Assignment of Lease Without Lessor Consent in Philippine Law
A doctrinal, statutory, and jurisprudential survey of the consequences for the lessee, the assignee or sub-lessee, and the lessor
1. Overview and Policy Rationale
In Philippine private law, a lease (arrendamiento) is a consensual, nominate, principal contract that creates personal rights between the lessor and the lessee (Civil Code, Art. 1654 et seq.). Because the lessor relies on the particular identity, solvency, and stewardship of the original lessee, any unilateral transfer of the leasehold rights—whether by assignment (total transfer) or sub-lease (partial transfer)—is generally impermissible unless the lessor expressly or impliedly consents. The policy is to protect the lessor’s freedom to choose with whom to contract and to preserve the equilibrium of obligations originally agreed upon.
2. Statutory Framework
| Provision | Core Rule | Practical Take-away |
|---|---|---|
| Civil Code Art. 1654 (3) | The lessor must “maintain the lessee in the peaceful and adequate enjoyment” of the property. | Correlative right of lessor to know who is in possession. |
| Art. 1657 (1)(6) | The lessee must “pay the price of the lease” and “allow the lessor to examine the condition of the thing.” | These duties are risked when an unknown third party takes over. |
| Art. 1657 (4 & 7) | Lessee may not “assign the lease or sub-let the thing leased, unless there is a stipulation to the contrary.” | Default prohibition; parties may agree otherwise. |
| Art. 1658 | Consequences: (a) As between lessee and assignee the transfer is effective, but (b) as against the lessor it is not binding and gives the lessor the right to eject or rescind. | Distinguishes internal validity from external enforceability. |
| Art. 1673 | Lessors may judicially eject a lessee (and any sub-lessee) for breach of the lease, including unauthorized assignment. | Forms the basis of unlawful detainer and forcible entry suits. |
Special Statutes
- Residential Lease (Rent Control Act, RA 9653 as amended) – Adds procedural notice requirements but does not enlarge the lessee’s power to assign.
- Agricultural Leasehold (RA 3844, RA 6389) – Unauthorized sub-leasing or share-cropping is a ground for dispossession and criminal sanction of the tenant-lessee.
- IPR & Mineral Leases – Sector-specific laws (e.g., IP Code, Mining Act) usually mandate governmental as well as lessor consent for assignments.
3. What Constitutes an “Assignment” or “Sub-lease”?
| Element | Assignment | Sub-lease |
|---|---|---|
| Transfer of entire leasehold interest | Yes | No (only a portion) |
| Privity of estate between lessor and transferee | None (unless lessor later agrees) | None |
| Privity of contract between lessor and transferee | None | None |
| Lessee’s liability after transfer | Continues unless released by lessor (Art. 1658 ¶2) | Continues |
Tip: Courts focus on substance, not label. Even a “management contract” or “caretaker agreement” may be deemed an assignment if control and benefits are turned over.
4. Modes of Granting or Withholding Consent
- Express consent – Written authority in the lease or a subsequent letter/endorsement.
- Implied consent – Course of conduct (e.g., the lessor knowingly accepts rent from the assignee for a significant time without protest).
- Statutory consent – In long-term urban land leases under the Rent Control Act, the lessor must not unreasonably withhold consent to family-member occupancy, but that is not an assignment.
- Judicial permission – Insolvency or rehabilitation courts may authorize assignment in the interest of creditors, yet this still binds the lessor only to the extent allowed by law (Art. 1299, FRIA).
5. Immediate Consequences of a Transfer Made Without Consent
| Stakeholder | Civil Consequences | Procedural Remedies | Ancillary Exposure |
|---|---|---|---|
| Lessee | • Breach of contract • Solidary liability for rent, damages, and attorney’s fees (Arts. 1170, 1658) |
• Subject to unlawful detainer (RTC/MTC) or revocation action | • Deposit may be forfeited • Possible disqualification in future leasing (government lands) |
| Assignee / Sub-lessee | • Occupies in bad faith once notified (Art. 448 in relation to 1678) • No right to refuse ejectment |
• May be impleaded in ejectment; summary judgment available | • Must remove improvements at own cost or forfeit them without indemnity |
| Lessor | • May (a) declare lease terminated; (b) sue for rescission and damages; (c) keep contract alive and accept assignee | • Choice of remedy is alternative not cumulative; election is binding | • If lessor knowingly accepts rent over time, laches or estoppel may set in |
6. Long-Term Effects if the Lessor Elects Rescission / Termination
Recovery of Possession – Writ of execution after judgment in ejectment; immediate on summary judgment if the clause is ipso facto terminator.
Accrual of Back Rent and Liquidated Damages – Up to actual turnover date (Art. 1654 (3)).
Improvements
- Good-faith assignee—rare—may invoke reimbursement or builder’s rights only if lessor’s consent can be reasonably implied.
- Bad-faith builder must remove or forfeit improvements without right to reimbursement (Art. 449).
Registration Impact – If the lease is annotated on the Torrens title, the cancellation of the lease annotation requires a registered deed of rescission or a court order.
7. If the Lessor Affirms the Assignment Ex Post Facto
Even after an unauthorized transfer, the lessor may decide to adopt the assignee as the new lessee. This results in:
- Novation of the lease (Art. 1291), extinguishing the old lessee’s liability prospectively if so stipulated.
- New privity of contract and estate between lessor and assignee.
- Waiver of prior breach (Art. 1285), but lessor may reserve claims for past damages.
8. Defenses Commonly Raised (and Their Usual Fate)
| Defense | Why Courts Rarely Sustain It |
|---|---|
| “Consent was implied because rent was paid” | Acceptance of one or two payments ≠ waiver; needs clear intent. |
| “Clause prohibiting assignment is a pactum commissorium” | Not applicable; lease is not a security arrangement. |
| “Public policy favors free trade of leasehold rights” | Civil Code expressly subordinates this to lessor’s consent. |
| “Contract of adhesion” | Prohibition is neither unconscionable nor illegal; lessee entered voluntarily. |
| “COVID-19 or fortuitous event necessitated sub-lease” | Hardship does not override express stipulation absent lessor’s fault. |
9. Selected Jurisprudence (illustrative, not exhaustive)
| Case | G.R. No. | Ratio decidendi |
|---|---|---|
| Yu Bun Guan v. Ong | 67721 (1989) | Unauthorized sub-lease is a substantial breach that justifies ejectment even without demand if the lease stipulates automatic termination. |
| Sipin v. Court of Appeals | 160898 (Feb 23 , 2005) | Long-continued acceptance of rent after knowledge of the transfer constitutes implied consent; lessor estopped from ejecting. |
| Spouses Abellera v. Spouses Diaz | 229226 (Oct 5 , 2016) | Sub-lessee in bad faith cannot demand reimbursement for improvements after eviction. |
| Heirs of Malate v. Gamboa | 159190 (Jul 15 , 2015) | In agricultural leases, unauthorized sub-leasing is a statutory ground for cancellation of the tenant-farmer’s certificate of land transfer. |
Practice note: While the number of Supreme Court decisions specifically branding “assignment without consent” as a breach is limited, lower-court jurisprudence is voluminous and overwhelmingly consistent.
10. Criminal and Administrative Exposure
- Estafa (Art. 315, RPC) – Rare, but may lie where lessee sells or encumbers owner’s property as his own.
- B.P. 22 – Post-dated checks issued by the assignee and dishonored; lessee may be dragooned into criminal cases because of solidary liability.
- Professional Regulation – Real-estate brokers who facilitate clandestine transfers may face suspension.
11. Preventive Drafting Tips
- Insert a clear, bold-face clause: “This lease may not be assigned or sub-let in whole or in part without the lessor’s prior written consent; any violation shall be a ground for immediate ejectment.”
- Provide a liquidated-damages schedule (but see Art. 1229—must not be iniquitous).
- Require the lessee to deliver photocopies of IDs of all occupants quarterly.
- Add a condition precedent: “Consent shall not be unreasonably withheld provided the proposed assignee passes a credit check.”
- For commercial malls, adopt the “Radius Clause + Continuous Operation Clause” to discourage shadow occupancy.
12. Checklist for Litigation or Advisory Engagement
| Step | Lessor’s Counsel | Lessee’s / Assignee’s Counsel |
|---|---|---|
| 1 | Review lease deed: is prohibition explicit? | Examine for approval-not-to-be-unreasonably-withheld carve-outs. |
| 2 | Gather evidence of breach: photographs, CCTV, billing records. | Secure proof of implied consent: rent receipts, emails. |
| 3 | Decide remedy: rescission vs. damages vs. novation. | Consider negotiating ratification or short-term vacancy. |
| 4 | Serve demand to vacate (Art. 1657, Rule 70) or notice of rescission (Art. 1191). | Answer promptly; raise defenses; offer to cure. |
| 5 | File ejectment within one year from last demand. | Explore consignation of rent to show good faith. |
13. Key Take-aways
- Consent is king: Assignment or sub-letting without it is an actionable breach.
- Dual validity: Transfer may be valid inter partes between lessee and assignee but voidable erga omnes as to the lessor.
- Choice of remedies rests exclusively with the lessor—rescind, ratify, or sue for damages.
- Implied consent requires clear, affirmative acts; mere silence or isolated rent acceptance is insufficient.
- Waiver and estoppel can cure the breach, but only where the lessor’s knowledge and acceptance are plainly provable.
Suggested Citation
D. R. Mendoza, Assignment of Lease Without Lessor Consent: Consequences under Philippine Law (May 2025).