Effective since August 30, 1950, maintenance and repair negotiations in the Philippine commercial real estate market are defined by the immense flexibility of the Civil Code of the Philippines (Republic Act No. 386). 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 assigns basic responsibilities:

• Lessor (Landlord): Under Article 1654(2), the lessor is obliged to make all necessary repairs on the leased property during the lease in order to keep it suitable for the use to which it has been devoted, unless there is a stipulation to the contrary.
• Lessee (Tenant): Under Article 1657(2), the lessee is obliged to use the thing leased as a diligent father of a family, devoting it to the use stipulated in the contract.

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: Under Article 1678 of the Civil Code, if the lessee makes useful improvements in good faith which are suitable for the intended use without altering the property's form or substance, the lessor must pay the lessee one-half of the value of the improvements at the time the lease terminates. Should the lessor refuse to reimburse this amount, the lessee has the right to remove the improvements, even if the principal property suffers damage. However, modern commercial leases often contractually stipulate that all permanent improvements become the property of the landlord without 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.

4. Jurisdiction and Dispute Resolution

Disputes arising from maintenance obligations or fit-out defaults are civil matters. Under Republic Act No. 11576, jurisdiction is determined as follows:

• Metropolitan Trial Courts (MeTC) and Municipal Trial Courts (MTC): Exercise exclusive original jurisdiction in civil actions where the amount of the demand does not exceed Two million pesos (P2,000,000.00), exclusive of interest, damages, and costs.
• Regional Trial Courts (RTC): Exercise exclusive original jurisdiction in civil actions involving title to, or possession of, real property where the assessed value exceeds Four hundred thousand pesos (P400,000.00).

See our Commercial Security DepositsPreview unavailable guide to review how funds are withheld when tenants fail to properly maintain or restore their units.

See our Commercial Required DisclosuresPreview unavailable 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.

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