In the Philippines, commercial leasing is primarily governed by the Civil Code of the Philippines (Republic Act No. 386), which took effect on August 30, 1950. Under this framework, the burden of due diligence falls heavily on both the landlord and the commercial tenant. While the Civil Code mandates landlords to act in "good faith" and disclose hidden physical defects, successful commercial tenancies rely primarily on clear operational transparency regarding building rules and government zoning.

This guide details the essential disclosures landlords should make prior to signing a commercial lease.

1. Statutory Disclosures: Hidden Defects

Under Article 1653 of the Civil Code, the provisions governing warranty against hidden defects in sales (Articles 1561 to 1566) are made applicable to lease contracts. A commercial landlord is liable for any "hidden defects" (redhibitory vices) that render the property unfit for the business's intended use, even if the landlord was unaware of them at the time the contract was signed.

Additionally, Article 1654(2) mandates that the lessor is obliged to make all necessary repairs on the property during the lease to keep it suitable for the intended use, unless there is a specific contractual stipulation to the contrary.

• Examples: A landlord must disclose chronic structural issues, recurrent flooding from faulty municipal drainage, or insufficient electrical load capacity that cannot support the tenant’s heavy machinery.
• Consequences: If a hidden defect surfaces that prevents the tenant from operating their business, the tenant may demand the rescission of the lease and seek damages. Under Batas Pambansa Blg. 129 (BP 129), as amended by Republic Act No. 7691, the jurisdiction for an action for rescission depends on the amount involved. If the amount of the demand, exclusive of interest and costs or the value of the property in controversy, exceeds Four Hundred Thousand Pesos (P400,000.00) outside Metro Manila, or One Million Pesos (P1,000,000.00) inside Metro Manila, the case falls under the exclusive original jurisdiction of the Regional Trial Court (RTC). Otherwise, if the amount is below these thresholds, the case falls under the jurisdiction of the Municipal Trial Court (MTC), Metropolitan Trial Court (MeTC), or Municipal Circuit Trial Court (MCTC).

2. Operational Disclosures

Commercial lease agreements should clearly disclose the operational rules of the building to prevent immediate disputes upon the tenant's move-in. Landlords should disclose:

• Zoning Restrictions: Ensuring the local government unit (LGU) permits the specific type of business in that zone. Under RA 7160 (Section 447/458), local legislative bodies (Sanggunian) have the power to enact zoning ordinances. Landlords must disclose if the property is not zoned for industrial use if a tenant plans manufacturing.
• Operating Hours: If the space is located within a larger mall or commercial complex, the lease must disclose mandatory operating hours, delivery curfews, and holiday closure rules.
• Exclusive Use Clauses: If the landlord has granted an exclusive right to another tenant (e.g., "No other coffee shops allowed in the building"), this must be disclosed and enforced.

• Signage Policies: Building restrictions on the size, lighting, and placement of exterior commercial signage.

3. Clearances & Permits Assistance

Running a business in the Philippines requires numerous permits from the Local Government Unit (LGU) and national agencies. While it is the tenant's responsibility to secure these permits, the landlord must disclose any issues with the building's own compliance that could halt the tenant's progress.

• Business Permits: While it is the tenant's responsibility to secure a Mayor's Business Permit (RA 7160, Section 444/455), the landlord must disclose any issues with the building's compliance that could halt the process.
• Occupancy Permit & Fire Safety Check: The landlord should disclose that the base building possesses current Occupancy Permits under PD 1096 and Fire Safety Inspection Certificates (FSIC) under RA 9514.
• Tax Declarations: Landlords often need to provide the tenant with copies of the latest Real Property Tax (RPT) receipts and the building's Tax Declaration. Additionally, a Barangay Clearance (RA 7160, Section 152(c)) is a prerequisite for most local business permits.

See our Commercial Lease RequirementsPreview unavailable guide on how to integrate these administrative responsibilities into the lease contract.

Stay Compliant with Landager

Tracking which commercial tenants have secured their necessary LGU permits, insurance policies, and signed building rule disclosures is administratively heavy. Landager provides landlords with a document vault to store tenant business permits digitally, ensuring full visibility over your building's collective compliance.

Back to Philippines Landlord-Tenant Laws OverviewPreview unavailable.