Commercial lease in the Philippines: Template, Key Clauses and Local Law (2026)

What is a commercial lease in the Philippines, and when do you need one? A commercial lease in the Philippines is a contract where an owner (the lessor) lets a business use property, such as an office, shop, warehouse or land, for a term in return for rent. You need one whenever a business occupies space it does not own. A commercial lease is treated very differently from a home rental: the Rent Control Act, which caps increases and protects residential tenants, does not apply to commercial premises, so the terms you agree carry much more weight. What you negotiate is largely what you get. The lease is governed by the Civil Code of the Philippines (Republic Act No. 386), which sets the general rules on lease, the duties of lessor and lessee, repairs, and what happens on expiry or breach. Two points shape many commercial leases. First, a foreign national or a wholly foreign-owned company cannot own land in the Philippines but can lease it, and under the Investors' Lease Act (Republic Act No. 7652) a qualified foreign investor may lease private land for up to 50 years, renewable once for up to 25 more. Second, tax touches the lease at several points: VAT on rent above the threshold, expanded withholding tax on rent, and documentary stamp tax on the lease itself. This article is general guidance, not legal advice. Have a Philippine lawyer and tax adviser review a lease before you sign. Last verified October 2026. ## Philippines commercial lease template Copy the block below and fill the bracketed fields. ```

CONTRACT OF LEASE This Contract of Lease (the "Lease") is made on [DATE] BETWEEN: [LESSOR NAME], of [address], TIN [number] (the "Lessor") AND [LESSEE NAME], of [address], TIN [number] (the "Lessee") 1. PREMISES The Lessor leases to the Lessee the property at [full address and area] (the "Premises") for use only as [permitted use]. 2. TERM The Lease runs for [N] years from [START] to [END], with an option to renew for [N] years on terms to be agreed, exercised by [N] months written notice. 3. RENT AND ESCALATION Rent is PHP [AMOUNT] per month, payable in advance by the [N] day of each month, increasing by [N]% each year. Rent is [exclusive] of VAT. 4. SECURITY DEPOSIT AND ADVANCE RENT The Lessee pays a security deposit of [N] months rent and [N] months advance rent on signing. The deposit is refundable within [N] days of expiry, less unpaid rent, charges and the cost of repairing damage beyond normal wear. 5. TAXES AND CHARGES The Lessee pays utilities and association dues. Real property tax on the Premises is the Lessor's. The Lessee withholds and remits expanded withholding tax on rent and documentary stamp tax is paid as the law requires. 6. USE, ALTERATIONS AND REPAIRS The Lessee uses the Premises only for the permitted use, keeps them in good order, and makes no structural alteration without written consent. The Lessor handles major and structural repairs; the Lessee handles minor repairs from ordinary use. 7. ASSIGNMENT AND SUBLEASE The Lessee may not assign the Lease or sublease the Premises without the Lessor's written consent. 8. INSURANCE The Lessee insures its own property and public liability; the Lessor insures the building. 9. DEFAULT AND TERMINATION If the Lessee fails to pay rent or breaches and does not cure within [N] days of notice, the Lessor may terminate and recover possession under the Civil Code and the Rules of Court. 10. SURRENDER On expiry or termination the Lessee returns the Premises in good order, normal wear excepted, and removes its property. 11. GOVERNING LAW AND DISPUTES This Lease is governed by Philippine law. Disputes go to the courts of [city], or to arbitration under [rules] if agreed. Signed and notarized: Lessor: __________________ Lessee: __________________ Name / title / date Name / title / date

- **Term and renewal (clause 2).** Set the term and a clear renewal mechanism. For a foreign investor relying on the Investors' Lease Act, keep the term and renewal within the 50 plus 25 year limit and the Act's conditions.
- **Rent, deposit and advance (clauses 3 and 4).** Two months deposit and one or two months advance is the usual commercial pattern, but it is negotiable. Say exactly how and when the deposit is returned, since deposit disputes are the most common source of conflict at exit.
- **Taxes (clause 5).** Rent above the VAT threshold attracts VAT; the lessee usually withholds expanded withholding tax on rent and remits it; and documentary stamp tax is due on the lease based on the total consideration. Agree in writing who bears each, and confirm current rates with the Bureau of Internal Revenue.
- **Repairs (clause 6).** The Civil Code puts necessary repairs on the lessor and ordinary upkeep on the lessee unless you agree otherwise, so spell out the split.
- **Default (clause 9).** An unlawful detainer action under the Rules of Court is the route to recover possession from a tenant who will not leave, so keep your notices and records clean. ## Key local-law points - **No rent control on commercial space.** The Rent Control Act protects lower-rent residential units, not commercial leases, so your escalation and renewal terms are set by the contract.
- **Foreign lessees.** Foreigners and foreign-owned companies cannot own land but can lease it. The Investors' Lease Act allows a qualified foreign investor to lease private land for up to 50 years, renewable once for up to 25 years, with conditions including that the land is used only for the approved investment.
- **Notarization and registration.** A lease is commonly notarized, and a long lease can be registered on the title to bind third parties. Check the local requirement for your term.
- **Taxes.** VAT, expanded withholding tax on rent and documentary stamp tax can all apply. Confirm the current rates and the VAT threshold with the Bureau of Internal Revenue before you fix the rent. ## Red flags to avoid - Assuming rent control limits increases on a commercial lease. It does not.
- A deposit clause that is silent on when and how the deposit comes back, which almost guarantees a fight at the end of the term.
- Leaving VAT, withholding tax and documentary stamp tax unaddressed, so the parties argue later about who pays.
- A foreign investor agreeing a term beyond what the Investors' Lease Act allows, which can make the excess unenforceable.
- No written consent process for alterations and subleasing, so disputes arise over fit-out and sharing space. Negotiate the term, the rent escalation, the deposit return and the tax split with care, and the template above will hold for most Philippine commercial tenancies. ## Where a contract workspace helps The template gives you a sound commercial lease. The ongoing burden is managing leases across a portfolio: tracking renewal and break dates so an option is not missed, keeping escalation and deposit terms consistent, and knowing each lease's tax treatment. Drafting from a standard tuned to how your company leases, having the renewal window, escalation and deposit terms flagged before you sign, and tracking every key date can sit in one AI contract workspace instead of a drawer of PDFs and a wall calendar. [Adira](https://adiralaw.com) is one such workspace. Its established depth is in Indian corporate law, so Philippine lease specifics are a roadmap capability and should be checked by a local adviser. The idea is plain: when drafting, review and date tracking live in one place, a missed renewal or an unreturned deposit stops being the thing you find out about too late.