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. While the original law had a sunset clause, its provisions have been extended and modified through several resolutions by the National Human Settlements Board (NHSB) (formerly the Housing and Urban Development Coordinating Council).

For tenants and landlords alike, understanding the specific limitations on rent hikes and the handling of security deposits is crucial to maintaining a lawful and harmonious tenancy.

I. Coverage of the Rent Control Act

The Act does not apply to all rental properties. It specifically targets the "affordable" segment of the residential market. As of the most recent extensions, the law covers:

Residential Units: Apartments, houses and/or lots, building parts, and dormitories used for residential purposes.
Rent Threshold: Units in the National Capital Region (NCR) and other highly urbanized cities with monthly rents up to PHP 10,000, and units in all other areas with monthly rents up to PHP 5,000.
Exclusions: Motels, hotel rooms, and commercial spaces are strictly excluded.

II. Rules on Rent Increases

The law prevents arbitrary and excessive price hikes to protect middle-to-low-income earners from displacement. The NHSB determines the allowable increase annually.

1. Allowable Increase Limits

Under current regulations, the following caps generally apply to units covered by the Act:

Units with the same tenant: If the unit is occupied by the same lessee, the lessor cannot increase the rent beyond the percentage set by the NHSB (typically ranging from 4% to 7% annually).
Vacated Units: Once a unit becomes vacant, the lessor is free to set a new initial rent for the next tenant. However, once the new lease begins, the annual caps apply again.

2. Frequency of Increases

Rent may only be increased once a year. Landlords cannot implement staggered increases that exceed the annual cap within a single 12-month period.

III. Security Deposits and Advance Rent

To prevent financial strain on tenants during move-in, Section 7 of R.A. 9653 strictly regulates the "Upfront" payments a landlord can demand.

1. The "1-Month Advance, 2-Month Deposit" Rule

The law limits the amount of initial payment to:

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

Any demand for "3 months deposit" or "2 months advance" for a covered unit is a direct violation of the Act.

2. Handling the Security Deposit

The security deposit is not "free money" for the landlord. It must be handled with specific fiduciary care:

Bank Placement: The deposit must be kept in a bank under the lessor's name, and any interest earned should accrue to the deposit.
Purpose: It is reserved exclusively for unpaid bills (electricity, water, etc.) or damages caused by the tenant beyond "ordinary wear and tear."
Refund Timeline: If the tenant leaves the premises in good condition and all bills are settled, the deposit (and any interest) must be returned to the lessee within one (1) month after the termination of the lease.

IV. Prohibited Acts and Protections

The Rent Control Act provides specific safeguards against "Constructive Eviction," where a landlord makes life difficult to force a tenant out.

No Ejectment for Rent Increase: A landlord cannot evict a tenant simply because the tenant refuses to pay an increase that exceeds the legal cap.
Grounds for Judicial Ejectment: A tenant can only be legally evicted for:

Subleasing the unit without written consent.
Arrears (non-payment) of rent for a total of three (3) months.
Legitimate need of the owner to repossess the property for their own use (subject to 3-month notice).
Necessary repairs ordered by authorities to make the unit safe.
Expiration of the lease period.

V. Penalties for Violations

Violating the Rent Control Act carries significant consequences. Under Section 13, any person found violating the provisions (such as overcharging rent or withholding deposits illegally) may face:

A fine of not less than PHP 25,000 nor more than PHP 50,000.
Imprisonment of not less than one (1) month and one (1) day up to six (6) months.
Or both, at the discretion of the court.

Summary Table: Quick Reference

Provision	Limit/Rule
Max Advance Rent	1 Month
Max Security Deposit	2 Months
Deposit Refund	Within 30 days of move-out (less damages/bills)
Rent Increase Frequency	Once every 12 months
Rent Arrears for Eviction	3 Months total
Coverage (NCR)	Units up to PHP 10,000/month