Residential Sublease Agreement

What is a Residential Sublease Agreement?

A Residential Sublease Agreement is used when one person (the "Sublessor") is renting the residential property (e.g. apartments, dorms, condominiums, or houses) as a lessee from the owner (the "original lessor") and the Sublessor allows another (the "Sublessee") to use the residential property for a fee. It is a legally binding contract between all parties concerned. The role of the parties should be understood as follows:

• The Sublessor is the person who rents the property, and in turn, sublets it to another called the Sublessee.
• The Sublessee is the person who will rent the property from the Sublessor.
• The original lessor is the owner of the property who has rented the property to the Sublessor under an already existing Residential Lease Agreement ("Original lease").

What is the difference between a Residential Lease Agreement and a Residential Sublease Agreement?

A Residential Sublease Agreement is entered into by a person (the Sublessee), to rent a residential property from another person who is in his turn a lessee in the original Lease Agreement. This means there will be 2 separate agreements existing at the same time:

• The Residential Lease Agreement: in which the lessor rents the property to the lessee.
• The Residential Sublease Agreement: in which the lessee (as Sublessor) rents the property to the Sublessee.

In a Residential Lease Agreement, the lessee is the one renting the property, while in a Residential Sublease Agreement, that same person is the Sublessor who rents the property to a Sublessee, while the original Residential Lease Agreement continues to exist.

Is it mandatory to have a Residential Sublease Agreement?

Yes, because this will lay down the terms and conditions of the sublease and will prevent the parties from reneging on the Sublease Agreement. This will also serve as documentation for what was agreed upon by the Sublessor and the Sublessee.

What is Advanced Rent in a Residential Sublease Agreement?

The advanced rent is usually paid at the signing of the Residential Sublease Agreement. It may be applied as rent for any of the months during the sublease period, as agreed upon by the parties. If the property is located in a highly urbanized city and the rent is equal to or less than Ten Thousand Philippine Pesos (P10,000.00) or if the property is not located in a highly urbanized city and the rent is equal to or less than Five Thousand Philippines Pesos (P5,000.00), the Sublessor cannot demand more than one-month advance rent.

The purpose of this is to ensure that the Sublessee will timely pay the rent and this amount can be used for those months where the Sublessee fails to pay rent.

What is a Security Deposit in a Residential Sublease Agreement?

The security deposit can be used to settle rent, unpaid electric, telephone, water, or such other utility bills or repair any damage to the property caused by the acts or negligence of the Sublessee. If the property is located in a highly urbanized city and the rent is equal to or less than Ten Thousand Philippine Pesos (P10,000.00) or if the property is not located in a highly urbanized city and the rent is equal to or less than Five Thousand Philippines Pesos (P5,000.00), the Sublessor cannot demand more than two months security during the entire duration of the Residential Sublease Agreement.

If at the end of the Residential Sublease Agreement, the rent and utility bills are paid and there is no damage to the property, the security deposit should be returned to the Sublessee.

What must a Residential Sublease Agreement contain?

A Residential Sublease Agreement contains the following information:

• The details of the property that will be rented,
• The period or duration of the sublease,
• The rental fee and other fees for the sublease,
• The purpose or use of the property,
• Applicable policies (for example: whether guests can stay overnight, the number of residents in the leased property & rules concerning pets).

What is not allowed in a Residential Sublease Agreement?

If the property is located in the National Capital Region or highly urbanized cities and the total monthly rent ranges from P1.00 to P10,000.00, or if the property is located in other areas and the monthly rent ranges from P1.00 to P5,000.00, then the Sublessor cannot raise the rent more than the amount of 4% of the original amount of rent from January 1 to December 31, 2024.

Further, the sublease cannot simply be terminated due to the change of the ownership of the property such as by sale, donation, or inheritance.

What are the prerequisites of a Residential Sublease Agreement?

The Sublessee must have checked the premises of the property to be leased before signing the Residential Sublease Agreement, and if possible, he should verify first whether the Sublessor is the actual lessee of the property under the original lease agreement.

The Sublessee should check the original Lease Agreement, and obtain the consent or approval of the original lessor under the original Lease Agreement. For this purpose, a Landlord's Consent to Sublease may be used.

Who can enter into a Residential Sublease Agreement?

The original lessee (the Sublessor) and the Sublessee are the parties to a Residential Sublease Agreement, meaning, they must sign the same. Note that the original lessor or the owner of the property should consent to the Residential Sublease Agreement through a Landlord's Consent to Sublease.

Note that the parties must be of legal age or 18 years old and above. Further, if the parties are organizations, the signatories may be the organization's representatives.

What can be the duration of a Residential Sublease Agreement?

The Sublessor and the Sublessee are free to choose how long the Residential Sublease Agreement will last, it can be for a fixed period or an indefinite term, and can also be renewed after the end of the Residential Sublease Agreement's fixed period if the Sublessor and Sublessee agree thereto.

It should be emphasized that since the original owner of the property is required to give his consent to the Residential Sublease Agreement, if the original lease ends or terminates, then the Residential Sublease Agreement also ends.

What has to be done once the Residential Sublease Agreement is ready?

Once the document is completed, at least three original copies of the Residential Sublease Agreement should be printed and all of the attachments (referred to in the next question) described in the document should be attached. The Lessor and the Lessee, or their authorized representatives, should read, and then sign all the copies of the document. The Sublessor and the Sublessee should keep one original copy and the third original copy should be kept by the original lessor (owner of the property).

After this, the document may be notarized. If the parties would want to notarize the Sublease Agreement, the document also includes an Acknowledgment portion in which case at least four original copies must be printed. Notarization of the document converts the document from a private document to a public document so that it becomes admissible in court without the need for further proof of its authenticity. To notarize the document, the parties must go to a notary public to acknowledge that they have signed the Residential Sublease Agreement freely and voluntarily. They should also present a valid I.D. issued by an official agency bearing their photograph and signature such as a driver's license or a passport, among others.

Once notarized, the Sublessor, the Sublessee, and the original lessor should each keep at least one copy of the notarized document, and the last one will be given to the notary public.

Which documents should be attached to the Residential Sublease Agreement?

The following should be attached to the document, if applicable:

• A copy of the Landlord's Consent to Sublease,
• A copy of the transfer certificate of title concerning the property subleased if it is an apartment, house, or building,
• A copy of the condominium certificate of title if the property subleased is a condominium,
• A copy of the authorization that shows that a representative can act on behalf of the Sublessor or Sublessee.
  • The representative of the Sublessor or Sublessee must have a Special Power of Attorney if he will appoint someone else to sign the Residential Sublease Agreement for him.

Is it necessary to notarize a Residential Sublease Agreement for it to be valid?

No, however, notarization of the document converts the Residential Sublease Agreement from a private document to a public document so that it becomes admissible in court without the need for further proof of its authenticity, meaning, the document will be presumed to be validly written and signed once it is shown to court in case a dispute is brought before it.

Is it necessary to register a Residential Sublease Agreement?

No, however, registration of the Residential Sublease Agreement before the Register of Deeds in the place where the property is located serves as protection for both the Sublessor and the Sublessee in case there is a change in ownership over the property. If there is a change in ownership, the new lessor who is the new owner cannot terminate the sublease.

Is it necessary to have witnesses for a Residential Sublease Agreement?

No, however, witnesses can testify as to how the Residential Sublease Agreement was entered into by the parties in case a dispute is brought to a court of law concerning the sublease.

What are the costs involved in the finalization of a Residential Sublease Agreement?

If the Residential Sublease Agreement is notarized, a certain percentage of the rent may be asked as a fee by the notary public. This is usually at 1%.

Which laws are applicable to Residential Sublease Agreements?

The Civil Code of the Philippines governs the law on contracts and subleases. Additionally, other laws such as Republic Act No. 9653 (the "Rent Control Act") as extended by the National Human Settlements Board Resolution No. 2021-02 govern sublease contracts that fall under the following conditions:

1. The property is located in the National Capital Region or highly urbanized cities and the total monthly rent ranges from One Peso (P1.00) to Ten Thousand Pesos (P10,000.00)
2. The property is located in other areas and the monthly rent ranges from One Peso (P1.00) to Five Thousand Pesos (P5,000.00).

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