Unlike residential rentals, which are heavily regulated by Republic Act No. 9653, otherwise known as the "Rent Control Act of 2009", commercial tenancies in the Philippines are primarily governed by the Civil Code of the Philippines (Republic Act No. 386), specifically Title VIII (Lease). Under Article 1306 of the Civil Code, parties are free to establish stipulations, clauses, terms, and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.

This guide explores the foundational rules surrounding commercial leases in the Philippines.

1. Freedom of Contract

Under Philippine Civil Law, commercial landlords and tenants are free to negotiate virtually all terms of the lease, provided they do not violate law, morals, public policy, or good customs.

There are no statutory caps on commercial rent increases, and no maximum limits on commercial security deposits or advance rent.

See our Commercial Lease RequirementsPreview unavailable guide for the essential clauses you must secure in writing.

2. Commercial Rent Increases

Because commercial properties are exempt from Republic Act No. 9653, otherwise known as the "Rent Control Act of 2009", rent escalation clauses are strictly a matter of contractual agreement. Landlords can impose any percentage of annual increase, provided the lessee agrees to the terms during the contract signing.

A standard commercial lease in the Philippines typically includes an escalation clause of 5% to 10% per annum, but this is entirely negotiable.

See our Commercial Rent IncreasesPreview unavailable guide for drafting enforceable escalation clauses.

3. Commercial Security Deposits

Without statutory boundaries, commercial security deposits are entirely dictated by the risk profile of the tenant and the landlord's demands. It is common for commercial landlords to demand:

• Security Deposit: 3 to 6 months' rent (sometimes more for high-risk build-outs).
• Advance Rent: 3 to 12 months' advance rent.

The conditions for refunding or forfeiting these deposits—such as covering unpaid common use service areas (CUSA) fees, damages, or unpaid rent—must be explicitly detailed in the lease contract.

See our Commercial Security DepositsPreview unavailable guide to understand withholding practices.

4. Maintenance and Build-Outs

The Civil Code requires the lessor to deliver the property in a state fit for its intended use. However, commercial contracts frequently shift the burden of maintaining the interior space entirely to the lessee.

• "As-Is, Where-Is": Many commercial spaces are rented bare (shell condition). The tenant is responsible for the build-out, subject to the landlord's approval of the architectural plans.
• Necessary Repairs: Under Article 1654(2) of the Civil Code, the lessor is obliged to make all necessary repairs to keep the property suitable for the use to which it has been devoted, unless there is a stipulation to the contrary. While many commercial contracts shift maintenance duties to the tenant, the default legal burden for necessary repairs rests with the landlord.

See our Commercial Maintenance ObligationsPreview unavailable guide for allocating repair duties.

5. Commercial Evictions

Commercial evictions follow the procedural framework of Rule 70 of the Rules of Civil Procedure. Pursuant to Batas Pambansa Blg. 129, as amended by Republic Act No. 11576, Metropolitan Trial Courts (MeTC), Municipal Trial Courts (MTC), and Municipal Circuit Trial Courts (MCTC) exercise exclusive original jurisdiction over cases of forcible entry and unlawful detainer, regardless of the amount of damages or unpaid rentals claimed. The Regional Trial Court (RTC) exercises appellate jurisdiction over these cases.

Regarding "self-help" measures, while Article 536 of the Civil Code generally prohibits the acquisition of possession through force or intimidation, the Supreme Court has upheld the validity of "re-entry" or "lock-out" clauses in commercial lease agreements (e.g., Viray v. Intermediate Appellate Court; Consing v. Jamandre). Such clauses allow the lessor to extrajudicially retake possession and padlock the premises upon a tenant's breach, provided the entry is peaceable and no force or intimidation is employed.

See our Commercial Eviction ProcessPreview unavailable guide for the steps to secure a judicial eviction.

Stay Compliant with Landager

Managing complex commercial portfolios with varying escalation clauses and massive deposits requires precision. Landager helps commercial landlords track diverse CUSA fees, automate escalating rent schedules based on lease terms, and securely log tenant communications to streamline property oversight in the Philippines.