Maintenance and repair negotiations in the Philippine commercial real estate market are defined by the immense flexibility of the Civil Code. Unlike rigid residential codes that predominantly place habitability burdens on the landlord, commercial owners frequently transfer significant upkeep responsibilities to the corporate tenant through the lease contract.

This guide explores standard practices for commercial repairs and fit-outs in the Philippines.

1. Civil Code Baseline

Absent any specific agreements in the lease contract, the Civil Code (Article 1654) assigns basic responsibilities:

• Lessor (Landlord): Must deliver the premises in a condition fit for the intended commercial use and undertake all necessary repairs (structural or extraordinary fixes required to maintain the base building's integrity, such as foundation or major roofing issues).
• Lessee (Tenant): Must handle ordinary repairs, maintaining the space diligently against daily wear and tear.

However, modern Philippine commercial leases routinely override this baseline to place heavily weighted obligations onto the tenant.

2. Standard Industry Practices

The "freedom to stipulate" permits landlords to draft contracts limiting their repair obligations. In premium commercial towers or strip malls, the typical divisions function as follows:

Landlord Maintenance

• Base Building Construction: Exterior walls, primary structural beams, concrete slabs, and base roofing elements.
• Common Areas (CUSA): Lobbies, public restrooms, elevators, parking structures, and exterior landscaping. To fund this, the landlord collects a Common Use Service Area (CUSA) fee from all tenants based on their gross leasable area.

Tenant Maintenance

• Interior Fixtures: The tenant bears 100% responsibility for the interior space, covering electrical wiring within the unit, internal plumbing fixtures, non-structural walls, and flooring.

• HVAC Systems: In many stand-alone buildings or specific mall units, the tenant is entirely responsible for purchasing, installing, maintaining, and replacing air conditioning (HVAC) systems and kitchen exhaust ducts.

3. Fit-Outs and Custom Alterations

When a commercial tenant signs a lease in the Philippines, units are frequently handed over in a "bare shell" or "warm shell" condition. The tenant is entirely responsible for the capital expense of the "fit-out"—building the space into a functional restaurant, clinic, or retail store.

• Landlord Approval: The lease must stipulate that all architectural designs, electrical loads, and construction timelines must receive the landlord's written approval before work commences.
• Ownership of Improvements: Unless otherwise agreed, the Civil Code grants landlords the option to reimburse the tenant a portion of the value for useful improvements. However, modern commercial leases universally stipulate that all permanent improvements (e.g., built-in cabinetry, reinforced ceilings) become the property of the landlord at the end of the term without any right to reimbursement.

Conversely, the landlord may require the tenant to invoke a "make good" clause, demanding the tenant demolish all improvements and restore the unit back to its original bare shell condition at their own expense before the security deposit is refunded.

See our Commercial Security DepositsIl-preview mhux disponibbli guide to review how funds are withheld when tenants fail to properly maintain or restore their units.

See our Commercial Required DisclosuresIl-preview mhux disponibbli guide for insights into obtaining Local Government Unit clearances during the fit-out phase.

Stay Compliant with Landager

In a commercial environment, managing maintenance requests and CUSA budgets is incredibly demanding. Landager enables property managers to track tenant repair requests, centralize documentation regarding who carries the financial burden per the lease, and transparently invoice CUSA fees alongside monthly rent.

Back to Philippines Landlord-Tenant Laws OverviewIl-preview mhux disponibbli.