Investing in real estate is a good investment. This mantra doesn’t need to be expounded. Any Filipino tycoon almost always has part of his assets diversified into real estate investments to secure and grow it further. Aside from being a sound and secure investment, real estate investments are also known to be quite expensive and beyond the reach of a person with an average income. However, recent trends in real estate in the Philippines, particularly the rise of condominiums, are changing this.

Recently, there has been a rise in the construction of condominiums around the metro. Condominiums are fast becoming the top choice for commercial and residential spaces. This is mainly due to the fact that condominiums offer accessibility, convenience, and luxury for a much lower price than other more traditional forms of property ownership. Some might even say that nowadays, a good condo unit can be worth more than your standard house and lot. Because of its high demand, condominiums are fast becoming the investment of choice for people looking to make a real estate investment.

One way to monetize one’s investment in a condominium is by offering it up for lease. Current trends in the economy have led to a rise of an urban class with high purchasing power that needs to be in close proximity with urban centers. In effect, this paves the way for a growing condo rental market. This growing market inevitably also leads to a potential number of issues between renters and lessors. So before one rents out, or rents a condo, it is important to be familiar with some of the most common leasing issues as there are many misconceptions about condo living.

Rent is one of the main sources of issues and disagreements between renters and leasors. That is why it is one of the main things to consider before signing a lease contract. There are usually three main issues when it comes to rent: The first is the timeframe the renter is given to pay his/her rent, the second is the amount of advance deposit a lessor can ask from the renter, and third is the amount and timeframe by which a lessor can increase the rent.

When to Pay the Rent

Issues and disagreements usually come up when a renter is tardy in paying his rent. So when a renter is tardy, when is it the renter or the lessor’s fault? According to section 7 of RA. 9653 or the Rent Control Act of 2009,

Rent shall be paid in advance within the first five (5) days of every current month or the beginning of the lease agreement unless the contract of lease provides for a later date of payment.”

This means that according to the law, the renter is supposed to pay his rent in advance every month, before the 6th day. The clause “unless the contract of lease provides for a later date of payment” means that the renter and the lessor can arrange for a later day of payment if both parties agree on it in their lease contract.

Advance Deposit

The second most common issue in paying rent is the amount of deposit that a lessor can demand from his his/her renter. According to section 7 of RA. 9653,

The lessor cannot demand more than one (1) month advance rent. Neither can he/she demand more than two (2) months deposit which shall be kept in a bank under the lessor’s account name during the entire duration of the lease agreement. Any and all interest that shall accrue therein shall be returned to the lessee at the expiration of the lease contract. In the event however, that the lessee fails to settle rent, electric, telephone, water or such other utility bills or destroys any house components and accessories, the deposits and interests therein shall be forfeited in favor of the latter in the amount commensurate to the pecuniary damage done by the former."

When it comes to deposits, a lessor can ask for a maximum of two months deposit from the renter. This deposit will be used as a guarantee in case the renter is unable to settle utility bills such as electricity, water, or the monthly rent. According to the law, any more that two months deposit is not allowed. Also, by the end of the lease agreement, the lessor is supposed to return the deposit to the renter.

Rent Increase

The third most common issue in increasing rent. Renters often complain whenever a lessor decides to increase rent. So when is it alright for a lessor to increase rent? According to section 4 of RA. 9653,

For a period of one (1) year from its effectivity, no increase shall be imposed upon the rent of any residential unit covered by this Act: Provided, that after such period until December 31, 2013, the rent of any residential unit covered by this Act shall not be increased by more than seven (7%) annually as long as the unit is occupied by the same lessee: Provided, further, That when the residential unit becomes vacant, the lessor may set the initial rent for the next lessee: Provided, however, That in the case of boarding houses, dormitories, rooms and bedspaces offered for rent to students, no increase in rental more than once per year shall be allowed."

This means that as of today, rent can only be increased to a maximum of 7% per year. This means that if a renter is paying 12,000 per month to a lessor, the lessor cannot increase the rent the next month or the month after that. An increase can only be made a year after the lease contract has begun. And if the rent is 12,000 pesos, it means that the lessor can increase his rent by 7% only which in this case is 12,1440 pesos. However, after the property has become vacant, the lessor can set a new amount of rent to a new renter.

There are many other issues that can come up when it comes to renting or renting out a condo in the Philippines. That is why it is important for potential lessors to be well-informed on some of the issues in leasing arrangements. First time renters also need to be familiar with these issues and it would help to read up on renting tips and guides for first-time renters. And for those who are already renting condominiums, it would be wise to review your renting rights before you renew your condo lease.