When a leased property changes hands in the Philippines, a common misconception arises that the change in ownership automatically terminates the lease. Under Philippine law, specifically the Civil Code and the Rent Control Act, the rights of a tenant are generally protected, ensuring that a sale is not a "get out of jail free" card for landlords to evict residents.
1. The General Rule: "Sale Does Not Extinguish the Lease"
The fundamental principle governing this situation is found in Article 1676 of the Civil Code of the Philippines. It states that the purchaser of a piece of land which is under a lease that is recorded in the Registry of Property cannot terminate the lease.
However, even if the lease is not recorded, the new owner still cannot terminate it if:
- There is a stipulation in the contract of sale that the purchaser shall respect the lease.
- The purchaser has actual knowledge of the existence of the lease.
- The lease falls under the Rent Control Act of 2009 (R.A. 9653).
2. The Protections Under the Rent Control Act (R.A. 9653)
For residential units falling under the Rent Control Act (typically those within certain rent price brackets in major cities), the law is even more explicit. Section 10 of R.A. 9653 states:
"No lessor or his successor-in-interest shall be entitled to eject the lessee upon the ground that the leased premises has been sold or mortgaged to a third person regardless of whether the lease or mortgage is registered or not."
This means that for the vast majority of residential tenants, the new owner must step into the shoes of the previous landlord and honor the existing lease agreement until it expires.
3. When Can the New Owner Terminate the Lease?
While the sale itself is not a ground for eviction, a new owner may terminate the lease or refuse to renew it based on the same legal grounds available to the original owner:
- Expiration of the Period: If the lease contract has reached its end date.
- Non-payment of Rent: Failure to pay rent for a cumulative period of three (3) months.
- Need for Personal Use: If the new owner legitimately needs the property for their own use or for the use of an immediate family member (provided notice is given and the tenant is not evicted during the lease term).
- Violations of the Contract: If the tenant violates terms like subleasing without consent or causing damage to the property.
4. The "Buyer in Good Faith" Exception
In cases of unregistered land or leases not annotated on the Title (Transfer Certificate of Title), a buyer who was genuinely unaware of the lease and bought the property "in good faith" might argue for the termination of the lease. However, in the Philippines, "possession" is considered constructive notice. Since the tenant is physically occupying the property, the buyer is legally expected to inquire about the occupant's status. Failure to do so usually defeats the "good faith" defense.
5. Summary of Tenant Rights and Obligations
| Feature | Protection/Requirement |
|---|---|
| Existing Contract | The new owner inherits the rights and obligations of the old landlord. |
| Rent Payments | Tenants should continue paying rent, but must be formally notified of the change in ownership and where to remit payments. |
| Security Deposits | The original landlord should transfer the security deposit and advance rent to the new owner, who then becomes liable to return it to the tenant. |
| Eviction Notice | If valid grounds for eviction exist, the new owner must still follow the "Due Process of Law" (demand letter followed by an unlawful detainer case if necessary). |
6. Practical Steps for Tenants
- Review the Contract: Check if there is a "Sales Clause" in your current lease. Some contracts explicitly state that the lease is terminated upon sale (though this may be overridden by the Rent Control Act for covered units).
- Verify the New Owner: Request a formal Letter of Introduction or a copy of the Deed of Sale to ensure you are paying the correct person.
- Document Everything: Keep copies of all rent receipts and communications. If the new owner refuses to accept rent, the tenant should "consign" the payment to a bank or the court to avoid being sued for non-payment.
- Demand Honoring of the Term: Remind the new owner that under Philippine law, they are bound by the existing period of the lease.