DISCLAIMER: The information provided here is for general informational and educational purposes only and is not intended as legal advice. Laws, regulations, and their interpretations may change over time and can vary depending on specific facts or circumstances. If you require legal advice, you should consult a qualified attorney in your jurisdiction.

Rights of a Lessee Regarding Property Renovations Without a Written Lease (Philippine Context)

In the Philippines, lease arrangements (whether residential or commercial) are governed primarily by the Civil Code of the Philippines (Republic Act No. 386). Although written contracts are the norm for clarity and certainty, it is not uncommon for landlords (lessors) and tenants (lessees) to have unwritten or “verbal” lease agreements. Even without a formal contract, basic legal principles still apply to protect both parties.

A recurring concern involves a lessee’s right—or lack thereof—to renovate or improve the leased property in the absence of a written lease. Below is a detailed overview of the legal considerations, rights, and obligations surrounding this scenario.

1. Nature of a Lease Without a Written Contract

Implied Lease
- An oral or unwritten lease can still be a valid contract under Philippine law if it meets the essential requisites of consent, subject matter, and consideration (i.e., mutual agreement to lease a property, the property itself, and the payment of rent).
- When rent is accepted by the lessor on a regular basis, it generally indicates the existence of a lease relationship, albeit unwritten.
Legal Basis
- The absence of a written contract does not negate the applicability of relevant provisions in the Civil Code (Articles 1642–1688), as well as any special laws such as the Rental Law (e.g., the Rent Control Act, if applicable to certain residential units).
- Generally, the rights and obligations of both parties flow from the Civil Code’s default rules on lease and from any explicit or implicit agreements.

2. General Rule: Consent of the Lessor is Required for Major Renovations

The starting point in Philippine law is that a lessee cannot unilaterally modify or renovate the leased property in a way that materially alters it without the lessor’s consent. Key articles in the Civil Code address improvements, repairs, and reimbursements:

Article 1654(3) of the Civil Code requires the lessor to maintain the lessee in peaceful and adequate enjoyment of the leased property. This implies that major alterations usually need lessor approval to avoid interfering with the property’s condition or violating the lessor’s ownership rights.
Article 1663 states that “The lessee is responsible for deterioration caused by members of his household and by guests and visitors…” which can extend to unconsented changes that damage the property.

In practice, small or routine improvements that do not alter the fundamental structure (e.g., painting walls in the same color, minor repairs) may be permissible; but anything that significantly changes the property usually requires express or at least implied permission from the lessor.

3. Categories of Improvements and the Lessee’s Rights

The Civil Code distinguishes among three general categories of improvements (or “expenses”) made on leased property: necessary, useful, and luxurious (or ornamental). The relevant provision is Article 1678, which covers the rights and reimbursements for improvements.

Necessary Improvements
- Necessary expenses are those required to keep the property habitable and prevent its deterioration (e.g., fixing a leaking roof, replacing broken water pipes).
- Even without a written lease, a lessee typically has a right to be reimbursed by the lessor for necessary improvements that preserve the property. However, the lessee must often show that such improvements were truly necessary to avoid destruction or serious damage, and that the lessor was promptly notified or that circumstances prevented such notice.
Useful Improvements
- Useful improvements enhance or increase the property’s utility or value but are not strictly necessary (e.g., adding cabinets or partitions, improving flooring).
- Under Article 1678, if these improvements are made in good faith and with the lessor’s knowledge (or at least no objection), upon termination of the lease, the lessor must generally pay one-half of the value of the improvements (as of lease termination) or allow the lessee to remove them.
- If the lessor opts for removal, the lessee may be required to restore the property to its original state (unless the lessor waives that requirement).
Luxurious or Ornamental Improvements
- Luxurious improvements are aesthetic in nature (e.g., fancy light fixtures, elaborate décor) that do not necessarily add to the overall utility or structure of the property.
- The lessee who made them may remove these improvements if it can be done without causing damage to the property. Otherwise, the lessor could choose to pay their value or demand removal if the premises can be restored to the original condition.

Important Caveat

Consent and Good Faith: Reimbursement under Article 1678 hinges significantly on whether the lessee acted in good faith (i.e., believing they had the right to make such improvements) and whether the lessor had knowledge or at least did not object. Unauthorized improvements that the lessor explicitly prohibited or knew nothing about may not be reimbursable, and the lessee could be liable for damages or restoration costs.

4. Right of Retention vs. Right to Remove Improvements

In some circumstances, a lessee who made improvements in good faith may claim a “right of retention”—refusing to vacate until compensated. However, Philippine jurisprudence has often held that if the lease is clearly terminated and the occupant no longer has the right to possess, the right of retention can be superseded by the lessor’s right to reclaim the property—unless a court finds equitable reasons to allow retention.

The more common remedy is that, upon expiration or termination of the lease, the lessee can either:

Remove the improvements (if doing so won’t damage the property), or
Receive reimbursement for the allowable portion (if the law or the lessor’s choice under Article 1678 so dictates).

5. Effect of No Written Stipulation on Renovations

Default Legal Provisions Apply
- In the absence of explicit written terms, the provisions of the Civil Code regarding improvements (Articles 1654, 1678, and related articles) control.
- The key is whether the improvements are necessary, useful, or luxurious—and whether the lessor consented or acquiesced.
Oral Consent or Tacit Approval
- Even without a written lease, the lessor may give oral consent or tacit approval for renovations. Such consent will typically be inferred if the lessor was aware of the renovations and did not raise any objection, especially when collecting rent.
- Courts look at the conduct of the parties to determine if an implied agreement or understanding exists.
Risk of Dispute
- Without a written agreement spelling out the scope and limits of renovations, disputes often arise over what was “allowed,” who should bear the cost, and whether the improvements were necessary or merely desirable.
- A lessee who renovates without explicit permission bears the risk of losing any right to reimbursement and may be liable for damages.

6. Practical Implications and Recommendations

Document and Communicate
- Even in an unwritten lease arrangement, it is prudent for the lessee to obtain written or electronic acknowledgment (like emails, text messages, or any other form of proof) from the lessor before undertaking major renovations or improvements.
Seek Explicit Consent
- Verbal assurances can be forgotten or denied; thus, if major or costly improvements are planned, it is advisable to secure written consent from the lessor to clarify responsibilities and reimbursement expectations.
Consider the Lease’s Duration
- If the lease is short-term (and likely to be terminated soon), spending a large sum on improvements can be unwise, especially if no reimbursement is guaranteed.
- If an oral lease is renewed monthly or yearly without formal documentation, the lessee should clarify the agreement’s length and renewal terms before committing to significant renovations.
Know Your Rights on Termination
- Upon lease termination (voluntary or otherwise), the lessee may negotiate with the lessor over useful or luxurious improvements. If the lessor chooses to keep the improvements, the lessee could be entitled to partial reimbursement (for “useful” improvements) or full compensation (if both parties so agree for “luxurious” improvements).
- If the lessor insists on removal, the lessee must restore the property to its original state before vacating, unless the lessor waives that requirement.
Consult with a Lawyer
- Because unwritten leases frequently give rise to misunderstandings, a lessee (and lessor) may benefit from a short consultation with an attorney, especially where significant money is at stake for renovations.
- A legal professional can help draft a simple memorandum of agreement or at least confirm the extent of renovations permissible under the Civil Code.

7. Relevant Civil Code Provisions for Quick Reference

Article 1642: States that a lease may be made orally or in writing.
Article 1654: Enumerates obligations of the lessor, which includes allowing the lessee peaceful enjoyment of the property.
Article 1657: Enumerates obligations of the lessee, which includes using the thing leased as a diligent father of a family and according to the purpose for which it is intended.
Article 1678: Covers rights of reimbursement or removal of improvements made by the lessee.

Conclusion

Even without a formal written lease, the law in the Philippines provides a framework governing property renovations by a lessee. Under the Civil Code, a lessee may recover some portion of expenses for necessary or useful improvements—provided they acted in good faith and with (or at least without objection by) the lessor. Major renovations or structural changes typically require explicit consent; otherwise, the lessee risks losing any right to reimbursement or facing liability for damages.

Because of the potential pitfalls in unwritten lease arrangements—especially concerning renovations—it is highly advisable for both landlords and tenants to document any changes or agreements in writing. Where doubts or large expenses exist, consulting an attorney is the safest course of action to protect one’s rights and avoid protracted disputes.

DISCLAIMER: This article is intended solely for informational purposes and does not constitute legal advice. For advice on any specific situation, please consult a qualified attorney in the Philippines.