (electricity via Meralco or local distribution utility, water via Maynilad/Manila Water or local water district, telecommunications, internet, gas, waste disposal) consumed on the Premises and shall arrange for utility accounts in the Lessee's name on or before commencement.

FIT-OUT AND ALTERATIONS

Any fit-out works to the Premises shall be carried out by the Lessee at the Lessee's cost and in accordance with: (a) the Lessor's building management fit-out guidelines; (b) the National Building Code (PD 1096) and the Fire Code (RA 9514); (c) any conditions of the relevant LGU and condominium corporation; and (d) the prior written approval of the Lessor (not to be unreasonably withheld). The Lessee shall submit fit-out plans to the Lessor for approval prior to commencement of works. All fit-out works shall be carried out by PCAB-licensed contractors. Structural alterations are prohibited without separate written consent and engineering certification.

MAINTENANCE AND REPAIRS

Pursuant to Articles 1654 and 1657 of the Civil Code: (a) the Lessor shall make all structural repairs necessary to keep the Premises suitable for the use intended, including repairs to the building envelope, structural elements, and common building systems, except for repairs caused by the Lessee's fault; and (b) the Lessee shall make all ordinary repairs caused by ordinary wear and tear within the Premises, including interior fittings, finishes, electrical outlets, lighting, and fit-out items installed by the Lessee. The Lessee shall promptly notify the Lessor in writing of any structural defect or damage requiring the Lessor's attention. Failure to make timely notification shall render the Lessee liable for additional damages caused by delay (Civil Code Art. 1663).

10.

PROHIBITION AGAINST SUBLEASE AND ASSIGNMENT

The Lessee shall not assign, transfer, mortgage, charge, sublet, or part with possession of the Premises (in whole or in part) or share occupation with any third party without the prior written consent of the Lessor, which may be granted or withheld at the Lessor's discretion. Pursuant to Article 1650 of the Civil Code, the Lessee may sublease only when the contract does not prohibit it; the Lessor expressly prohibits sublease and assignment under this Agreement. A change of control of the Lessee (whether by transfer of shares of stock or otherwise) shall be deemed an assignment for purposes of this clause and shall require the Lessor's prior written consent.

11.

INSURANCE

The Lessee shall, at the Lessee's cost, maintain throughout the Term: (a) comprehensive general liability insurance with a reputable insurer in an amount of not less than PHP 5,000,000 per occurrence, naming the Lessor as an additional insured; (b) insurance covering the Lessee's property, equipment, and fit-out within the Premises against fire and all-risks perils; and (c) employees' compensation insurance as required under the Social Security Law (RA 11199) and the Labor Code. The Lessor shall maintain insurance over the building structure. The Lessee shall furnish copies of policies and premium receipts to the Lessor upon request.

12.

REINSTATEMENT

At the expiry or earlier termination of this Agreement, the Lessee shall, at the Lessee's cost, reinstate the Premises to the original state and condition as at commencement (or as agreed in the Lessor's fit-out approval), including: (a) removal of all fixtures, fittings, partitions, and equipment installed by the Lessee; (b) restoration of walls, floors, ceilings to original; (c) removal of all signage, branding, and data cabling; (d) making good of all wall penetrations and structural modifications; and (e) deep cleaning. The Lessee shall complete reinstatement before the last day of the Term and obtain the Lessor's written acceptance. The cost of any reinstatement not completed shall be deducted from the Security Deposit; any excess shall be recoverable as a debt under Article 1170 of the Civil Code.

13.

TERMINATION AND DEFAULT

Either party may terminate this Agreement on giving the other not less than 3 months' written notice of intention not to renew at expiry. The Lessor may terminate this Agreement immediately and re-enter the Premises (subject to applicable Philippine procedural law) where: (a) any rent or other sum remains unpaid for fifteen (15) days after due date despite written demand; (b) the Lessee commits a material breach and fails to remedy within fifteen (15) days of written notice; (c) the Lessee becomes insolvent, is placed under corporate rehabilitation under the Financial Rehabilitation and Insolvency Act (RA 10142), or makes any arrangement with creditors; (d) the Lessee abandons the Premises; or (e) the Lessee uses the Premises for any purpose other than the Permitted Use or for any illegal purpose. Termination shall be without prejudice to the Lessor's right to recover all unpaid rent, damages, costs, and reinstatement expenses pursuant to Articles 1170 and 2201 of the Civil Code. Self-help eviction (lock-out, utility cut-off) is prohibited under Philippine law; possession must be recovered by judicial ejectment proceedings before the appropriate court.

14.

FORCE MAJEURE

Neither party shall be liable for delay or failure to perform (other than monetary obligations) caused by an event beyond reasonable control, including caso fortuito under Article 1174 of the Civil Code, fire, flood, typhoon, earthquake, pandemic, public health emergency declared by the Department of Health or WHO, war, civil disturbance, or government order (a "Force Majeure Event"). The party affected shall give written notice as soon as reasonably practicable. If the Force Majeure Event continues for more than ninety (90) days, either party may terminate this Agreement on thirty (30) days' written notice without further liability, save for sums already accrued.

15.

NOTARISATION AND ELECTRONIC EXECUTION

For the protection of both parties, the parties shall have this Agreement notarised before a notary public under the 2004 Rules on Notarial Practice (A.M. No. 02-8-13-SC) to make it a public document under Section 19, Rule 132 of the Rules of Court, suitable for registration where required. This Agreement may also be executed electronically; electronic signatures and electronic documents are valid and binding under the Electronic Commerce Act of 2000 (RA 8792). The Lessee shall be responsible for documentary stamp tax under Sec. 194 of the NIRC.

16.

GOVERNING LAW AND JURISDICTION

This Agreement is governed by and construed in accordance with the laws of the Republic of the Philippines. The parties irrevocably submit to the exclusive jurisdiction of the courts of competent jurisdiction in Makati City for the resolution of any dispute arising out of or in connection with this Agreement. Ejectment actions shall be filed before the Metropolitan Trial Court / Municipal Trial Court of the venue under the Revised Rules on Summary Procedure. Where both parties' principal places of business are in the same city or municipality, parties shall observe barangay conciliation under Sec. 412 of RA 7160 if applicable. Nothing in this clause shall limit the right of either party to apply for provisional remedies (e.g., injunction, replevin) under Rules 57-61 of the 1997 Rules of Civil Procedure.

17.

GENERAL PROVISIONS

Entire Agreement: This Agreement constitutes the entire agreement and supersedes all prior negotiations, representations, and agreements. Amendment: No variation is binding unless in writing and signed by both parties (Civil Code Art. 1356). Severability: If any provision is unenforceable, the remaining provisions continue in full force. Waiver: Failure or delay in exercising any right does not constitute a waiver. No Third-Party Beneficiaries: No person other than the Lessor, the Lessee, and their permitted successors and assigns shall have any right to enforce any term hereof. Counterparts: This Agreement may be executed in counterparts (including electronically), each constituting an original. Headings: Clause headings are for convenience only.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date first written above.

LESSOR

Roberto Santos

President

Bayan Properties Holdings, Inc.

Date: ____________________

LESSEE

Carla Mendoza

Chief Executive Officer

Bean and Brew Manila Coffee Corp.

Date: ____________________

What is a commercial lease agreement?

A commercial lease agreement is the binding contract by which a Philippine lessor grants a lessee — typically a corporation, partnership, or sole proprietor — the use and enjoyment of premises for office, retail, industrial, warehouse, BPO, food and beverage, or similar non-residential purposes, in consideration of rent. The contract is governed primarily by Articles 1642-1688 of the Civil Code of the Philippines (Republic Act 386) on lease of things, supplemented by the freedom-of-contract principle of Article 1306. Unlike residential leases of low- and middle-income units, commercial leases in the Philippines are NOT covered by the Rent Control Act (RA 9653) — they fall fully under contract terms negotiated between the parties.

In the Philippines, commercial leases routinely contain clauses that have no equivalent in residential tenancies: percentage rent based on gross sales (common in shopping malls), Common Use Service Area (CUSA) charges, fit-out periods, exclusivity covenants, anchor-tenant rights, demolition clauses, and rent escalation tied to the Philippine Consumer Price Index. The premises must comply with the National Building Code of the Philippines (Presidential Decree 1096), the Fire Code (RA 9514) enforced by the Bureau of Fire Protection (BFP), and the local-government building permit and occupancy permit regime under the Local Government Code (RA 7160). Lessees must obtain a Mayor's Permit and a BIR Certificate of Registration (Form 2303) before commencing business operations at the leased premises in the Philippines.

Tax treatment is the single most important commercial difference compared with residential leases. If the Philippine lessor is VAT-registered, or its annual gross rental receipts exceed ₱3,000,000, Section 105 of the National Internal Revenue Code (NIRC) requires charging twelve percent (12%) Value-Added Tax on rent. Below the threshold and not VAT-registered, the lessor pays three percent (3%) percentage tax under Section 116 (or may opt for the 8% income-tax option under the TRAIN Law). Lessees who are top-20K corporations or government withholding agents must deduct five percent (5%) Expanded Withholding Tax (EWT) under Revenue Regulations 11-2018, remit it to the Bureau of Internal Revenue (BIR), and issue BIR Form 2307 to the lessor.

What this template covers

The Doxuno commercial lease template includes all essential clauses required under Philippine law for an enforceable office, retail, or industrial lease, plus optional Expert sections that strengthen position in higher-value or longer-term arrangements.

Identification of lessor and lessee

SEC registration, TIN, principal office, authorised signatory under Philippine corporate law

Premises description and floor area

Complete address, unit, floor area in square metres, common areas

Permitted use clause

Specific business activity and limit on change of use without consent

Term, renewal, and option to extend

Fixed period under Civil Code Art. 1670, with right of first refusal options

Monthly rent and CUSA

Base rent in Philippine peso (₱), Common Use Service Area dues separately

VAT and percentage tax treatment

NIRC Sec. 105 (12% VAT) or Sec. 116 (3% percentage tax) per lessor registration

Rent escalation clause

Annual increase percentage or CPI-linked formula, freely negotiated

Security deposit and advance rent

Typically 2-6 months deposit and 1-3 months advance for Philippine commercial

Fit-out period

Rent-free weeks for tenant improvements before commencement

Permits, business license, and BIR registration

Mayor's Permit, BIR Certificate, BFP fire safety inspection certificate

EWT 5% withholding clause

RR 11-2018 mechanics with BIR Form 2307 issuance

Termination and Civil Code Art. 1673 grounds

Ejectment by lessor with written demand and Rule 70 unlawful detainer

How to create your commercial lease

No prior legal training required. The Doxuno generator walks you through each section to produce a professional PDF valid throughout the Philippines.

1
Identify the lessor and lessee
Enter the full corporate name, SEC registration number, principal office address, Tax Identification Number (TIN), and authorised signatory of each party. For sole proprietors, indicate full legal name, business style registered with the Department of Trade and Industry (DTI), and DTI Business Name Registration certificate number. Complete identification supports validity under Article 1305 of the Civil Code of the Philippines and ensures enforceability in any Philippine Regional Trial Court or Metropolitan Trial Court.
2
Describe premises and permitted use
Indicate the complete address, unit/floor identification, and floor area in square metres of the leased premises. Specify the permitted use precisely — for example, "operation of a coffee shop" or "BPO office for software development" — because Philippine courts treat unauthorised change of use as a breach justifying rescission under Article 1659 of the Civil Code. Confirm that the premises hold a valid Occupancy Permit issued by the Office of the Building Official (OBO) of the relevant Philippine local-government unit.
3
Set rent, term, escalation, and CUSA
Enter the monthly base rent in Philippine peso (₱), the term in months and years, the escalation percentage (typically 5%-10% per year in Metro Manila commercial property), and the Common Use Service Area (CUSA) charge if applicable. Decide whether rent is VAT-able at 12% (Section 105 NIRC) or subject to 3% percentage tax (Section 116). For commercial leases in the Philippines, freedom of contract under Article 1306 prevails — there is no statutory cap on escalation, unlike residential RA 9653 leases.
4
Configure deposit, advance, and fit-out
Set the security deposit (Philippine commercial market practice is two to six months) and the advance rent (one to three months). For shell-and-core premises, define the fit-out period during which the lessee performs tenant improvements rent-free — typically four to twelve weeks depending on premises size. Allocate responsibility for Mayor's Permit, BIR Certificate of Registration (Form 2303), Bureau of Fire Protection (BFP) Fire Safety Inspection Certificate, and Department of Public Works and Highways (DPWH) signage permits if relevant in the Philippines.
5
Sign and notarize
Generate the PDF and have authorised representatives sign every page, attaching corporate Secretary's Certificates evidencing signing authority. While Article 1356 of the Civil Code makes the lease binding without notarization, commercial leases in the Philippines are routinely notarized before a Notary Public commissioned under the 2004 Rules on Notarial Practice (A.M. No. 02-8-13-SC) — this converts the contract into a public document and is required for registration with the Register of Deeds when the term exceeds one (1) year.

Legal considerations in the Philippines

A commercial lease in the Philippines sits at the intersection of the Civil Code, NIRC tax regime, and local-government regulation. The points below shape negotiating positions and post-signing compliance.

This template is provided for informational purposes only and does not constitute legal advice. For high-value, long-term, or anchor-tenant arrangements, please consult a licensed lawyer admitted to the Integrated Bar of the Philippines (IBP) and a BIR-accredited Certified Public Accountant.

Reviewed by legal professionals. The content of this page and the template clauses have been reviewed against the Civil Code of the Philippines (RA 386), the NIRC and TRAIN Law (RA 10963), and the Local Government Code (RA 7160), ensuring legal soundness for ordinary commercial tenancies in the Philippines.

Why RA 9653 does NOT apply to commercial leases

The Rent Control Act of 2009 (RA 9653, as extended by RA 11571 until 31 December 2027) covers only residential units in the Philippines with monthly rent up to ₱10,000 in Metro Manila and other highly urbanized cities, and up to ₱5,000 elsewhere. Section 4 of RA 9653 expressly limits coverage to "residential units" — defined as apartments, houses or land on which dwellings are situated, dormitories, rooms and bed spaces. Commercial premises (offices, retail, industrial, warehouse, BPO) fall outside this scope and revert to the Civil Code of the Philippines and the freedom-of-contract principle of Article 1306. As a consequence, parties to a Philippine commercial lease may freely negotiate the deposit amount, advance rent, escalation formula, and ejectment grounds, subject only to the Civil Code prohibition on stipulations contrary to law, morals, good customs, public order, or public policy.

VAT, percentage tax, and EWT mechanics

A Philippine commercial lessor whose annual gross rental receipts exceed ₱3,000,000 must register for VAT under Section 105 of the NIRC and charge twelve percent (12%) Value-Added Tax on rent, remitting it monthly to the Bureau of Internal Revenue via BIR Form 2550M. Below the threshold and not voluntarily VAT-registered, the lessor pays three percent (3%) percentage tax under Section 116 (or eight percent (8%) income-tax option introduced by the TRAIN Law of 2017 — RA 10963 — under RR 8-2018, available to self-employed individuals and professionals with gross receipts ≤ ₱3M). The lessee, if a top-20K corporation or government instrumentality, must withhold five percent (5%) Expanded Withholding Tax (EWT) on rental payments under Revenue Regulations 11-2018, remit it to the BIR, and issue Form 2307 to the lessor for credit against income tax. Failure to issue BIR-registered Official Receipts (under the lessor's Authority to Print) for every rent collection in the Philippines exposes the lessor to administrative penalties.

Building Code, Fire Code, and Mayor's Permit

Before any commercial premises in the Philippines may be lawfully occupied, the building must hold a valid Occupancy Permit issued by the Office of the Building Official (OBO) under the National Building Code (Presidential Decree 1096) and a Fire Safety Inspection Certificate (FSIC) issued by the Bureau of Fire Protection (BFP) under the Fire Code (RA 9514). The lessee must additionally secure a Mayor's Permit (Business Permit) from the local-government unit where the premises are located, renewable annually before 20 January, together with BIR Form 2303 Certificate of Registration. A clear Philippine commercial lease allocates responsibility for these permits — typically the lessor warrants Building/Occupancy/Fire permits at the building level, while the lessee secures business-specific permits at the tenant level. Operating without a Mayor's Permit is a violation of the Local Government Code (RA 7160) and may trigger closure orders under the Anti-Red Tape Act (RA 9485, as amended by RA 11032).

Termination, ejectment, and dispute resolution

Article 1673 of the Civil Code of the Philippines lists the grounds on which the lessor may judicially eject a commercial lessee: (a) expiration of the lease period, (b) lack of payment of the price stipulated, (c) violation of any of the conditions agreed upon, (d) lessee devoting the thing to a use other than that stipulated, and (e) lessor needing the property for own use after notice. A written demand to pay or to comply, and to vacate, is a precondition to filing an unlawful detainer action under Rule 70 of the Rules of Court before the Metropolitan or Municipal Trial Court of the place where the property is located. The action is summary in nature with a 30-day decision period. Where parties prefer faster resolution, the lease may include an arbitration clause under the Alternative Dispute Resolution Act of 2004 (Republic Act 9285) referring disputes to the Philippine Dispute Resolution Center, Inc. (PDRCi) in Makati. Barangay conciliation under RA 7160 typically does NOT apply to corporate lessees.

Frequently Asked Questions

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