SUBJECT: The Concept of ‘The Investor’s Lease Act’ (RA 7652) for Foreigners

I. Introduction

This memorandum provides an exhaustive analysis of Republic Act No. 7652, otherwise known as the Investor’s Lease Act. The law serves as a critical exception to the constitutional prohibition against foreign ownership of private lands in the Philippines. It specifically authorizes foreign investors to lease private lands for a period exceeding the standard term limit set by statute, thereby facilitating long-term capital investments. This memo will delineate the law’s scope, key provisions, procedural requirements, and its interplay with other relevant statutes.

II. Statement of the Issue

The primary issue is to determine the legal framework and conditions under which a foreign individual or a foreign-owned corporation may enter into a long-term lease agreement for private land in the Philippines pursuant to Republic Act No. 7652, and to identify the limitations and obligations imposed by said law.

III. Statement of the Law

The governing law is Republic Act No. 7652, enacted on May 26, 1993. Its operation is grounded in Section 2, Article XII of the 1987 Philippine Constitution, which allows the lease of private lands to foreigners for a period not exceeding fifty (50) years, renewable once for a period not exceeding twenty-five (25) years. RA 7652 amplifies this by permitting a longer lease term for qualified foreign investors. The law must be read in conjunction with the Foreign Investments Act of 1991 (RA 7042, as amended by RA 8179) and the general provisions on lease under the Civil Code of the Philippines.

IV. Background and Legislative Intent

The law was enacted to attract and promote productive foreign investments by providing investors with tenure security over land, a fundamental requirement for many large-scale business ventures. The legislative intent is clear: to bolster the Philippine economy by allowing foreign investors to lease land for periods commensurate with the amortization periods of their capital investments, which often exceed the standard lease terms. It recognizes that a longer, stable leasehold is a key incentive for foreign capital infusion in industrial, commercial, and tourism enterprises.

V. Scope and Coverage

The law applies to foreign investors and foreign-owned corporations duly registered with the Securities and Exchange Commission (SEC) or the Board of Investments (BOI), or other relevant government agencies. The leased land must be used exclusively for the purpose of the investment. The law covers leases of private lands only; it does not apply to public or agricultural lands, which are governed by other statutes like the Public Land Act and the Comprehensive Agrarian Reform Law.

VI. Key Provisions and Conditions

Qualified Foreign Investor: The lessee must be a foreign national or a corporation that is at least sixty percent (60%) owned by foreign nationals, making a foreign investment in a Philippine enterprise.

Minimum Investment: The foreign investor’s lease is contingent upon a minimum equity investment of US$200,000. This amount may be revised by the President of the Philippines upon recommendation of the National Economic and Development Authority (NEDA).

Lease Area Limitation: The area of land to be leased shall be reasonable and commensurate with the project or business activity as evaluated by the appropriate investment promotion agency (IPA).

Lease Term: The maximum lease period is fifty (50) years, renewable once for an additional period not exceeding twenty-five (25) years. This provides a potential total lease term of seventy-five (75) years.

Approval and Registration: The lease contract must be approved and registered with the appropriate IPA (e.g., BOI for BOI-registered projects, or the Philippine Economic Zone Authority (PEZA) for ecozone locators). Upon approval, the lease contract is registered with the Register of Deeds of the province or city where the land is located.

Prohibited Acts: The leased land cannot be used for any purpose other than that for which the investment was approved. Subleasing without IPA approval is prohibited.

VII. Comparative Analysis with Other Land Lease Frameworks

The following table compares the lease provisions under RA 7652 with other common frameworks available to foreigners.

Feature	Investor’s Lease Act (RA 7652)	Constitutional Lease (Art. XII, Sec. 7)	Condominium Act (RA 4726)	Lease of Public/Agricultural Land
Applicant	Registered foreign investor/corp. (min. 60% foreign equity)	Any foreign individual or corporation	Foreign individual or corporation (for unit only, not land)	Generally restricted; specific laws may apply (e.g., FIA for export enterprises)
Maximum Term	50 yrs, renewable once for 25 yrs (75 yrs total)	25 yrs, renewable for another 25 yrs (50 yrs total)	Perpetual ownership of unit; land is owned in common by all unit owners	Typically 25 yrs, renewable for 25 yrs; subject to specific laws
Governing Law	Republic Act No. 7652	1987 Constitution, Civil Code	Condominium Act, Civil Code	Public Land Act, Comprehensive Agrarian Reform Law
Primary Purpose	For business/industrial use of the investment	Any lawful private purpose	Residential, commercial, or industrial use of the condominium unit	As stipulated by the granting statute (e.g., agriculture, industry)
Approval Body	Relevant Investment Promotion Agency (BOI, PEZA, etc.)	None required for contract; registration with Register of Deeds	Register of Deeds for Condominium Certificate of Title	Department of Environment and Natural Resources (DENR) or other agency
Land Type	Private land	Private land	Private land subdivided into condominium units	Public domain or agricultural land

VIII. Procedural Requirements

Registration of Investment: The foreign investor must first register its business and investment with the appropriate IPA and meet the minimum equity requirement.

Execution of Contract: The parties execute a lease contract stipulating the terms, rental, and purpose, ensuring compliance with the maximum period and use restrictions.

IPA Approval: The contract is submitted to the relevant IPA for approval. The IPA evaluates if the lease area is reasonable for the project.

Registration with Register of Deeds: The approved contract is presented to the local Register of Deeds for registration and annotation on the Torrens Title of the land. This registration is essential for the contract’s effectivity against third parties.

Reporting: The lessee may be required to submit periodic reports to the IPA to ensure continued compliance with the law’s conditions.

IX. Legal Implications and Liabilities

Failure to comply with the conditions of RA 7652, such as using the land for an unauthorized purpose or falling below the minimum investment threshold, can result in the cancellation of the lease approval by the IPA. This may render the lease contract voidable. Furthermore, any violation may subject the foreign investor to penalties under the Foreign Investments Act and other applicable laws. The law also imposes criminal liability for any willful violation of its provisions. The rights of the lessee are generally defined by the Civil Code provisions on lease, subject to the special provisions of RA 7652.

X. Conclusion

Republic Act No. 7652 is a vital legal instrument designed to attract foreign direct investment by providing a stable, long-term leasehold right over private land. It operates as a carefully crafted exception to constitutional restrictions, balancing national interest with economic pragmatism. Its utility is contingent upon strict adherence to its conditions, particularly regarding the qualification of the investor, the minimum investment amount, and the approved use of the leased property. For any foreign investor considering a long-term business presence in the Philippines, compliance with the Investor’s Lease Act is a critical component of securing their real property interests.