Salient Features of the Investor’s Lease Act

Coverage

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Any foreign investor investing in the Philippines shall be allowed to lease private lands in accordance with the laws of the country subject to certain conditions.

Meaning of Investing in the Philippines

It shall mean making an equity investment in the Philippines through actual remittance of foreign exchange or transfer of assets, whether in the form of capital goods, patents, formulas, or other technological rights or processes, upon registration with the Securities and Exchange Commission.

Conditions of the Lease

(1) No lease contract shall be for a period exceeding fifty (50) years, renewable once for a period of not more than twenty- five (25) years;

(2) The leased area shall be used solely for the purpose of the investment upon the mutual agreement of the parties;

(3) The leased premises shall comprise such area as may reasonably be required for the purpose of the investment subject howeverto the Comprehensive Agrarian Reform Law and the Local Government Code.

Limitations of the Lease

(1) Withdrawal of the approved investment in the Philippines within the period of the lease agreement 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 agreement without prejudice to the right of the lessor to be compensated for the damages he may have suffered thereby.

(2) Any lease agreement 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.

(3) In addition to the conditions for the renewal of a lease agreement after the period of fifty (50) years as provided herein, the foreign lease shall show that it has made social and economic contributions to the country.

(4) In the case of tourism projects, lease of private lands by foreign investors qualified herein shall be limited to projects with an investment of not less than five million (5M) US dollars, seventy percent (70%) of which shall be infused in said project within three years from the signing of the lease contract.

Other Important Provisions

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 in lease of lands to foreigners.

Presidential Decree 471, an Act Fixing A Maximum Period For The Duration Of Leases Or Private Lands To Aliens, provides the following rules:

  • The maximum period allowable for the duration of leases of private lands to aliens or alien-owned corporations, associations, or entities not qualified to acquire private lands in the Philippines shall be twenty-five years, renewable for another period of twenty-five years upon mutual agreement of both lessor and lessee.
  • Any contract or agreement made or executed in violation of this degree shall be null and void ab initio, and both parties to the agreement shall be punished by a fine of not less than five hundred nor more than one thousand pesos, or by imprisonment of from six months to one year, or both in the discretion of the court, Provided, that the president or managers and directors or trustees of corporations, associations or partnerships violating this decree shall be criminally liable in lieu thereof.