(Philippine context — residential and commercial leases)

1) Why this topic matters

In Philippine leasing practice, landlords commonly require (a) advance rent and (b) a security deposit at the start of the lease. Confusion often happens when a tenant wants to leave early: “May advance and deposit naman—do I still have to pay the remaining months?”

The short legal idea is this: advance rent and security deposit do not automatically pay off the remaining lease term. They have specific purposes, and whether you still owe the “full term” depends primarily on the lease contract and the rules on obligations and damages under Philippine law.

2) Key concepts (and how they differ)

A. Advance rent

Advance rent is rent paid ahead of time, usually:

1 month advance applied to the first month, or
sometimes applied to the last month (only if the contract clearly says so).

Legal nature: It is rent, not a guarantee.

B. Security deposit

A security deposit is money held by the lessor as security for the tenant’s obligations—commonly:

unpaid rent and utilities,
damages beyond ordinary wear and tear,
cleaning/restoration costs if contractually allowed,
other specified charges.

Legal nature: It is not rent by default; it is a guarantee. Unless the contract permits it, the tenant generally cannot unilaterally “treat the deposit as rent.”

3) Core rule: Do you still pay the full lease term?

The controlling document is the contract

In the Philippines, a lease is a contract. As a general rule, contracts have the force of law between the parties (principle of autonomy of contracts and binding effect of contracts under the Civil Code).

So the answer to “Do I still pay the full term?” usually starts with:

Does the lease have a fixed term? (e.g., 12 months)
Is there an early termination clause? (pre-termination fee, notice period, conditions)
Does it allow the deposit to be applied as rent? (and when)
What happens upon early move-out? (liquidated damages, forfeiture, re-letting rules)

If you leave early without a contractual right to do so

If the lease is for a fixed term and you vacate early without an agreed early termination mechanism or legal justification, the lessor can generally claim that you breached the lease and may seek:

unpaid rent (and/or)
damages (including penalties or liquidated damages if stipulated), subject to what the contract provides and what is allowable under general principles on obligations and damages.

Important: The advance rent and deposit may be applied by the landlord to what you owe, but they don’t necessarily erase liability for the rest of the term unless the contract says they do.

4) Typical scenarios and what usually happens

Scenario 1: “I paid 1 month advance + 2 months deposit. I’m leaving halfway through a 1-year lease.”

Common outcome (if the contract is strict):

You still owe rent up to the end of the lease or you owe an agreed pre-termination fee/liquidated damages, depending on the contract.
The landlord may keep or apply the deposit to unpaid rent/damages.
The advance rent is already rent (usually for the first month), so it typically does not help with later months unless it was explicitly designated as the last month.

Scenario 2: “Can I just stop paying rent for the last 2 months and tell the landlord to use my deposit?”

Common contractual position: No, unless the lease explicitly allows it. Many contracts prohibit offsetting rent with deposit because the deposit is meant to cover end-of-lease risks (repairs/utilities). If you stop paying, you create “unpaid rent,” and the landlord may still charge penalties/interest if the contract provides.

Scenario 3: “The landlord agrees to end the lease early.”

If the lessor accepts surrender (mutual agreement), you can negotiate:

a notice period,
a fixed early termination fee, and
treatment of deposit (full return less documented deductions, or partial forfeiture).

Best practice: Put the agreement in writing: end date, amounts due, deductions, and return schedule.

Scenario 4: “The unit has serious issues and I need to move out—do I still owe the remaining term?”

Potentially no, if facts support a legal justification such as:

substantial breach by the lessor (e.g., failure to maintain peaceful possession; refusal to address conditions that make the premises unfit or unsafe, depending on the lease obligations and circumstances),
constructive eviction (the premises become practically uninhabitable due to conditions attributable to the lessor and the tenant is effectively forced to leave),
other grounds recognized by law or contract (e.g., loss of the leased thing, or conditions that legally excuse performance).

These are fact-intensive. Documentation matters (notices, photos, inspection reports, communications).

5) What Philippine law generally says (practical reading)

A. Lease obligations under the Civil Code (high-level)

Philippine lease rules under the Civil Code (on Lease of Things) broadly reflect that:

The lessor must deliver the thing, maintain it in a condition suitable for the use agreed upon, and ensure peaceful possession.
The lessee must pay rent and use the property with due care, and return it at the end.

From these, disputes often reduce to:

Was there a breach?
Is early termination permitted by contract or by law due to breach/defect?
What damages/penalties apply?
How should the deposit be applied and returned?

B. Rent Control Act limitations (when applicable)

When a residential unit is covered by the Rent Control Act (Republic Act No. 9653) as implemented in the locality and within covered rent brackets, it is commonly understood to restrict how much a lessor may demand as move-in payments (often discussed as limits on advance rent and deposit for covered units).

Practical note: Coverage depends on factors like location, rental rate bracket, and whether rent control rules are currently in effect for that bracket. For non-covered units, the lease terms generally control (subject to laws on fairness, public policy, and specific statutes).

6) Is the security deposit refundable?

General rule in practice

The security deposit is generally refundable at the end of the lease minus lawful deductions, which should be:

specified in the contract, and
supported by documentation (bills, repair receipts, photos, turnover inspection report).

Common valid deductions

Unpaid rent (if any)
Unpaid utilities that the tenant is obligated to pay
Cost to repair tenant-caused damage beyond ordinary wear and tear
Cleaning/restoration if contractually agreed and reasonable

Common disputed deductions

“Repainting fee” charged automatically even if ordinary wear and tear only
Excessive “repair” claims without proof
“Forfeiture” of deposit without a clear contractual basis (unless tied to stipulated penalties or proven damages)

Timing of refund

Philippine law does not impose a single universal “deposit must be returned within X days” rule for all leases. Many leases set a period (e.g., 30–60 days) to allow utility bills to arrive and for inspection. What matters is what the contract says and whether the lessor acts in good faith and accounts for deductions.

7) Can the landlord forfeit the deposit automatically if you move out early?

Only if the contract provides a clear basis, such as:

liquidated damages clause,
forfeiture clause for pre-termination,
or the deposit is expressly labeled non-refundable (this may still be tested against fairness/public policy depending on circumstances, but parties often agree to it in commercial contexts).

Even with a forfeiture clause, disputes usually turn on:

whether the clause is clear,
whether the amount is reasonable as liquidated damages,
whether the tenant’s departure is indeed a breach, or was justified by the lessor’s breach.

8) If you still “owe the full term,” does the landlord have to try to re-rent the unit?

Philippine contract and damages principles emphasize actual loss and good faith, but leases often include clauses that:

treat early termination as a breach with fixed liquidated damages (e.g., “two months’ rent”), or
allow the lessor to charge rent until a replacement tenant is found, sometimes with marketing/processing fees.

In practice, courts often scrutinize:

whether claimed damages are supported,
whether liquidated damages are penal or unconscionable,
whether the lessor acted in good faith.

Because outcomes are fact-specific, the most predictable protection is a well-drafted early termination clause.

9) Practical guidance: what to check in your lease

Look for these clauses (they decide most disputes):

Term and renewal
- Fixed-term (12 months) vs. month-to-month
Early termination
- Notice requirement (30/60 days)
- Pre-termination fee / liquidated damages
- Conditions for penalty waiver (job relocation, safety issues, etc.)
Deposit use
- Can it be applied to rent? If yes, when?
- Is it non-refundable? Under what conditions?
Deductions and turnover
- Damage standards (wear and tear vs. chargeable damage)
- Requirement of a move-out inspection
Utilities
- Who pays; how arrears are handled
Default penalties
- Interest, late payment fees, attorney’s fees
Return of deposit timeline
- Timeframe and method, documentation of deductions

10) Illustrative examples (how the numbers play out)

Example A: Lease allows pre-termination with fee

Rent: ₱20,000/month
Term: 12 months
Paid at move-in: 1 month advance + 2 months deposit
Clause: “Tenant may pre-terminate with 60 days notice and payment of 1 month rent as liquidated damages.”

If tenant leaves at month 6:

Tenant pays: 60 days (or pays rent during notice) + ₱20,000 liquidated damages
Deposit returned: less unpaid utilities/damages
Deposit is not automatically the liquidated damages unless contract says deposit will be applied.

Example B: No early termination clause; tenant leaves early

Landlord may claim:

unpaid rent for remaining term or provable damages, plus penalties if stipulated Tenant may argue:
landlord accepted surrender (written acceptance helps), or
landlord breached, or
stipulated penalties are excessive, etc.

The deposit may be applied against what is owed, but liability does not vanish just because a deposit exists.

11) Best practices to avoid disputes

For tenants

Get a written receipt specifying which month the advance rent applies to.
Demand a written statement of deposit deductions with proof.
Do a move-in checklist (photos/videos) and a move-out inspection with the lessor/agent.
Give written notice of issues and keep records of requests for repairs.

For landlords

Clearly define what the deposit covers and what counts as chargeable damage.
Use an inspection form signed by both parties.
Provide an itemized accounting upon move-out.

12) Bottom line principles

Advance rent is rent. It usually covers the first month (or another specified month), not the remaining lease term.
Security deposit is security. It is not rent unless the contract expressly allows it to be treated as such.
Leaving early doesn’t automatically erase obligations. You may still owe the remaining term or a stipulated pre-termination amount, depending on the contract and the presence/absence of legal justification.
Deposit return depends on contract + proof of deductions. The lessor should account for deductions in good faith and with documentation.