| SUBJECT: The Concept of ‘Contract of Lease’ and the Rule on Sublease |
I. Introduction
This memorandum provides an exhaustive analysis of the contract of lease under the Philippine Civil Code, with a specific focus on the rules governing sublease. The contract of lease, encompassing both lease of things and lease of work or service, is a consensual, bilateral, onerous, and commutative nominate contract that creates reciprocal rights and obligations for the parties. A critical incident of this contract is the lessee’s right to enjoy the property, which may, under specific conditions, include the right to sublease. This research will delineate the essential elements, rights, and obligations under a contract of lease, and exhaustively examine the statutory and jurisprudential parameters of sublease, including its prohibitions, effects, and remedies available to the parties.
II. Definition and Essential Elements of a Contract of Lease
A contract of lease is defined under Article 1643 of the Civil Code. For a lease of things, it is a contract where one party binds himself to give another the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite. For a lease of work or service, one party binds himself to execute a piece of work or to render to another some service for a price certain. Its essential elements (essentialia) are: (1) consent of the contracting parties; (2) determinate object (the thing to be leased or the service to be rendered); and (3) a price certain in money or its equivalent. The contract is perfected by mere consent and is governed by the principles of obligations and contracts.
III. Rights and Obligations of the Lessor
The primary obligations of the lessor are enumerated from Article 1654 to Article 1657 of the Civil Code. These include: (a) To deliver the thing leased to the lessee; (b) To make all necessary repairs during the lease to keep the thing suitable for its intended use, except those which are the responsibility of the lessee; (c) To maintain the lessee in the peaceful and adequate enjoyment of the lease for its entire duration. This is the warranty against eviction and disturbance. The lessor’s rights principally consist of the right to collect the agreed rent and to have the property returned at the termination of the lease, barring any tacit renewal.
IV. Rights and Obligations of the Lessee
The primary obligations of the lessee are outlined from Article 1658 to Article 1677. These include: (1) To pay the price of the lease according to the terms agreed upon; (2) To use the thing leased as a diligent good father of a family, adhering to the purpose stipulated or, absent stipulation, according to the nature of the thing; (3) To return the thing at the termination of the lease, save for legal deposit in certain cases. The lessee’s correlative rights include the right to the useful and legal possession of the property, the right to have repairs made by the lessor, and the right to be maintained in peaceful enjoyment.
V. The Concept and General Rule on Sublease
Sublease is a derivative lease agreement where the original lessee (the sublessor) grants to a third party (the sublessee) the right to use and enjoy all or part of the leased property, for all or part of the remaining period of the original lease, in consideration of a price. The general rule is found in Article 1649 of the Civil Code: “The lessee cannot sublease the thing leased, or assign his rights without the consent of the lessor, unless there is a stipulation to the contrary.” Therefore, the lessee’s right to sublease is not inherent; it is exceptional and requires either the express or implied consent of the lessor. A sublease creates a new and independent relationship between the sublessor and sublessee, but it does not extinguish or create a direct relationship between the original lessor and the sublessee.
VI. Exceptions and Conditions for a Valid Sublease
A valid sublease may be constituted under the following conditions, which are exceptions to the general prohibition:
It is crucial to note that even with consent, the sublease cannot impose upon the sublessee conditions more onerous than those in the original lease, nor can it extend beyond the term of the original lease.
VII. Comparative Analysis: Original Lease vs. Sublease
| Aspect | Original Contract of Lease | Contract of Sublease |
|---|---|---|
| Governing Provision | Primarily Articles 1643-1677, Civil Code. | Primarily Article 1649, Civil Code, in relation to lease provisions. |
| Parties | Lessor (owner/administrator) and Lessee. | Sublessor (original lessee) and Sublessee. |
| Basis of Right | Rooted in the lessor’s ownership or right to lease. | Derivative; rooted in the lessee’s right of enjoyment from the original lease. |
| Requirement for Validity | Consent, object, and price. | All elements of a lease, plus the lessor’s consent (unless stipulated otherwise). |
| Privity of Contract | Direct privity between lessor and lessee. | Direct privity between sublessor and sublessee. No direct privity between original lessor and sublessee. |
| Effect of Termination of Original Lease | Extinguishes the lease obligations. | Automatically terminates the sublease, as the sublessor’s right to enjoy ceases. |
| Action for Ejectment/Unlawful Detainer | Lessor files against the lessee. | Lessor files against the lessee/sublessor. The sublessee may be joined as a co-defendant. The sublessor may file against the sublessee. |
| Liability for Rent | Lessee is directly liable to lessor. | Sublessee is liable to sublessor. The original lessee remains solidarily liable to the lessor for the rent and damages. |
| Repairs & Maintenance | Lessor’s obligation, per Article 1654. | Sublessor’s obligation to the sublessee, but the sublessor may still demand repairs from the original lessor. |
VIII. Effects of a Prohibited or Unauthorized Sublease
An unauthorized sublease (one executed without the lessor’s consent when required) produces specific legal consequences:
IX. Remedies of the Parties
Lessor’s Remedies: (1) File an action for unlawful detainer or judicial ejectment under Article 1673; (2) Sue for damages arising from the breach of contract; (3) If rent is unpaid, avail of the remedy of distraint of personal property under the Local Government Code for real property tax purposes, or sue for collection.
Lessee/Sublessor’s Remedies: Against a sublessee in breach, the sublessor may file an action for ejectment or collection of rent. Against the lessor, the lessee may demand repairs, sue for damages for disturbance of enjoyment, or seek a reduction of rent if the property’s usefulness is impaired.
Sublessee’s Remedies: The sublessee may enforce the sublease against the sublessor. If evicted by the lessor, the sublessee may recover damages from the sublessor for breach of the warranty of peaceful enjoyment.
X. Conclusion
The contract of lease establishes a comprehensive framework of reciprocal rights and duties centered on the temporary enjoyment of a thing or service. The rule on sublease is a protective measure for the lessor, emphasizing the intuitu personae (personal consideration) nature of the contract. The general prohibition under Article 1649 safeguards the lessor’s interest in the character and use of the lessee. Any valid sublease is contingent upon the lessor’s consent, either express or implied. An unauthorized sublease constitutes a culpable breach, providing the lessor a ground for ejectment and an action for damages, while still leaving the sublessee with recourse against the sublessor. Parties to a contract of lease must therefore clearly stipulate their intentions regarding sublease to avoid future conflict and litigation.
