In the Philippines, the relationship between lessors (landlords) and lessees (tenants) regarding rent increases is primarily governed by the Rent Control Act of 2009 (Republic Act No. 9653). This law seeks to protect lower-income earners from arbitrary and excessive rent hikes while balancing the right of property owners to a reasonable return on their investment.

1. Scope and Coverage

The Rent Control Act does not apply to all residential units. Its protection is specifically targeted based on the monthly rent amount and the location of the property.

Rent Thresholds: The law currently covers residential units with monthly rents ranging from ₱1.00 to ₱10,000.00 in the National Capital Region (NCR) and other highly urbanized cities. For other areas, the threshold may vary as determined by the housing authorities.
Definition of "Residential Unit": This includes apartments, houses and/or lots, building parts used for home purposes, and boarding houses/dormitories. It excludes motels, hotels, and commercial spaces.

2. Maximum Allowable Increases

The law does not allow landlords to increase rent at will. The Human Settlements Adjudication Commission (HSAC) and the Department of Human Settlements and Urban Development (DHSUD) periodically review and set the maximum percentage of increase.

Historically, the guidelines have followed these patterns:

Annual Limit: For units covered by the Act, the annual rent increase is generally capped (often at 7% to 11% depending on the prevailing resolution from the regulatory board).
Cumulative Nature: If a landlord decides not to increase the rent for one year, they cannot "double up" the increase the following year to exceed the annual cap.

3. Regulations on Advanced Rent and Deposits

To prevent financial strain on tenants, R.A. 9653 strictly limits the upfront costs a landlord can demand:

Advance Rent: Limited to a maximum of one (1) month.
Security Deposit: Limited to a maximum of two (2) months.
Interest on Deposit: The security deposit must be kept in a bank account, and any interest earned must be returned to the tenant upon the expiration of the lease.
Usage of Deposit: The deposit is primarily for unpaid bills (electricity, water) or repairs for damages caused by the tenant beyond "normal wear and tear."

4. Grounds for Judicial Ejectment

Even if a tenant refuses an illegal rent increase, they cannot be arbitrarily evicted. Under Section 9 of the Act, a lessor may only eject a lessee based on specific legal grounds:

Subleasing: If the tenant leases the property to a third party without written consent.
Arrears in Payment: Failure to pay rent for a total of three (3) months.
Owner’s Need for the Property: If the owner or their immediate family needs the unit for their own use (requires 3 months' notice and a prohibition on re-leasing for at least one year).
Necessary Repairs: When the unit is subject to a condemnation order or requires repairs to make it safe.
Expiration of Lease Contract: If a fixed-period contract ends.

5. Prohibited Acts and Penalties

The law explicitly prohibits landlords from cutting off utility services (water/electricity) or using coercion to force a tenant to vacate due to a dispute over rent increases.

Penalties for Violation:

Fines: Generally ranging from ₱25,000 to ₱50,000.
Imprisonment: Not less than one (1) month but not more than six (6) months.
Combination: Both a fine and imprisonment may be imposed at the court's discretion.

6. Common Misconceptions

"No Contract, No Rights": Even a verbal lease agreement is protected under the Rent Control Act. The law focuses on the actual rental amount paid.
Automatic 10% Increase: Many landlords believe they have a "right" to a 10% increase every year. This is only true if the unit falls within the Act’s thresholds and the current DHSUD resolution allows for that specific percentage.
Sale of the Property: The sale or mortgage of the residential unit is not a valid ground for ejecting a tenant. The new owner must respect the existing lease agreement.