10 Things You DON’T Know about Rent Control Law in the Philippines
Did you know that there is a law controlling rent prices of most “Houses for Rent” in the Philippines and that the monthly rent cannot be increased by the landlord arbitrarily?
Housing rentals are covered by the Philippines’ Rent Control Act of 2009, a law that has been in effect since 2009 intended to protect millions of Filipino renters across the country.
According to data from the Philippine Statistics Authority (PSA), there are at least 1.5 million renters nationwide, and 97% of these renters are renting units with rates costing P10,000 per month and below. The Rent Control Law, therefore, provides a much needed relief to millions of Filipinos still without their own homes and left with no choice but to rent property.
The Housing and Urban Development Coordinating Council (HUDCC) is the government agency in charge of overseeing the implementation of the Philippines’ Rent Control Law or the Republic Act (RA) 9653 or “An Act Establishing Reforms in the Regulation of Rent of Certain Residential Units, Providing the Mechanisms Therefore and For Other Purposes”.
RA 9653 was approved in 2009 and expired on December 31, 2013. Since then, the HUDCC has been extending the provisions of the Act — and its latest extension is from January 1, 2018 until December 31, 2020. This means the applicable rules and regulations of the Rent Control Law — its most salient points explained below — are valid until December 31, 2020.
Here are ten (10) important items from the Rent Control Act which you probably are not aware of but, regardless if you are a renter or a landlord, you ought to know.
1. Only houses with rent P10,000 and below are covered by law
The Rent Control Law or RA 9653 covers residential units in these locations charging the following rental amounts:
- (a) in Metro Manila with monthly rent between one peso (P1.00) and ten thousand pesos (P10,000) per month; and
- (b) in other highly urbanized cities in the country, with monthly rent between one peso (P1.00) and five thousand pesos (P5,000).
This simply means the Rent Control Law applies only to houses for rent in Metro Manila charging rent of up to P10,000 per month and houses for rent in other cities, outside Metro Manila, charging rent of up to P5,000 per month.
Rent here refers to housing rent alone and does not include water, electricity, utility, or other charges that may be charged to the renter. (See related post: Taxes and Fees when Buying Property in the Philippines)
The covered units do not refer to “house and lots” solely. Specifically, these units as defined in the law include:
- 1. Apartments;
- 2. Houses and/or land on which another’s dwelling is located and used for residential purposes; and
- 3. Buildings or parts thereof, which are being used solely as dwelling units, boarding houses, dormitories, rooms, and bed spaces.
Condo units fall under number 3 above, which means they are covered by the Rent Control Law as long as the monthly rent is P10,000 and below.
2. Units with monthly rent above P10,000 are exempted
Housing units that charge rental rates beyond P10,000 per month are not covered by the Rent Control Act.
The law, in effect, exempts these units from coverage, which means whatever amount of rent and escalation rates, if any, will depend on the agreement between the landlord and tenant. The owner may charge any amount he or she wishes as long as the prospective tenant will accept it. The parties are also free to negotiate and agree on rate increases and frequency of such increase since there is no law governing units with monthly rent above P10,000.
3. Rent-to-own units, commercial spaces, motels, and hotels are not covered
Rented units which are used as motels, motel rooms, hotels, and hotel rooms are not covered by RA 9653.
Commercial spaces, including those used for home industries, retail stores, or other business purposes, if the owner and his or her family actually live therein and use it principally for dwelling purposes, are also not covered.
Units under a rent-to-own scheme also do not fall under the Rent Control Act because they are governed by separate contracts. Typically in this contract, the landlord may engage the tenant in a rent-to-own agreement that will allow the transfer of ownership of the rented unit to the tenant at a later date. As such, this is a separate, binding agreement between the lessor and lessee and, as such, is exempted from the Rent Control Act.
4. Illegal to charge beyond “1 Month Advance, 2 Months Deposit”
The law is clear regarding the imposition of the “1 Month Advance, 2 Months Deposit” rule. Owners of residential units cannot demand more than that; anything beyond it is considered illegal.
In addition, the law requires landlords to deposit said “2 Months Deposit” in a bank under the lessor’s name. Interestingly, all interest that accumulated and accrued on the deposit shall be returned to the tenant at the expiration of the rental contract, according the law. This is surely noteworthy, but we’re sure very, very few unit owners currently abide by this rule.
The deposit and accrued interest may be used, as allowed by law, to pay the remaining obligations of the lessee, including unpaid bills on water, electricity, telephone, and other utility bills, or for the repair of damages and replacement of broken furniture, accessories, or components in the rented unit.
5. Maximum 2% price increase for Houses with Rent below P5,000
Residential units charging monthly rent of up to P4,999.00 cannot increase the rental price by more than two percent (2%) per year, as prescribed by the Rent Control Act.
From January to December 2018, Spiderman rented the unit of Lady Vermin with monthly rent of P2,500. On January 2019, Lady Vermin is increasing the rate to P2,550 per month. Is this allowed?
Answer: Yes. The rent may be increased by a maximum of 2%, that is, a maximum of P50 (computed as P2,500 x 2%) since the rent is less than P5,000. Therefore, by January 2019, the new monthly rent of P2,550 that will be charged to Spiderman is allowed by law.
6. Maximum 7% price increase for Houses with Rent from P5,000 to P8,999
Housing units charging monthly rent of P5,000 to P8,999, meanwhile, are not allowed to increase rates by more than seven percent (7%) per year, if the unit is occupied by the same tenant.
A condo unit in BGC is charging P8,000 monthly rent. By how much can the rent of this condo be increased next year? (See also: Tips when Buying Condo Units in the Philippines)
Answer: P560.00, because rent can only be increased by a maximum of 7%. (P8,000 x 7% is P560.00). Thus, for next year, the condo owner can raise the rental rate charged to the tenant up to P8,560.00 per month.
Pepper Potts was paying rent of P8,000 per month to landlord Thanos before deciding to leave the unit. Iron Man saw the vacancy and was interested to move in, but Thanos told him the monthly rent is now P9,000 — an increase of 12.5% from the P8,000 rent paid by the previous tenant, Pepper Potts. Is this allowed?
Answer: Yes, landlords are allowed to increase the rental rate, beyond the set percentage limit, to be charged to a new renter. Even if it’s beyond the 7% maximum rate prescribed by RA 9653, this is allowed since the landlord is not prohibited from charging a new rental rate to a new renter.
The only exception to this rule is when the housing unit is offered for rent to students. (See No. 8 below)
7. Maximum 11% Price Increase for Houses with Rent from P9,000 to P10,000
According to the provisions of the Rent Control Act, houses for rent charging monthly rent of P9,000 up to P10,000 are not allowed to increase rates by more than eleven percent (11%) per year, if the unit is occupied by the same tenant.
The monthly rent for a condo unit in Makati is P9,000. What is the allowed rental increase for next year if the unit will be rented by the same tenant?
Answer: P990.00, because rent may be increased by a maximum of 11% (that’s P9,000 x 11% = P990.00). This means the new rental rate for next year can be increased to a maximum of P9,990 per month (that’s P9,000 original rent + P990 increase).
Again, take note that this limit applies to units occupied by the same tenants. A new rate, which could be higher than an 11% increase, may be charged to a brand-new renter as this is allowed by the Rent Control Law.
8. Boarding house or bedspace for students can increase rent only once a year
Boarding houses, dormitories, rooms, and bedspaces offered for rent to students can only increase rents once a year, even if a new boarder occupies the unit within the same year.
Gamora offers bedspace to students at P1,000 per month. When the previous student-tenant left in April, she increased the rate to P1,500 per month. One month later, she found another bedspacer, Rocket Raccoon and she charged him P1,500 per month. After only 3 months, Rocket Raccoon left. His friend Groot was interested to bedspace, but according to Gamora, the rate has increased to P2,000 per month. Is this allowed?
Answer: No. The law states that no further increase on the same year is allowed for units offered for rent to students. Since the rate was already increased in May when Rocket Raccoon moved in, no additional increases will be allowed in the same year — even if if there will be a new tenant.
Take note that this strict rule only applies to units offered for rent to students.
9. Valid grounds for evicting tenants
Aside from tenants, landlords and unit owners are also protected by certain provisions of the Rent Control Act. What are cases wherein the landlord is legally allowed to terminate the lease contract and to eject the tenant?
Here are valid grounds for ejecting renters from the property:
a. The tenant sub-leases the unit (that is, offers the unit for rent to other renters) without the explicit written permission or consent of the owner;
b. The renter has three (3) months worth of unpaid rent;
c. After the expiration of the rent contract, the owner has a legitimate need to repossess the property for his/her own use or that of his/her family as a residential unit, provided that the renter was notified three months in advance;
d. The unit owner needs to make necessary repairs on the unit, which is the subject of an existing order of condemnation by appropriate authorities, in order to repair the property and to make it safe and habitable; and
e. The lease contract has expired.
Take note that the Rent Control Act expressly disallows the eviction of the renter merely on the basis that the property has been sold or mortgaged to a third party, regardless of whether the lease or mortgage is registered or not.
10. Penalty for violators of Rent Control Act
The Philippine Rent Control Law is definitely commendable, but we believe its effectiveness may be hampered because of three (3) things:
First, tenants must be made aware that such a law exists so that tenants will know their obligations and rights. More information and public awareness campaigns should be conducted by government agencies in order to inform Filipinos about this law.
Second, tenants who may have complaints about their landlords must know the proper avenue where they can air their grievance. Where exactly can tenants go if they have complaints or issues with their landlords about unauthorized rent increases? Honestly, we ourselves don’t know.
Lastly, complaints must be dealt with swiftly and properly by the appropriate government agency so that justice can be served for both landlord and tenant.
According to the law, violators of the Rent Control Act face a fine of not less than P25,000 but not more than P50,000, or imprisonment of one (1) month and one (1) day up to six (6) months, or both. These are decent penalties butt we hope the law can have more teeth in running after unscrupulous landlords who exploit their tenants.
An effective implementation of the law can definitely benefit millions of Filipino families who currently have no choice but to rent a house or condo unit. Here at PinoyMoneyTalk, we simply hope and pray that the government can provide more avenues to educate Filipinos about their rights and obligations, both as landlords and as tenants.
You must read these other awesome real estate posts!
- 7 Useful Tips when Buying a Condo Unit
- Taxes and Fees when Buying Property in the Philippines
- List of PAG-IBIG Housing Loan Requirements
(UPDATE: January 2018) Prior to December 31, 2017, the implementing guidelines issued by HUDCC impose a limit on residential units charging monthly rent of up to P3,999.00 of a maximum of 4% per year, if the unit is occupied by the same tenant.
At the same time, housing units charging monthly rental rates between P4,000 and P10,000.00 before December 31, 2017 were not allowed to increase rates by more than 7% per year, if the unit is occupied by the same tenant. These rates have now been changed as explained in the latest and updated provisions above.
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