CIVIL LAW

VII. SPECIAL CONTRACTS
B. Contract of Lease
2. Sublease and Assignment of Lease

I. Legal Basis

The rules governing sublease and assignment of lease in the Philippines are primarily found under the Civil Code of the Philippines (Republic Act No. 386), particularly in Articles 1646 to 1657, as well as in jurisprudence interpreting these provisions.

II. Definitions

Lease (Article 1642): A lease is a contract where one party, the lessor, binds themselves to allow another party, the lessee, to use and enjoy a thing for a price certain, for a specified or determinable period.
Sublease:
- A sublease occurs when the lessee (original tenant) leases the property or a portion thereof to another party, called the sublessee, without surrendering their own leasehold rights to the lessor.
- The lessee retains privity of contract with the lessor and continues to be primarily liable under the main lease contract.
Assignment of Lease:
- An assignment of lease is the transfer by the lessee of all their leasehold rights to a third party, the assignee.
- It results in the termination of the privity of contract between the original lessee and the lessor, and establishes privity of contract between the lessor and the assignee.

III. Key Distinctions Between Sublease and Assignment of Lease

Aspect	Sublease	Assignment of Lease
Definition	Lessee rents the property or a portion to a sublessee.	Lessee transfers the entirety of their rights under the lease.
Privity of Contract	Privity remains between lessor and original lessee.	Privity is created between lessor and assignee.
Liability to Lessor	Lessee remains liable to lessor for the lease terms.	Assignee assumes all liabilities under the lease.
Scope	Can involve only a part of the leasehold rights.	Involves the entirety of the leasehold rights.
Consent Requirement	Consent of lessor is required unless explicitly allowed in the contract.	Consent of lessor is typically mandatory.

IV. Rules and Legal Requirements

A. Consent of the Lessor

Article 1650: The lessee cannot assign the lease nor sublease the thing leased without the express consent of the lessor, unless there is a stipulation to the contrary.
Implication of No Consent:
- Any sublease or assignment made without the lessor’s consent is considered voidable.
- The lessor has the right to rescind the lease contract and eject the lessee or sublessee.

B. Obligations of the Lessee in a Sublease

The original lessee remains bound to the lessor for all obligations under the lease contract.
The sublessee has no direct contractual relationship with the lessor, except in cases where the lessor consents to such direct arrangement.

C. Obligations of the Assignee in an Assignment

The assignee steps into the shoes of the lessee and assumes all rights and obligations under the lease.
The original lessee is discharged from liability only upon the consent of the lessor to the assignment.

V. Rights and Obligations of the Parties

A. Rights of the Lessor

Approval of Sublease or Assignment:
- The lessor may impose conditions or deny consent unless a stipulation in the lease contract provides otherwise.
Direct Action:
- In cases of non-payment of rent or violation of lease terms, the lessor retains the right to act against the lessee.

B. Obligations of the Lessee (Article 1654)

Pay the rent agreed upon.
Use the property only for the stipulated purpose.
Make ordinary repairs needed due to wear and tear.

C. Rights of the Sublessee

To use the property in accordance with the sublease contract.
Sublessee’s rights are dependent on the lessee’s compliance with the main lease.

D. Rights of the Assignee

To use and enjoy the property under the same terms as the original lessee.
Assumes all obligations under the lease.

VI. Termination of Sublease and Assignment

Expiration of Main Lease:
- The sublease or assignment is extinguished upon the termination of the original lease contract.
Violation of Lease Terms:
- Any breach by the lessee, sublessee, or assignee may result in the termination of the contract by the lessor.

VII. Jurisprudence

Samson v. Court of Appeals, G.R. No. 108245 (1995):
- Clarified that the absence of lessor’s consent to a sublease renders it voidable, not void.
Tan v. Court of Appeals, G.R. No. 126119 (1998):
- The lessee remains liable for the acts of the sublessee under the principle of privity of contract with the lessor.
Almeda v. Court of Appeals, G.R. No. 154365 (2005):
- Affirmed that assignment of lease requires the lessor's express approval to extinguish liability of the original lessee.

VIII. Practical Implications

Lessor’s Protection: Lessors are safeguarded against unauthorized transfers of leasehold rights that may lead to potential financial or property misuse issues.
Lessee’s Responsibility: Lessees must ensure compliance with lease terms to avoid liability, even in the presence of subleases or assignments.
Drafting Contracts: Lease contracts must explicitly stipulate provisions regarding subleasing and assignment to prevent disputes.

This detailed analysis ensures a complete understanding of subleases and assignments in the context of Philippine civil law.