Key Legal Provisions in Cellular Tower Lease Agreements in the Philippines

The Philippines has one of the fastest-growing telecommunications markets in Southeast Asia, driven by high mobile penetration and continuing demand for better data coverage. Cellular towers (or cell sites) are critical infrastructure, and the majority are erected on private land through long-term lease agreements between landowners (lessors) and either telecommunications entities (telcos such as Globe, Smart, and DITO) or independent tower companies (towercos such as PhilTower, edotco, MIESCOR Infrastructure, Frontier Tower Associates, and ISOC Infrastructures).

These lease agreements are governed primarily by the Philippine Civil Code provisions on lease (Articles 1642–1688), the general law on obligations and contracts (Articles 1156–1422), and special regulations from the Department of Information and Communications Technology (DICT), the National Telecommunications Commission (NTC), the Anti-Red Tape Authority (ARTA), and local government units (LGUs).

Below is a comprehensive discussion of the key legal provisions typically found in cellular tower lease agreements in the Philippine context as of 2025.

1. Governing Law and Regulatory Framework

All cellular tower leases must expressly state that they are governed by Philippine law. The most important regulatory references are:

• Republic Act No. 7925 (Public Telecommunications Policy Act of 1995) and its IRR
• Executive Order No. 32 (2022) – streamlining of cell tower permits
• RA 11032 (Ease of Doing Business and Efficient Government Service Delivery Act of 2018) as amended by RA 11517 (ARTA Amendments)
• Joint Memorandum Circular No. 001, series of 2021 (DICT-DILG-DICT Joint Memorandum Circular on Common Tower Policy)
• DICT Department Order No. 002, s. 2018 (Height Regulations and Co-location Policy)
• NTC Memorandum Circular No. 07-08-2021 (Guidelines on Independent Tower Companies)
• Local Government Code (RA 7160) – LGU authority over zoning, building permits, and locational clearances

Non-compliance with any of these renders the lease unenforceable in practice, even if the contract itself is valid between the parties.

2. Nature of the Lease: Lease of Space vs. Lease of Roof vs. Ground Lease

Philippine courts have consistently treated cellular tower leases as ordinary leases of immovable property under Article 1643 of the Civil Code, whether the site is:

• Ground-based (typically 200–500 sqm plus access easement)
• Rooftop (typically 20–60 sqm on the roof plus ground space for equipment shelter)
• Wall-mounted or micro-cell installations

The lease creates a real right that is registrable with the Register of Deeds under Section 113 of PD 1529 (Property Registration Decree) if the term exceeds one year and is annotated on the title as an encumbrance.

3. Term and Renewal Options

Standard terms are 10 + 5 + 5 or 15 + 5 + 5 years (total possible 25 years).

Renewal is almost always at the sole option of the lessee/towerco. Philippine courts uphold unilateral renewal clauses provided they are clear and not grossly oppressive (see PLDT vs. Alvarez, G.R. No. 179408, March 5, 2014).

A well-drafted renewal clause will state: “Lessee shall have the exclusive option to renew this Lease for additional periods of five (5) years each upon the same terms and conditions except for rental rate, which shall be negotiated in good faith or adjusted based on prevailing market rates or CPI, whichever is higher.”

4. Rental Rate and Escalation Clause

Fixed monthly rent is still the dominant model (average ground lease: ₱15,000–₱45,000/month in provinces, ₱50,000–₱120,000 in Metro Manila/NCR; rooftop leases are usually 30–50% lower).

Escalation clauses of 5–10% per annum compounded are standard and have been upheld as valid (Globe Telecom vs. Crisostomo, CA-G.R. CV No. 101791, 2014).

A typical enforceable escalation clause reads:
“The monthly rent shall increase by eight percent (8%) per annum on every anniversary date of the lease, compounded annually.”

Revenue-sharing models (e.g., 20–30% of co-location revenue) are increasingly used by towercos but remain less common with direct telco leases.

5. Security Deposit and Advance Rent

Usually equivalent to three (3) to six (6) months’ rent, refundable or applicable to the last months of the lease.

PDIC-insured bank guarantee or surety bond is sometimes accepted in lieu of cash.

6. Permitted Use and Exclusive Rights

The lessee is granted the exclusive right to install, operate, maintain, replace, and upgrade telecommunications equipment, including 4G, 5G, and future technologies.

The lessor covenants not to allow any competing tower or equipment that may cause radio frequency interference within a specified radius (usually 500 meters–1 km).

7. Construction, Improvement, and Upgrade Rights

The lessee has the unilateral right to construct the tower, equipment shelter, generator set, and perimeter fence.

All improvements introduced by the lessee (tower, concrete foundation, shelter) remain the property of the lessee and may be removed upon termination, provided the premises are restored to their original condition, except normal wear and tear.

Foundations deeper than 5 meters are sometimes treated as lessor property under Article 440 of the Civil Code, but modern contracts contain an express waiver of this article.

8. 24/7 Access and Utility Easement

Lessee and its authorized personnel shall have unrestricted access 24 hours a day, 7 days a week, 365 days a year, including an easement of right-of-way if the site is landlocked.

Electricity and water consumption are for the lessee’s account, usually sub-metered.

9. Co-location and Subleasing Rights

This is now the most critical provision for towercos. The lessee has the absolute right to sublease space on the tower or rooftop to other NTC-registered telecommunications entities without lessor consent and without additional payment to the lessor.

This right survives any sale or transfer of the land by the lessor.

10. Insurance and Indemnification

Lessee maintains comprehensive general liability insurance (minimum ₱10–20 million) and names the lessor as additional insured.

Mutual indemnification clauses are standard, but the lessee almost always assumes full liability for electromagnetic radiation claims, structural failure, or third-party injury arising from the tower.

11. Taxes, Fees, and Government Permits

The controlling rule is:

• Real property tax on land – lessor
• Real property tax on tower and improvements – lessee (unless the LGU assesses it against the land, in which case lessee reimburses the increase)
• Business taxes, mayor’s permit fees, barangay clearances – lessee

All parties are now jointly and severally liable for securing permits under the 2021 DICT-DILG-DICT JMC, but in practice the lessee/towerco shoulders the cost and effort.

12. Assignment and Transfer of Rights

The lessee may assign the lease or sell the tower to any other NTC-registered entity or towerco without lessor consent.

The lessor may sell the land, but the lease binds the new owner (pactum commissorium prohibition does not apply).

13. Termination and Default Provisions

Grounds for lessee default are narrow (non-payment for 60–90 days after notice).

Grounds for lessor default are broader: interference with operations, breach of non-compete, or allowing structures that cause RF interference.

Early termination buy-out clauses are common: the lessee may terminate anytime after the 5th or 7th year upon payment of a buy-out amount equivalent to 12–36 months’ rent.

14. Removal of Equipment and Site Restoration

Upon expiry or termination, the lessee must remove all equipment and restore the premises within 90–180 days.

Failure to remove gives the lessor the option (not obligation) to appropriate the improvements without compensation or to demand removal at lessee’s expense.

15. Radiation and Health Concerns Clause

Most contracts now include an express acknowledgment by the lessor that the installation complies with ICNIRP standards and DOH guidelines, and the lessor waives any future health-related claims.

16. Force Majeure and Condemnation

Standard clause extended to include typhoons, earthquakes, and government moratoriums on cell sites.

In case of expropriation, the lessee is entitled to compensation for the tower and unamortized improvements.

17. Dispute Resolution

Venue is usually the courts of the city/municipality where the property is located.

Arbitration under the Construction Industry Arbitration Commission (CIAC) or Philippine Dispute Resolution Center, Inc. (PDRCI) is increasingly preferred, especially for towercos.

Current Market Trends and Best Practices (2025)

• Towercos now dominate new builds; direct telco leases are rare.
• Rental rates have stabilized or slightly declined in many provinces due to tower oversupply after the 2020–2024 aggressive build-out.
• 5G small-cell and in-building solution leases are shorter (5–10 years) and use license agreements rather than formal leases.
• LGUs continue to be the biggest bottleneck despite EO 32; many towercos now include “permit assistance fees” or success-based bonuses to landowners who help secure clearances.

Landowners are well-advised to have their lease agreements reviewed by counsel experienced in telecommunications infrastructure. A poorly drafted agreement can lock the property into below-market rent for 25 years with no realistic termination rights, while a well-negotiated one can provide stable, inflation-protected income and valuable property enhancements.