Penalty for Late Rent When the Lease Contract Has No Penalty Clause
(Philippine law overview, May 2025)
1. Governing Sources of Law
| Sphere | Key Authorities | Core Points Relevant to Late-Payment Penalties |
|---|---|---|
| Civil Code of the Philippines (Republic Act No. 386, 1950) | Art. 1169 – default (mora) rules Art. 1170 – damages for breach Art. 2209 – “legal interest” at 6 % p.a. if no rate stipulated |
Obligations with a fixed due date fall into delay ipso jure the day after maturity; damages are limited to legal interest when no penalty is agreed. |
| Rent Control Act (RA 9653, as successively extended – latest extension RA 11571, effect until 31 Dec 2027) | Sec. 3 (b) & (c) – definition of “rent” and coverage Sec. 9 – grounds for ejectment |
The Act is silent on monetary penalties; it protects against excessive rent and provides a 3-month arrears rule for eviction. |
| Judicial doctrine | Reformina v. NLRC (G.R. No. 76149, 30 Aug 1988) et al. on legal interest Spouses Abella v. Spouses Abella (G.R. No. 181371, 15 Jun 2015) on unconscionable penalty clauses |
When no rate is stipulated, courts uniformly apply 6 % per annum as compensatory interest; any unilateral imposition beyond that may be struck down. |
| BSP (Bangko Sentral) Circular No. 799-2013 | Sets legal interest at 6 % per annum for monetary judgments and forbearance of money. | Reinforces Art. 2209. |
2. What Happens if the Lease Is Silent on Penalties?
No Automatic “Late-Payment Fee.” A landlord may not lawfully impose an ad-hoc surcharge, flat fee, or interest higher than 6 % unless the tenant expressly agreed to it in the lease. Penal clauses (Arts. 1226–1229 Civil Code) must be consensual; without agreement, there is none.
Tenant’s Default Still Exists.
- Fixed due date: When rent is expressly due on, say, the 5th of every month, the tenant falls into default the day after (Art. 1169, ¶2).
- No due date stated: Landlord must first make an extrajudicial demand (written or oral) before default attaches (Art. 1169, ¶1).
Only “Legal Interest” as Damages.
- Rate: 6 % per annum, simple interest, computed from the date of demand (extrajudicial or the date of filing of the ejectment or collection suit) until full payment (Art. 2209 as harmonized with BSP Circular 799).
- No compounding unless expressly agreed (Art. 1959).
Ejectment Remedy (Unlawful Detainer).
- Under RA 9653, failure to pay rent for three (3) consecutive months after demand is a ground for eviction.
- The barangay conciliation process (Lupong Tagapamayapa) is a mandatory first step for residential leases outside highly urbanized cities.
Security Deposit Offset.
- Landlord may apply the deposit to unpaid rent when the tenant vacates (Sec. 7, RA 9653) but cannot unilaterally appropriate it during the lease without tenant’s written consent or a stipulation to that effect.
3. Illustrative Computation
Scenario: ₱ 15,000 monthly rent due on 1 March 2025; no penalty clause; landlord sent written demand on 8 March. Paid on: 30 April (60 days late).
Interest: ₱ 15,000 × 6 % × (53 days ÷ 365) = ₱ 15,000 × 0.06 × 0.1452 ≈ ₱ 131
Only ₱ 131 may be validly collected as “penalty,” plus the ₱ 15,000 principal. Any higher figure is vulnerable to being nullified as inique or unconscionable.
4. Frequently-Litigated Issues
| Issue | Court Treatment |
|---|---|
| Unilateral “policy memos” adding ₱ 500/day late fee | Struck down for lack of consent; landlord limited to 6 % p.a. interest. |
| Verbal agreement on 10 % monthly penalty | Enforceable only if proved by credible evidence (parol evidence rule applies once a written lease exists). |
| Tenant tenders rent late but landlord refuses | Tender must be unconditional and on or before due date; late tender may be refused without curing default, but landlord may waive by acceptance. |
| Covid-19 force majeure argument | Courts largely reject pandemic as a ground to erase rent; may suspend demand if premises became uninhabitable, but interest still runs after demand once occupation resumed. |
5. Best Practices
For Landlords
- Insert a clear penalty clause (e.g., “₱ 300/day or 3 % per month, whichever is higher”), keeping the rate reasonable to avoid being voided.
- Serve timely written demand quoting Art. 1169 to start the running of interest and the 3-month ejectment clock.
- Document acceptance of late payments—note on receipts that acceptance is “without prejudice to accumulated interest.”
For Tenants
- Negotiate or strike out excessive penalty clauses before signing.
- Keep proof of payments; pay through traceable channels (GCash, bank transfer) to avoid disputes.
- Respond promptly to demand letters; partial payment plus a written request for waiver of penalties often succeeds when no clause exists.
6. Key Take-Aways
- Silence equals 6 % p.a.: Without a contractual penalty, only the statutory legal interest applies.
- No late-fee “policies” by memo: Penalties must be part of the lease, not an afterthought.
- Eviction, not penalty, is the main lever: After three months’ arrears post-demand, lessors may sue for ejectment.
- Put it in writing—always: Whether imposing or resisting penalties, documentation and clear stipulation are decisive in Philippine courts.
This article reflects Philippine statutes, BSP regulations, and Supreme Court doctrine as of 31 May 2025. Future legislative amendments or new jurisprudence may modify these rules.