3. Sublease and Assignment

C. Sublease and Assignment of Lease (Civil Code, arts. 1649-1652)

Civil Code, arts. 1649-1652

Article 1649. The lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary. (n)

Article 1650. When in the contract of lease of things there is no express prohibition, the lessee may sublet the thing leased, in whole or in part, without prejudice to his responsibility for the performance of the contract toward the lessor. (1550)

Article 1651. Without prejudice to his obligation toward the sublessor, the sublessee is bound to the lessor for all acts which refer to the use and preservation of the thing leased in the manner stipulated between the lessor and the lessee. (1551)

Article 1652. The sublessee is subsidiarily liable to the lessor for any rent due from the lessee. However, the sublessee shall not be responsible beyond the amount of rent due from him, in accordance with the terms of the sublease, at the time of the extra-judicial demand by the lessor.

Payments of rent in advance by the sublessee shall be deemed not to have been made, so far as the lessor's claim is concerned, unless said payments were effected in virtue of the custom of the place. (1552a)

Sublease

• A lessee may sublease the thing leased unless there is an express prohibition to do so.
• Remedy of lessor if lessee violates prohibition: action for rescission of the lease and damages.
• If the prohibition to sublease is not express but only implied, the sublease will still be allowed.
• Duration of sublease cannot be longer than that of the lease to which it is dependent.
• The prohibition against subleasing may not embrace the taking in of boarders. (Mallarte v. Court of Appeals, G.R. No. 85108, October 4, 1989)
• In a sublease arrangement, there are two distinct leases: the principal lease and the sublease.

NOTE: The sub-lessee remains obligated to the sub-lessor under the sublease, subject to the sub-lessee’s obligations to the lessor under Articles 1651 and 1652 of the Civil Code.

Circumstances when a sub-lessee is made liable to the lessor:

• For all acts which affect the use and preservation of the thing leased in the manner stipulated between the lessor and the lessee.
• For any rent due to the lessor from the lessee which the latter failed to pay:
• Sublessee is subsidiarily liable
• Sublessee shall not be responsible beyond amount of rent due from him, in accordance with the terms of the sublease, at the time of the extrajudicial demand by the lessor.

Accion Directa

A direct action which the lessor may bring against a sublessee who misuses the subleased property or for unpaid rents otherwise due from the original lessee (sublessor).

Alternative remedies of aggrieved party

• Rescission of the contract with damages

Failure of lessor to place the lessee in possession of the premises leased is a case of lessor’s non-compliance with his obligation. (BAR AREA)

Restrictions to Rescission

• Requires judicial action;
• Can be brought only by the aggrieved party; and
• Must be substantial, not slight or minor breach.
• Action for damages only, allowing the lease to remain subsisting.

Q: Under a written contract dated December 1, 1989, Victor leased out his land to Joel for a period of five (5) years at a monthly rental of P1,000.00, to be increased to P1,200.00 and P1,500.00 on the third and fifth year, respectively. On January 1, 1991, Joel subleased the land to Conrad for a period of 2 years at a monthly rental of P1,500.00. On December 31, 1992, Joel assigned the lease to his compadre, Ernie, who acted on the belief that Joel was the rightful owner and possessor of the said lot. Joel has been faithfully paying the stipulated rentals to Victor. When Victor learned on May 15, 1992 about the sublease, he sued Joel and Conrad for rescission of the contract of lease and for damages.

• Will the action prosper? If so, against whom? Explain.
• In case of rescission, discuss the rights and obligations of the parties

A:

• NO, on the stated filing date, the action for rescission cannot rest on Joel’s assignment to Ernie, which is dated December 31, 1992. Joel may sublet to Conrad because there is no express prohibition therefor. (NCC, Art. 1650)

Joel cannot assign the lease to Ernie without the consent of Victor. (NCC, Art. 1649) But the assignment dated December 31, 1992 cannot be a ground for Victor’s action filed on May 15, 1992. The sub-lease to Conrad remained valid for 2 years from January 1, 1991, and had not yet lapsed when the action was filed on May 15, 1992.

• On the stated facts, Victor cannot obtain rescission or recover the property on the basis of that later assignment in his May 15, 1992 action. Joel’s permitted sublease to Conrad supplies no ground for rescission, and the parties’ rights under the lease and sublease remain subject to their terms.

Ernie’s rights against Joel arising from the later assignment cannot be determined as part of an action filed before that assignment.

Q: A is the owner of a lot on which he constructed a building in the total cost of P10, 000,000. Of that amount, B contributed P5,000,000 provided that the building as a whole would be leased to him (B) for a period of ten years from January 1, 1985 to December 31, 1994 at a rental of P100,000 a year. To such condition, A agreed. On December 20, 1990, the building was totally burned. Soon thereafter, A’s workers cleared the debris and started construction of a new building. B then served notice upon A that he would occupy the building being constructed upon completion, for the unexpired portion of the lease term, explaining that he had spent partly for the construction of the building that was burned. A rejected B’s demand. Did A do right in rejecting B’s demand?

A: If the fire was a fortuitous event, A was correct in rejecting the demand of B: the total destruction of the building extinguished the lease. The fact that the building burned does not, by itself, establish that the fire was a fortuitous event. (NCC, Art. 1655)