(Philippine legal and tax context; general information, not legal or tax advice.)

1) Subletting in plain terms: what it is and why the paperwork matters

Subletting happens when a tenant (the lessee) rents out all or part of the leased house to another person (the sublessee/subtenant) for a period that sits inside the tenant’s own lease term. The tenant becomes a “middle landlord” to the subtenant—while still remaining a tenant of the property owner (the lessor/landlord).

Two concepts are often confused:

Sublease (subletting): Tenant keeps the original lease and gives the subtenant the right to occupy/use the premises. The tenant remains primarily responsible to the landlord.
Assignment of lease: Tenant transfers their lease rights to another, typically stepping out of the relationship (subject to landlord consent and the contract). In many practical cases, landlords prefer a fresh lease over assignment.

Subletting is legally possible in the Philippines, but it is high-risk when done informally because it creates overlapping obligations:

obligations under the head lease (landlord ↔ tenant), and
obligations under the sublease (tenant ↔ subtenant)

The safest arrangements are those that (1) match the head lease terms, (2) obtain written landlord consent when required, and (3) address tax registration and invoicing properly.

2) Core legal framework that governs subletting a house

A) Civil Code rules on leases

Philippine leases are primarily governed by the Civil Code provisions on lease (lease of things), plus general contract principles.

Key legal effects relevant to subletting:

Contracts control—within the law. If the head lease prohibits subletting or requires prior consent, violating that can be a breach and a ground to terminate and evict.
The tenant remains responsible to the landlord. Even when a subtenant occupies the house, the landlord can still hold the original tenant accountable for rent, damages, prohibited use, nuisance, and other violations—unless the landlord clearly released the tenant and accepted a different arrangement.
Subtenant rights are derivative. A subtenant’s right to stay usually cannot exceed what the tenant has. If the head lease ends lawfully, the sublease typically collapses with it.

B) Statute of Frauds: when a written contract is crucial

For leases involving real property, a written contract is strongly advisable. Under the Statute of Frauds principle in Philippine law, certain agreements (commonly including leases beyond a certain duration) are not enforceable in court unless in writing. Even when enforceable, unwritten terms invite disputes.

Practical takeaways:

Put both the head lease and sublease in writing.
Ensure the sublease explicitly references the head lease and is consistent with it.

C) Rent Control (for some residential leases)

Residential rent may be covered by the Rent Control Act (R.A. 9653) if the unit falls within coverage thresholds and the law is in effect for the relevant period (coverage, caps, and effectivity have historically depended on extensions and updated implementing rules). When it applies, it may limit allowable rent increases and impose rules for covered units.

Practical takeaways:

Do not assume rent control applies to all houses; it is threshold- and area-dependent.
Even when rent control doesn’t apply, consumer protection and contract law still do.

D) Condominium/subdivision/HOA rules can override “practical permission”

If the “house” is within a subdivision with HOA rules or is a condominium unit, the contract isn’t the only constraint:

Condominium corporations and master deed/bylaws often regulate leasing, “transient” stays, and registration of occupants.
HOAs may limit occupancy density, require gate passes, restrict short-term stays, or require owner/tenant registration.

Violating these can lead to penalties, denial of access, or administrative problems—even if the landlord is okay with the sublease.

E) Short-term rentals (Airbnb-style) are a special risk category

Subletting for short stays (daily/weekly) can trigger:

building/HOA restrictions,
local permitting and fire safety requirements,
classification as a lodging/business activity rather than a simple residential lease,
stricter tax visibility (platform payments create records).

Even if not explicitly prohibited by law nationwide, local rules and private restrictions can make it practically non-viable.

3) The most important threshold question: is subletting allowed under the head lease?

A) Check the head lease’s “Sublease/Assignment” clause

Common patterns:

Absolute prohibition: “No subletting/assignment under any circumstance.”
Consent required: “Subletting allowed only with landlord’s prior written consent.”
Conditional permission: “Allowed to immediate family only,” “allowed for room sharing,” “allowed with notice,” etc.
Silent contract: If the contract is silent, default Civil Code principles and the parties’ intent matter; however, silence is not safety—landlords often contest it later.

B) Why written landlord consent matters (even when “pinayagan naman”)

A verbal “okay” is easy to deny later. Written consent protects all sides by documenting:

who the approved subtenant is,
the allowed term,
occupancy limits,
whether the landlord can deal directly with the subtenant in specific situations,
whether the tenant remains fully liable (usually yes).

C) Tenant liability does not disappear

Even with consent, the tenant should assume:

rent and utilities ultimately remain the tenant’s responsibility to the landlord,
damage, nuisance, unauthorized repairs, illegal use, and HOA fines may be charged to the tenant,
the tenant must enforce the sublease (collect, evict, manage behavior) to prevent breach of the head lease.

4) Structuring the paperwork: three workable models

Model 1: Classic sublease (tenant ↔ subtenant), with landlord written consent

Landlord keeps the head lease with the tenant.
Tenant signs a sublease with the subtenant.
Landlord signs a consent letter (or consent page) acknowledging the sublease.

Best for: ordinary subletting where landlord doesn’t want direct dealings.

Model 2: Landlord-approved “tripartite” acknowledgment

Landlord, tenant, and subtenant sign a short agreement:
- confirms consent,
- confirms subtenant must follow house rules,
- clarifies no direct landlord-subtenant lease is created (unless intended),
- confirms the tenant remains liable.

Best for: subdivisions/condos requiring registration; clearer enforcement.

Model 3: Replace subletting with a new lease (clean restart)

Tenant ends the lease (or assigns with landlord consent) and landlord leases directly to the new occupant.

Best for: longer subletting, higher risk properties, or when tenant wants to exit liability.

5) What a Philippine house lease should contain (and what changes for subletting)

A solid head lease anticipates subletting even if it’s prohibited, because ambiguity causes litigation.

Essential clauses (head lease)

Parties and IDs: full legal names, addresses, government IDs (with data privacy handling).
Property description: address, boundaries, inclusions (furniture/appliances), inventory checklist.
Purpose/use: strictly residential; prohibition on business/lodging unless permitted.
Term: start/end dates; renewal terms; holdover rules.
Rent: amount, due date, payment channel, late charges, receipts/invoices.
Security deposit / advance rent: conditions for deductions, return timeline, offset rules.
Utilities and association dues: who pays what; how metering is handled.
Repairs and maintenance: ordinary repairs vs major repairs; reporting procedure; unauthorized alterations.
Alterations/improvements: written approval, ownership of improvements, restoration obligation.
Sublease/assignment rules: consent requirement, prohibited arrangements (Airbnb), occupancy caps.
Default and remedies: demand notice, cure period, termination triggers.
Access and inspection: notice requirements, emergency access.
Insurance and risk of loss: who insures contents; liability allocation.
Rules & regulations: HOA/condo rules incorporated by reference.
Attorney’s fees / liquidated damages: carefully drafted to avoid unconscionability.
Dispute resolution: barangay conciliation where applicable, venue, arbitration (optional).
Notarization: making it a public instrument improves enforceability and evidentiary weight.

The sublease must add subletting-specific protections

A sublease should include everything above, plus:

“Sublease is subordinate” clause: subtenant acknowledges the head lease and agrees not to violate it.
Automatic termination clause: sublease ends automatically when the head lease ends (for any reason not caused by the subtenant’s unlawful acts, depending on how you allocate risk).
No privity with landlord clause: clarifies landlord is not the subtenant’s landlord (unless the landlord wants that).
Indemnity: subtenant covers fines, damages, HOA penalties, and claims caused by subtenant.
Move-in/move-out condition reports: photos, inventory list, damage scoring.
Guest and occupancy limits: avoids overcrowding that triggers HOA complaints or breach.
Short-term stay restrictions: if the head lease forbids, the sublease must forbid.
Compliance pack: attach HOA rules, garbage schedule, parking rules, community IDs.

6) Eviction and enforcement: what happens when subletting goes wrong

A) If subletting violates the head lease

If the tenant sublets without required consent, the landlord may:

treat it as breach and terminate per contract terms,
issue a written demand to comply/stop or to vacate,
file an ejectment case (commonly unlawful detainer if possession was initially lawful but became unlawful).

B) If the subtenant refuses to leave

The tenant (as sublessor) typically must proceed against the subtenant under the sublease:

issue a written demand to pay/vacate,
file the appropriate court action if needed.

Self-help evictions (padlocking, removing belongings, cutting utilities) are legally dangerous and can trigger civil/criminal exposure depending on facts.

C) Barangay conciliation (Katarungang Pambarangay)

Many lease-related disputes between individuals who are residents in the same city/municipality may require barangay conciliation before court action, subject to exceptions (e.g., parties are corporations, different localities, urgency, etc.). This can affect timing and strategy.

7) Taxes: the most overlooked part of subletting (and the part with the most penalties)

Subletting creates tax exposure for:

the property owner/landlord (rental income), and
the tenant-sublessor (income from sublease, if they collect rent or profit).

A) Rental income is taxable income

As a general rule, rent received is part of gross income and must be reported. This applies whether you are:

the property owner leasing out the house, or
the tenant earning from subletting (especially where the tenant charges the subtenant rent and retains a margin).

B) Income tax: individuals vs corporations

Individuals earning rental income generally report it in their income tax returns and choose among:

graduated rates with allowable deductions (itemized or an optional standard deduction regime where available), or
an 8% option on gross receipts (where eligibility rules are met, typically for self-employed/professionals and small taxpayers not VAT-registered; the exact eligibility depends on current rules and the taxpayer’s circumstances).

Corporations report rental income as part of corporate taxable income under corporate income tax rules.

Important nuance for subletting: If the tenant is merely “passing through” rent (collecting from subtenant and paying landlord), tax treatment still depends on who the payor is contracting with and who is actually receiving income. In practice, if the tenant collects rent in their own name, that collection is visible income and must be properly accounted for; deductions/expenses may apply depending on the tax regime.

C) Business tax: VAT or percentage tax (depending on thresholds and registration)

Rental activity can be treated as a business activity for tax purposes, especially when it is regular, ongoing, or structured as a rental enterprise.

General framework:

If gross receipts exceed the VAT threshold (historically ₱3,000,000 under TRAIN-era rules), VAT registration may be required.
If not VAT-registered, a percentage tax regime may apply unless exempt or covered by an alternative regime (rules change over time; confirm current rates and exemptions applicable to leasing).

D) BIR registration and invoicing/receipting

Where leasing is treated as a business, the lessor/sublessor may need to:

register with the BIR as a taxpayer engaged in business,
secure a Certificate of Registration,
register “books of accounts” (physical or electronic, depending on rules),
issue registered invoices/receipts as required.

Recent reforms have pushed invoicing rules toward “invoice-first” treatment for tax substantiation. In practice, landlords and sublessors should align their documentation with the current BIR framework on invoices/receipts to avoid disallowances and penalties.

E) Withholding tax on rent (common in corporate/withholding-agent tenants)

When the tenant (payor) is a withholding agent (often a corporation, certain businesses, or government entities), rent payments may be subject to expanded withholding tax (EWT). Typical mechanics:

The tenant withholds a percentage from rent, remits it to the BIR, and issues a creditable withholding tax certificate (commonly a 2307-type document) to the landlord.
The landlord then credits the withheld amount against their income tax due.

For subletting:

If the subtenant is a withholding agent and pays rent to the tenant-sublessor, EWT can apply at the sublease level.
If the tenant pays rent to the landlord and is a withholding agent, EWT can apply at the head lease level.

Rates and scope depend on taxpayer classification and current BIR tables; documentation is critical.

F) Documentary Stamp Tax (DST) on lease agreements

Lease contracts can be subject to Documentary Stamp Tax, generally computed based on the contract consideration and term, with filing/payment requirements governed by BIR rules. This is often missed because many residential leases proceed without stamping—until needed for enforcement, bank use, visa use, or audit.

DST is typically tied to:

execution of the lease contract,
the amount of rent/consideration for the lease term,
filing/payment within prescribed deadlines using the appropriate BIR forms and payment channels.

G) Local government requirements: permits and local business taxes

Local government units (LGUs) may require:

barangay clearance and mayor’s permit for businesses,
local business taxes for those engaged in the business of leasing,
compliance with zoning, signage, and fire safety (especially for boarding houses or transient accommodations).

For “purely private residential leasing,” enforcement varies by LGU; for boarding/transient/short-term operations, scrutiny is typically higher.

H) Real Property Tax (RPT) remains with the owner

Subletting doesn’t shift the obligation to pay Real Property Tax (amelyar) from the property owner, though contracts may allocate economic responsibility (e.g., tenant reimburses). Contract allocation does not change the LGU’s right to collect from the owner.

I) Common penalties for noncompliance

Tax noncompliance can trigger:

surcharges and interest,
compromise penalties,
disallowance of deductions/credits due to missing invoices/withholding certificates,
potential exposure in audits when rental income is visible through bank transfers/platform payouts.

8) Practical compliance roadmap (owner and tenant-sublessor)

A) For the property owner/landlord (head lease)

Paper the lease properly: written, clear sublease policy, notarized if feasible.
Decide your stance on subletting: prohibited, consent required, or allowed under conditions.
Tax posture: ensure rental income reporting is consistent with your BIR registration status and documentation.
If tenant is a withholding agent: require proof of remittance and withholding certificates.

B) For the tenant who plans to sublet (sublessor)

Get written consent if required—preferably identifying the subtenant and allowed term.
Mirror the head lease: your sublease must not promise rights the head lease forbids.
Protect yourself: indemnities, deposits, condition reports, HOA compliance.
Treat sublease collections as visible income: determine whether you must register, invoice/receipt, and file taxes accordingly.
Do not “hide” the arrangement: landlords, HOAs, and platforms create paper trails.

C) For the subtenant

Ask to see the head lease and consent: avoid paying someone who has no right to sublet.
Confirm termination risk: understand that if the head lease ends, your sublease may end too.
Pay documented: insist on proper invoices/receipts where applicable and keep proof of payment.

9) Contract clauses that matter most for subletting (illustrative, not a template)

A) Landlord consent clause (head lease)

Subletting requires prior written consent.
Consent may be conditioned on background checks, occupant caps, HOA registration.
Subletting without consent is a material breach.

B) Subordination and automatic termination (sublease)

Sublease is subordinate to head lease.
Sublease automatically terminates upon termination/expiry of head lease.
Subtenant waives claims against landlord arising solely from head lease termination, subject to mandatory rights and specific fault-based exceptions you define.

C) Indemnity and fines

Subtenant indemnifies tenant-sublessor for HOA fines, penalties, and damage caused by subtenant/guests.

D) Use restrictions

No illegal activity.
No transient accommodation/short-stay hosting if prohibited.
Occupancy limit and guest policy.

E) Deposits and condition reports

Detailed move-in inventory and photo annex.
Clear rules on deductions and timeline for return.

10) Common subletting pitfalls in the Philippines (and how they typically surface)

“Silent” head lease assumed to allow subletting → landlord objects later; breach/eviction risk.
Sublease term longer than head lease → subtenant claims longer stay; dispute escalates.
HOA/condo bans short-term stays → access issues, fines, forced vacate.
Utility accounts and unpaid bills → tenant gets stuck with arrears.
No documentation of payments → hard to enforce eviction or claims; tax exposure unmanaged.
Tax ignored until there’s an audit or a transaction (loan application, visa, sale, dispute) → penalties and delay.

11) Checklist: “subletting a house” essentials in one page

Before subletting

Review head lease: subletting/assignment clause, use restrictions, occupant limits
Obtain written landlord consent (and HOA/condo approval if needed)
Decide structure: sublease vs landlord direct lease
Prepare written sublease aligned with head lease
Inventory + condition report + photos
Decide payment channel and documentation (invoices/receipts)
Clarify utilities, internet, association dues, parking, IDs/access
Assess permits (boarding/transient/short-term) if applicable
Assess tax obligations: registration, income reporting, business tax, withholding, DST

During the sublease

Maintain compliance with HOA/condo rules
Keep records: payments, notices, repairs, complaints
Issue/collect proper tax documentation where required

Ending

Written notice of nonrenewal/termination
Final inspection and deductions documentation
Return deposit balance per agreed timeline

12) Bottom line principles

Subletting is not just “finding a replacement tenant.” It creates a layered legal relationship where the tenant remains exposed unless the landlord formally restructures the deal.
The safest sublease is one that is expressly permitted, documented, consistent with HOA/condo rules, and tax-compliant in reporting and documentation.
Tax obligations arise from rent and rent-like collections, whether you are the owner-landlord or a tenant-sublessor. Documentation (invoicing/receipting, withholding certificates, and proper registration where required) is often the difference between a manageable arrangement and a costly dispute.