Validity of a Lease When the Lessor Who Granted a Special Power of Attorney Dies
(Philippine Legal Perspective)
1. Overview
In day-to-day practice, owners of Philippine real property often issue a Special Power of Attorney (SPA) appointing someone—usually a spouse, child, lawyer, or property manager—to negotiate and sign a lease in their name. The question that inevitably surfaces is: What happens to that lease if the principal (the owner/lessor) dies either before or after the SPA is exercised?
Answering it requires weaving together three bodies of law:
| Field | Key Civil Code Provisions | Related Rules / Statutes |
|---|---|---|
| Contracts | Arts. 1305 – 1318, 1311, 1317 | Statute of Frauds (Art. 1403 [2][e]) |
| Agency | Arts. 1868 – 1932, esp. 1919 – 1921, 1930 – 1931 | Rule 89, Rules of Court (estate leases) |
| Lease | Arts. 1642 – 1688 | Local Government Code tax rules |
Add to that a century’s worth of Supreme Court decisions[*] and one obtains the doctrine summarized below.
Key distinction:
When the lease contract was perfected relative to the principal’s death controls its fate.
2. Agency Basics and Extinguishment by Death
Nature of an SPA
An SPA is an “agency” under Art. 1868. The agent’s authority is strictly what the instrument confers. Because leases dispose of real rights over immovable property, the SPA must be in writing and notarized (Art. 1874).Ordinary rule—agency ends with death
Art. 1919(3) is categorical: death of the principal extinguishes the agency. From the moment of death, the agent’s authority generally evaporates.Statutory exceptions
- Agency coupled with an interest / common interest (Art. 1930).
The SPA survives if (a) the agent already holds an independent, present material interest in the property, and (b) the lease is granted to protect that interest. Merely expecting commissions or rent-sharing is not enough. - Agency for a third person who accepted the stipulation (also Art. 1930).
The third person (e.g., a lessee who already accepted the offer) must have relied on the agency before the principal’s death.
- Agency coupled with an interest / common interest (Art. 1930).
Good-faith protection (“ostensible agency”)
Acts of an agent who, without knowing of the death, contracts with a third person who is likewise in good faith bind the estate under Art. 1921. The burden of proving bad faith rests on the heirs.
3. Scenario A – Lease Perfected Before the Lessor Dies
| Question | Answer |
|---|---|
| Is the lease valid? | Yes. The SPA was alive when consent was given; under Art. 1311, the contract takes effect not only between the parties but also their heirs. |
| May the heirs revoke it? | Not unilaterally. They step into the lessor’s shoes and must respect the agreed term, subject only to ordinary grounds for termination (e.g., breach, substantial damage). |
| Can the lessee be evicted to sell the property? | Only after the lease expires, unless legal causes for eviction under Arts. 1654 & 1673 exist or the lessee voluntarily surrenders possession. |
| Who collects rent? | The heirs or the judicial/extrajudicial estate administrator. Payment to the original agent after learning of the death does not discharge the lessee (Art. 1919 in relation to Art. 1241). |
Practical tip for lessees: once notified of the lessor’s death, demand proof of heirship or letters of administration before paying rent.
4. Scenario B – Lease Signed After the Lessor Dies
| Question | Answer |
|---|---|
| Was the agent empowered? | No. The agency has already been extinguished, absent the Art. 1930 exceptions. |
| Effect on the lease? | The contract is unenforceable under Art. 1317; it produces no effect unless ratified expressly or impliedly by all heirs. |
| Does good faith cure the defect? | Good faith gives the lessee a right to demand ratification and, failing that, reimbursement of improvements/expenses, but it does not automatically validate the lease. |
| Remedies for heirs | They may (a) ratify the lease, (b) negotiate new terms, or (c) refuse ratification and eject the lessee. |
| Estate-administration overlay | If the property is part of a judicial estate, Rule 89 § 7, Rules of Court forbids the administrator from leasing for >1 year without probate-court approval—any longer lease is void unless authorized. |
5. Special Situations
Conjugal or community property
If only one spouse gave the SPA and dies, the survivor’s rights depend on whether the property is absolute community or conjugal partnership. Consent of both spouses—or court authorization—is normally required for a lease exceeding one year (Family Code Art. 124).Corporate lessors
Death of a controlling shareholder does not extinguish the corporation’s SPA; a corporation has juridical personality separate from its members (Corp. Code, now R.A. 11232).Registration under the Land Registration Act
Annotating the lease or the SPA on the title gives constructive notice to heirs and third persons, reducing disputes over knowledge and good faith.Improvements introduced by the lessee
If the lease is later voided, Arts. 448–456 (rules on builders in good faith) and Art. 1678 (lessor’s option to appropriate useful improvements) govern reimbursement.
6. Doctrinal Case Law (Selected)**
| Case | G.R. No. | Date | Doctrine |
|---|---|---|---|
| Ramos v. E. G. Sassoon & Co. | L-10615 | 10 Oct 1918 | Sale by agent after principal’s death is void unless ratified—applied by later lease cases. |
| Jayme v. CFI of Capiz | L-26093 | 27 Apr 1972 | Death of principal terminates agency; lessee who built improvements may claim reimbursement but cannot insist on the lease. |
| Perez v. Court of Appeals | 112877 | 17 Jul 1996 | Art. 1317 controls acts of agents without authority; ratification relates back, validating the contract. |
| Villanueva v. Ablola | 196346 | 20 Jan 2016 | Reiterated need for clear evidence of an agency “coupled with an interest” to survive death. |
[*] Philippine Reports dating as far back as the Spanish Code of Commerce era reach the same conclusion.
7. Tax and Compliance Notes
| Item | During Principal’s Life | After Principal’s Death |
|---|---|---|
| Rental income tax | Creditable to lessor; 5% CWT withheld by lessee if corporation. | Income belongs to the estate (a separate taxable entity) until distribution. |
| Estate tax | — | Fair-market value of the leased property (not the rental stream) included in gross estate (NIRC §85). |
| Local taxes | Real-property tax remains a lien on the property regardless of death. | Same, but notices go to the estate administrator or heirs. |
8. Practical Checklist
For lessees
- Inspect the SPA—verify notarization, scope, and date.
- Confirm that the principal is alive; if not, request heir/administrator ratification.
- Register the lease or annotate it on the Torrens title where feasible.
For heirs / administrators
- Locate all outstanding SPAs and leases.
- Decide swiftly whether to ratify, renegotiate, or terminate any post-mortem contracts.
- If the estate is under probate, secure court approval for leases >1 year.
For agents
- Keep the principal (and eventually the heirs) informed of all negotiations.
- Cease acting once you learn of the death unless the SPA clearly falls under Art. 1930.
- Turn over rentals and documents to the heirs or estate representative.
9. Conclusion
- Lease perfected while the lessor was alive: generally binding on the heirs and the estate until its agreed expiry, subject to ordinary causes for termination.
- Lease executed only after death: normally unenforceable because the SPA died with the principal; it ripens into a valid lease only upon ratification.
- Exceptions are narrow—chiefly an agency coupled with an existing, independent interest.
In short, verify the timing, the text of the SPA, and the existence (or not) of ratification. Rights and liabilities flow from those facts.
This article is for information only and not a substitute for formal legal advice. Where large sums or valuable property are involved, consult Philippine counsel experienced in property and estate matters.