Nine Tenths of the Law by Amanda Carpo

One sided lease agreements in the Philippines are the rule of thumb and don’t imagine for a second that they are in favor of the lessee. Maybe it is because the lessors are paying the legal fees. Foreigners are often shocked by the commercial and legal terms and conditions used in lease contracts in the Philippines.  They normally require several months post dated checks, sizable security deposits and advanced rentals, contain forfeiture clauses, power of attorney clauses to auction property, padlock premises and other “common commercial practices” which are either obnoxious in other countries and perhaps even downright illegal.

Can you blame the lessor who is stuck with unpaid bills whose premises are trashed at the end of the lease period? Are they just responding to their environments?  The mutual distrust in local lease contracts is reflective of the lack of sophistication of commercial arrangements in the Philippines and the lack of faith in the judicial system.  When your controversies cannot be resolved easily in court or by some arbitrary body, this forces you to lay down the law yourself. It also means that the legal structure and by this I mean-the laws-are not in place to protect both lessor and lessee.

Are the lawyers who draft the contracts to blame? Perhaps. Business is business but at the same time commercial contracts should be entered into in good faith. As officers of the law, lawyers should counsel their clients to be fair and reasonable lest they start a vicious cycle of abusive contracts.

It is extremely difficult to advise foreigners who are lessees to enter into local lease contracts. In the first place, they are forced to lease because of the general prohibition on land ownership. Second, they are used to terms that make business sense. Third, the law in place-the Civil Code- while it contains basic terms and conditions fails to recognize modern commercial practices. Finally, it is hard to find a good lessor. In my view, it’s almost like advising on marriage. Good luck with that.

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