X. CONTRACT OF LEASE Flashcards
X. CONTRACT OF LEASE
A. General Provisions (Civil Code, arts. 1642-1645)
T W/S
to provide.. for use or E of another
to perform a work for FP
Here are the key points summarized and listed down numerically for memorization:
- Types of Lease: The contract of lease may involve either things or work and service.
- Lease of Things: In the lease of things, one party agrees to provide another party with the enjoyment or use of a thing for a specified price and period, which can be definite or indefinite. However, leases for more than ninety-nine years are not valid.
- Lease of Work or Service: In the lease of work or service, one party commits to performing a piece of work or providing a service to another party for a fixed price. This contract does not establish a principal-agent relationship between the parties.
- Consumable Goods Exception: Consumable goods generally cannot be leased, except when they are meant for exhibition purposes or when they are accessory to an industrial establishment.
X. CONTRACT OF LEASE
B. Rights and Obligations of Lessor (Civil Code, arts. 1654-1679)
R2 Rec R & i
R2 ins
Obl 2 del
Obl to Maint
Obl not2D
Rights and obligations of the lessor (landlord) and lessee (tenant)
Rights of the Lessor (Landlord):
1. Right to Receive Rent: The lessor has the right to receive the agreed-upon rent from the lessee.
2. Right to Demand Payment: The lessor can demand payment of the rent at the stipulated time and place.
3. Right to Receive Interest on Delayed Payments: If the lessee defaults on rent payments, the lessor is entitled to receive interest on the delayed payments, unless there is a stipulation to the contrary.
4. Right to Inspect the Property: The lessor has the right to inspect the property leased periodically, provided there is no interference with the lessee’s peaceful possession.
Obligations of the Lessor (Landlord):
1. Obligation to Deliver the Property: The lessor must deliver the property to the lessee at the beginning of the lease term in a condition suitable for the purpose stipulated in the contract.
2. Obligation to Maintain the Property: The lessor is responsible for maintaining the property in a habitable condition throughout the duration of the lease.
3. Obligation Not to Disturb Possession: The lessor is obliged not to disturb the lessee’s peaceful possession of the leased property during the term of the lease.
X. CONTRACT OF LEASE
C. Sublease and xxx of Lease (Civil Code, arts. 1649-1652)
Assiggment by Lessor notAll
Subletting Ok exc if Proh
key points regarding sublease :
- Consent Requirement for Assignment: The lessee cannot assign the lease to another party without the consent of the lessor, unless there is a stipulation in the contract allowing assignment (Article 1649).
- Subletting Allowed Unless Prohibited: In the absence of an express prohibition in the lease contract, the lessee may sublet the leased property, either in whole or in part, without prejudice to their responsibility towards the lessor (Article 1650).
- Responsibility of Sublessee: The sublessee is bound to the lessor for all acts related to the use and preservation of the leased property, as stipulated between the lessor and the original lessee (Article 1651).
- Sublessee’s Liability for Rent: The sublessee is subsidiarily liable to the lessor for any rent due from the original lessee. However, the sublessee’s liability is limited to the amount of rent due from them according to the terms of the sublease at the time of the lessor’s demand (Article 1652).
- Advance Rent Payments: Payments of rent made in advance by the sublessee are not considered as paid towards the lessor’s claim unless it’s a customary practice in the locality.
X. CONTRACT OF LEASE
B. Rights and Obligations of xxx Lessee (Civil Code, arts. 1654-1679)
R2 use
R2 enjoy
Obl2 pay R
Obl to Ret
Rights of the Lessee (Tenant):
1. Right to Use the Property: The lessee has the right to use the leased property for the purpose agreed upon in the lease contract.
2. Right to Enjoy Peaceful Possession: The lessee has the right to peaceful possession and enjoyment of the leased property throughout the lease term.
3. Right to Demand Receipt for Payments: The lessee is entitled to demand a receipt for all payments made to the lessor.
Obligations of the Lessee (Tenant):
1. Obligation to Pay Rent: The lessee must pay the agreed-upon rent to the lessor at the stipulated time and place.
2. Obligation to Use the Property Properly: The lessee must use the leased property in accordance with the purpose specified in the lease contract and exercise reasonable care to prevent damage.
3. Obligation to Return the Property: At the end of the lease term, the lessee must return the property to the lessor in the same condition it was received, subject to ordinary wear and tear.
X. CONTRACT OF LEASE
C. xyz Assignment of Lease (Civil Code, arts. 1649-1652)
Key points assignment of lease :
- Consent Requirement for Assignment: The lessee cannot assign the lease without the consent of the lessor, except if there is a provision in the contract allowing assignment (Article 1649).
- Subletting Permitted: In the absence of an express prohibition in the lease contract, the lessee may sublet the leased property, either wholly or partially, without affecting their responsibility towards the lessor (Article 1650).
- Responsibility of Sublessee: The sublessee is obligated to the lessor for all actions related to the use and upkeep of the leased property as agreed upon between the lessor and the lessee (Article 1651).
- Sublessee’s Liability for Rent: The sublessee is secondarily liable to the lessor for any rent due from the lessee. However, the sublessee’s responsibility is limited to the rent amount owed by them according to the terms of the sublease at the time of the lessor’s demand (Article 1652).
- Advance Rent Payments: Rent payments made in advance by the sublessee are not considered paid towards the lessor’s claim unless it’s a customary practice in the area (Article 1652).
Sublease vs Assignment of Lease
Leases while retaining vs
Transfer of ent L
Certainly! Here are the key differences between sublease of lease and assignment of lease:
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Nature:
- Sublease: In a sublease, the original lessee (sublessor) leases the property to a third party (sublessee) while retaining their own lease with the original lessor.
- Assignment: In an assignment, the original lessee transfers their entire lease interest to a third party, who becomes the new lessee and assumes all rights and obligations under the lease.
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Responsibility:
- Sublease: The sublessor remains responsible to the original lessor for fulfilling the terms of the lease, including rent payment and property maintenance.
- Assignment: Upon assignment, the assignee (new lessee) assumes all responsibilities and liabilities under the lease, relieving the original lessee of any further obligations.
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Consent Requirement:
- Sublease: Generally, a lessee can sublet the property without the lessor’s consent unless the lease agreement expressly prohibits subleasing.
- Assignment: The lessee usually requires the lessor’s consent to assign the lease, unless the lease agreement permits assignment without consent.
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Relationship with Lessors:
- Sublease: The original lessor maintains the lease relationship with the sublessor, and the sublessee has no direct contractual relationship with the lessor.
- Assignment: The assignee (new lessee) enters into a direct contractual relationship with the lessor upon assignment, assuming all rights and responsibilities under the original lease.
-
Liability for Rent:
- Sublease: The sublessee is only liable for the rent owed to the sublessor as per the terms of the sublease agreement.
- Assignment: The assignee becomes directly liable to the lessor for rent payments and other obligations under the original lease.
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Termination:
- Sublease: The sublease is terminated when the original lease expires or if either the sublessor or the sublessee terminates the sublease agreement.
- Assignment: The assignment does not terminate the original lease; instead, it transfers the lessee’s rights and obligations to the assignee for the remainder of the lease term.
These differences outline distinct legal arrangements regarding the transfer of lease interests and the resulting relationships between parties involved.
MCQ:
John has been renting an apartment from Sarah for the past two years under a fixed-term lease agreement that is set to expire in six months. Recently, Sarah informed John that she has sold the apartment to a new owner, Mike. In this situation, which of the following statements is correct?
A. Mike, as the new owner, is not bound by the existing lease agreement between John and Sarah, and can immediately terminate John’s tenancy.
B. Mike must honor the remaining six months of John’s fixed-term lease agreement, after which he can choose to renew or terminate the lease.
C. Mike must honor John’s existing lease agreement until its expiration, but he can impose new terms and conditions on John during the remaining lease period.
D. Mike is obligated to honor John’s existing lease agreement indefinitely, even after its expiration, unless John voluntarily vacates the apartment.
Answer: B. Mike must honor the remaining six months of John’s fixed-term lease agreement, after which he can choose to renew or terminate the lease.
Legal Reasoning:
According to the general principle mentioned in the search results, when a property is sold or transferred to a new owner, the existing leases typically remain in effect, and the new owner is expected to respect and honor those lease agreements. In this case, John has a fixed-term lease agreement with Sarah that is still valid for the next six months.
As the new owner, Mike is considered a successor in interest and is bound by the terms of the existing lease agreement between John and Sarah. Therefore, Mike must honor the remaining six months of John’s fixed-term lease agreement and cannot immediately terminate John’s tenancy.
However, once the fixed-term lease expires after six months, Mike has the option to either renew the lease with John on new terms or terminate the lease agreement, as the new owner is not obligated to extend the lease beyond its original term.
Options A and C are incorrect because they contradict the general principle of respecting existing lease agreements after a property transfer. Option D is also incorrect because it goes beyond the obligation of honoring the existing lease term and suggests an indefinite extension, which is not supported by the information provided.
Challenging MCQs on Lease Contracts
MCQ 1
Maria leases a luxury car from a car rental company for a period of one year. After six months, the car is involved in an accident and is severely damaged. Which of the following is most likely true?
(A) The car rental company bears the entire loss.
(B) Maria bears the entire loss.
(C) The loss is shared equally between Maria and the car rental company.
(D) The loss is borne by the insurance company covering the car.
Answer: (A) The car rental company bears the entire loss.
Legal Basis: This question tests the understanding of the nature of a lease contract. In a lease contract, the lessor (car rental company) bears the risk of loss or damage to the leased property, unless the lessee (Maria) is at fault for causing the damage.
MCQ 2
Juan leases a commercial space to operate a restaurant. The lease contract does not specify the term of the lease. Which of the following is correct?
(A) The lease is void for indefiniteness.
(B) The lease is valid for a period of one year.
(C) The lease is valid for a period of ninety-nine years.
(D) The lease is valid for an indefinite period.
Answer: (D) The lease is valid for an indefinite period.
Legal Basis: While Article 1643 states that the lease term may be definite or indefinite, it does not void leases with indefinite terms. Therefore, a lease without a specified term is valid.
MCQ 3
A farmer leases a tractor from a farm equipment dealer. The tractor comes with a plow attachment. Which of the following statements is correct regarding the plow attachment?
(A) The plow attachment is considered an accessory to the industrial establishment and can be leased.
(B) The plow attachment is a consumable good and cannot be leased.
(C) The lease contract must specifically mention the plow attachment for it to be included in the lease.
(D) The plow attachment is automatically included in the lease of the tractor.
Answer: (A) The plow attachment is considered an accessory to the industrial establishment and can be leased.
Legal Basis: Article 1643 allows consumable goods to be leased if they are accessory to an industrial establishment. A tractor used on a farm is considered an industrial establishment, and the plow attachment is an accessory to it, making it eligible for lease.
