Disclaimer: The following discussion is provided for general informational purposes only and does not constitute legal advice. For specific concerns about your individual situation, consult a qualified attorney licensed to practice in the Philippines.

1. Introduction

In the Philippines, most landlord-tenant relationships are governed by written lease agreements. However, there are instances where a tenancy arrangement exists without a formally signed contract. This situation often arises in more informal setups—such as verbal agreements between friends, relatives, or short-term occupants—or in cases where the parties agree on fundamental terms (e.g., rent, start date, deposit) but fail to finalize a written agreement.

One of the most contentious issues in these informal arrangements is the return (or non-return) of the security deposit, especially if the tenant never took occupancy or if the arrangement abruptly ended before moving in. This article explores the legal principles surrounding deposit refunds in the absence of a signed lease agreement in the Philippine context.

2. Legal Framework

2.1 The Civil Code of the Philippines

Leases (locatio conductio) in Philippine law are primarily governed by the Civil Code (Articles 1642–1688), which sets out the rights and obligations of the lessor (landlord) and the lessee (tenant). Notably:

Article 1305 states that a contract exists when there is a meeting of the minds between two parties regarding the object and the cause (or consideration) that are to constitute the contract.
Article 1643 defines a lease of things as a contract where one party (the lessor) binds themselves to give another (the lessee) the enjoyment or use of a thing for a certain period and for a certain price.

Under these provisions, a binding lease can exist even without a formal written contract, as long as there is mutual consent and an agreement on essential terms (e.g., property, rental amount, duration). Consequently, the obligation to return or retain a deposit can be influenced by whether or not there is a valid lease—even if unwritten.

2.2 Rent Control Act (Republic Act No. 9653)

For residential units that fall under the coverage thresholds (monthly rents not exceeding specific amounts, typically adjusted per city or region), the Rent Control Act of 2009 (RA 9653) imposes certain restrictions on the amount of rent increase, advance rent, and deposit. While RA 9653 primarily addresses rent increases and eviction procedures, it also touches on the treatment of deposits:

Landlords typically are allowed to collect up to two months’ deposit and one month advance under standard practice (though RA 9653 itself does not specify the amount for deposit, many local ordinances or standard industry practices adopt this as a norm).
The security deposit is intended to cover unpaid utilities, unpaid rent, or damages to the property. After the lease term, it is to be returned within a reasonable period (often interpreted as one month after move-out or completion of an inventory/inspection).

However, the Rent Control Act alone does not detail the entire process of recovering a deposit if no formal contract was signed. Instead, the Act’s provisions build on the general principles under the Civil Code.

3. Validity of a Lease Without a Signed Agreement

Under Philippine law, a lease does not have to be in writing to be enforceable, as long as:

All essential elements (subject matter, consideration [rent], and consent) are present.
Both landlord and tenant agree on these essential terms.

Even if a tenant has not signed a formal lease contract, other evidence can demonstrate a lease arrangement—such as text messages, emails, proof of rental payments, or verbal agreement corroborated by witnesses. If these elements are proven, a de facto lease can exist, and the tenant’s deposit rights and the landlord’s obligations may still apply.

Key point: The absence of a signed lease does not automatically forfeit a tenant’s right to reclaim their deposit. Rather, it compels the parties (and possibly the courts) to look at the facts to establish whether the landlord-tenant relationship actually formed.

4. The Security (or “Damage”) Deposit

4.1 Purpose of the Deposit

Commonly referred to as a “security deposit” or “damage deposit,” this amount is paid in advance by the prospective tenant to assure the landlord that the tenant will:

Comply with payment of rent.
Fulfill other obligations (e.g., payment of utilities).
Refrain from causing damage to the property or will be liable for costs of repair if damage occurs.

4.2 When Is the Deposit Refundable?

Under usual lease practices:

The deposit should be returned after the tenant vacates the property, subject to deductions for:
- Unpaid rent.
- Utility bills (electricity, water, internet) not settled by the tenant.
- Costs of repairing damage beyond normal wear and tear.

If the lease does not commence at all—for instance, the tenant decided not to move in or the landlord no longer wishes to proceed—questions arise whether the tenant is entitled to a full or partial refund.

4.3 Deduction or Forfeiture of Deposit Without Moving In

If the tenant never occupied the unit, the landlord may argue that the deposit can be forfeited or partially withheld as “liquidated damages” for loss of an opportunity to rent to someone else. However, under Philippine law, courts generally disfavor forfeitures unless:

The contract (even a verbal one) explicitly states that the deposit is non-refundable in the event of cancellation.
The landlord can prove actual damages or demonstrate that they were prevented from renting to another party, resulting in a direct loss.

Because the burden of proving damages typically rests with the landlord, a tenant can argue for a refund (full or partial) if the lease was never activated and no damage was incurred.

5. Legal Remedies and Strategies

Amicable Settlement
- The best first step is to approach the landlord and request the return of the deposit, highlighting any evidence (receipt of deposit, messages, etc.) that no rental occupancy occurred or that the lease was canceled.
- In many cases, landlords are willing to settle once they realize there is no firm basis for retaining the deposit if no damage or outstanding obligation exists.
Barangay Conciliation
- If direct negotiation fails, barangay conciliation (mediation under the Katarungang Pambarangay Law) is the next step. This is a prerequisite for many civil actions involving parties from the same city or municipality.
- The parties meet before the Barangay Lupon Tagapamayapa (Peace Council) to find a settlement. If no agreement is reached, a Certificate to File Action is issued.
Small Claims Court (MTC)
- If the amount in dispute does not exceed the current small claims threshold (generally ₱400,000 for cases filed in recent years, though this can be updated by the Supreme Court), you may file a small claims case in the Metropolitan Trial Court or Municipal Trial Court.
- Small claims proceedings are designed for speed, simplicity, and require no lawyer. Present your evidence (deposit receipts, messages, any proof of an agreement or cancellation) to show that the deposit is due back.
Regular Civil Action
- If the amount exceeds the small claims threshold or the issues are more complex, a regular civil suit for sum of money or damages can be filed in the appropriate court. This route is more time-consuming and costly, typically requiring the assistance of counsel.

6. Practical Considerations

Documentation Matters
- Even if you do not have a formally signed lease, document all communications—text messages, emails, chat messages—showing that a deposit was paid and the circumstances around the landlord’s refusal to refund.
Inspection and Acknowledgment
- If the tenant briefly occupied the place (even for a short time) before changing their mind, ensure an exit inspection is done. This way, the landlord acknowledges the condition of the property and cannot later claim damages from normal wear and tear or nonexistent damage.
Reasonable Deductions
- If you did occupy the unit, the landlord can deduct any unpaid rent or unpaid bills from the deposit. Sometimes, a landlord may attempt to charge for cosmetic issues (like minor nail holes or scuffs). Normal wear and tear is usually not chargeable unless the lease or local ordinance states otherwise.
Timely Action
- While Philippine law does not specify a strict “deadline” for claiming a deposit refund if there was no written contract, it is prudent to demand repayment promptly. Delays could complicate matters or allow the landlord to claim additional damages.
No “Self-Help” Eviction or Deposit Forfeiture
- Landlords cannot simply decide to forfeit the deposit without a valid reason. If the tenant never occupied the property or no actual damage was incurred, forfeiture clauses can be struck down by courts for being unjust or unconscionable.

7. Conclusion

Despite the absence of a signed lease agreement, Philippine law protects tenants from unjust forfeiture of deposits. As long as there is proof that a deposit was handed over in anticipation of a lease, the landlord generally bears the burden of proving that it is legally justifiable to retain part—or all—of that deposit. If the prospective tenant never moved in or has met all obligations, the deposit is typically refundable, less any documented losses the landlord can prove.

Should a dispute escalate, tenants can resort to barangay conciliation and, if necessary, file a case in either a small claims court or regular court to recover the deposit. To minimize disputes, both parties should commit to transparent communication and, if possible, always memorialize essential terms in writing. Even a short and simple one-page document or digital correspondence can help avoid confusion and ensure fair treatment for both landlord and tenant.

Disclaimer Reminder: This guide is for general information and should not be relied upon as legal advice. Each case may present unique facts or legal considerations. For specific legal concerns, consult an attorney in the Philippines.