The relationship between lessors and lessees in the Philippines is primarily governed by Republic Act No. 9653, also known as the Rent Control Act of 2009, alongside subsequent resolutions issued by the Department of Human Settlements and Urban Development (DHSUD). These regulations are designed to protect lower-income sectors from arbitrary rent hikes while ensuring property owners maintain a fair return on their investment.

1. Scope and Coverage

The Rent Control Act does not apply to all rental properties. It specifically targets residential units within specific rent brackets. As of the most recent regulatory updates, the law covers:

Residential units in the National Capital Region (NCR) and other highly urbanized cities with monthly rent of PHP 10,000 and below.
Residential units in all other areas with monthly rent of PHP 5,000 and below.

"Residential units" include apartments, houses and/or lots, building modules, and dormitory rooms. It excludes motels, hotels, and commercial spaces.

2. Regulations on Rent Increases

For units covered by the Act, landlords cannot increase rent at their sole discretion. The National Economic and Development Authority (NEDA) and the DHSUD set annual caps on how much rent can be raised.

Current Statutory Limits

The law typically allows for the following graduated increases:

Units with rent up to PHP 4,999: Maximum increase of 4% per year.
Units with rent from PHP 5,000 to PHP 8,999: Maximum increase of 7% per year.
Units with rent from PHP 9,000 to PHP 10,000: Maximum increase of 11% per year.

Frequency of Increases

A lessor may only increase the rent once a year. For rooms rented to students (boarding houses/dormitories), the increase can only be applied once every year, even if a new student occupies the unit within that same year.

3. Security Deposits and Advance Rent

The law is very strict regarding the "upfront" costs a landlord can demand. This is often referred to as the "2+1 Rule."

The Limit

Security Deposit: Maximum of two (2) months.
Advance Rent: Maximum of one (1) month.

Handling of the Security Deposit

The security deposit must be kept in a bank under the lessor’s name as a trust account. Any interest earned on that deposit must be returned to the lessee at the end of the contract.

The deposit is intended to cover:

Unpaid utility bills (water, electricity, etc.).
Damages to the unit exceeding "ordinary wear and tear."

If the tenant leaves the property in good condition with all bills paid, the deposit (and its interest) must be returned within 60 days after the termination of the lease.

4. Additional Security Deposits Upon Rent Increase

A common point of contention is whether a landlord can demand an "additional" security deposit when the monthly rent is increased.

Under Philippine law, the security deposit is capped at two months' worth of rent. Therefore:

If the monthly rent increases from PHP 7,000 to PHP 7,400, the "two-month" equivalent rises from PHP 14,000 to PHP 14,800.
The landlord may legally request the tenant to pay the PHP 800 difference to ensure the security deposit remains equal to two months of the current rent.
However, the landlord cannot demand a third or fourth month of deposit regardless of the rent amount.

5. Prohibited Acts and Penalties

The Rent Control Act provides protections against common predatory practices:

Excessive Deposits: Demanding more than two months' deposit or more than one month's advance rent is a violation.
Ejectment due to Sale: A lease cannot be terminated simply because the landlord sold the property to a third party. The new owner must honor the existing lease agreement.
Non-Payment Grace Period: While non-payment of rent for three months is a ground for judicial ejectment, the landlord cannot simply padlocked the door or cut off utilities without a court order.

Penalties

Violators of RA 9653 may face:

A fine ranging from PHP 25,000 to PHP 50,000.
Imprisonment of one month and one day to six months.
Both fine and imprisonment, at the court's discretion.

6. Summary Table of Protections

Feature	Legal Limit / Rule
Max Advance Rent	1 Month
Max Security Deposit	2 Months
Rent Increase Frequency	Once per year
Interest on Deposit	Must be returned to the lessee
Grounds for Ejectment	Non-payment (3 months), subleasing without consent, or owner's need for the unit (with 3 months' notice)