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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Under the Investors’ Lease Act, it is the policy of the State to encourage foreign investments consistent with the constitutional mandate to conserve and develop our own patrimony. The state hereby adopts a flexible and dynamic policy on the granting of long-term lease on private lands to foreign investors for the establishment of industrial estates, factories, assembly or processing plants, agro-industrial enterprises, land development for industrial or commercial use, tourism, agriculture, agro-forestry, ecological conservation and other similar priority productive endeavors.
Coverage
Any foreign investor in the Philippines shall be allowed to lease private lands in accordance with the laws of the Republic of the Philippines subject to the following conditions:
- The aggregate period of the lease contract shall not exceed ninety-nine (99) years: Provided, That upon the recommendation of the Fiscal Incentives Review Board (FIRB) or other relevant government agencies, the President of the Philippines may impose a shorter lease period for investors engaged in vital services or industries considered as critical infrastructure, in the interest of national security or pursuant to government-identified priorities for national development;
- The leased area shall be used solely for the purpose of the approved and registered investment upon the mutual agreement of the parties;
- The leased premises shall compromise such area as may be reasonably be required for the purpose of the approved and registered investment upon the mutual agreement of the parties;
- The leased premises shall compromise such area as may be reasonably be required for the purpose of the approved and registered investment subject however to the Comprehensive Agrarian Reform Law and the Local Government Code;
- The foreign investor must have an approved and registered investment under Republic Act No. 7042, otherwise known as the “Foreign Investments Act of 1991,” as amended; Republic Act of 11534, otherwise known as the “Corporate Recovery and Tax Incentives for Enterprises Act” or “CREATE,” as amended by Republic Act No. 12066, otherwise known as “CREATE MORE” Act; or under applicable laws, or has complied with the investment requirements prescribed by the appropriate Investment Promotion Agency (IPA) pursuant to existing laws;
- The lease contract shall be registered with the Registry of Deeds of the province or city where the leased area is located and annotated on the certificate of title covering the leased area; and
- The Register of Deeds shall register the lease contract if all of the following conditions exist:
- The investor presents proof of an approved and registered investment;
- The date of commencement and maximum duration of the lease are certain;
- The technical description of the property acts for the commencement of its investment project;
- The lessee has performed preparatory acts for the commencement of its investment of its investment project; and
- There is a provision in the lease contract providing for its termination in case of change in the purpose or project for which the lease was intended, or in case of failure to commence the investment project within a reasonable period from the signing of the lease contract.
The leasehold right acquired under the long-term lease contracts entered into pursuant to this Act may be sold, transferred, assigned, or may be serve as security for a loan: Provided, That when a buyer, transferee, assignee, or creditor is a foreigner or foreign-owned enterprise, the conditions and limitations in respect to the use of the leased property as provided under this Act shall continue to apply.
Operative Act of Registration
The registration of the long-term lease contract shall be the operative act that renders the lease binding against third persons.
A registered lease contract shall not be subject to collateral attack. It cannot be altered, modified, or cancelled, except in a direct proceeding in accordance with law.
Limitations
- Foreign individuals, corporations, associations, or partnerships not otherwise investing in the Philippines as defined herein shall continue to be covered by Presidential Decree No. 471 and other existing laws on lease of lands to foreigners;
- Withdrawal of the approved and registered investment in the Philippines within the period of the lease contract entered into under this Act, or use of the leased area for the purpose other than that authorized, shall warrant the ipso facto termination of the lease contract without prejudice to the right of the lessor to be compensated for the damages the lessor may have suffered thereby;
- Any lease contract under this Act which is renewable at the option of the lessee subject to the same terms and conditions of the original contract shall be interpreted to mean as renewable upon the mutual agreement of the parties;
- In addition to the conditions for the renewal of a lease contract, the foreign lessee shall show that it has made social and economic contributions to the country; and
- In the case of tourism projects, lease of private lands by qualified foreign investors shall be limited to projects with an investment of not less than Five Million US dollars (USD 5,000,000.00), seventy percent (70%) of which shall be infused in said project within three (3) years from the signing of the lease contract.
Sublease
Unless there is an express publication in the lease contract, the lessee may subject the property with the consent of the lessor.
Registration of Sublease Contracts
Sublease contracts shall be registered with the Registry of Deeds and annotated on the Certificate of Title to the land.
Termination of Lease Contract
In case of failure to commence investment project within three (3) years from the signing of the lease contract, the FIRB, Board of Investments (BOI), or the relevant IPA, as applicable, shall order the lessee to explain the delay and if merited, require such lessee to commence the project within a reasonable period. Failure to comply with the order and to initiate the project within the period provided may, after due notice and hearing, cause the revocation of all entitlements granted under this Act.
Penal Provision
Any contract made or executed in violation of any of the following prohibited acts shall be null and void ab initio and both contracting parties shall be punished by a fine of not less than One Million Pesos (PhP1,000,000.00) but not more than Ten Million Pesos (PhP10,000,000.00) or imprisonment of six (6) months to six (6) years, at the discretion of the court:
- Any provision in the lease contract stipulating a lease period in excess of that provided under this Act;
- Use of the leased premises for a purpose contrary to existing laws of the land, public order, public policy, morals, or good customs;
- Any agreement resulting in the lease of land in excess of the approved area: Provided, That, where the excess of the totality of the area leased is due to the acts of the lessee, the lessee shall be held solely liable therefor: Provided further, That, in the case of corporations, associations, or partnerships, the president, manager, director, trustee, or officers responsible for the violation hereof shall bear the criminal liability.
These penalties shall likewise apply to all sublease contracts.
Related Articles:
- What are Investment Contracts and how are they registered?
- THE REAL ESTATE INVESTMENT TRUST (REIT) ACT OF 2009
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
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