The Philippines Liberalizes the Lease of Private Lands by Foreign Investors through Republic Act No. 12252

 

Republic Act No. 12252 (RA 12252), enacted on September 3, 2025, signifies a major modification to the Philippines’ investment policy concerning real property rights of foreign investors. This legislation, officially titled “An Act Liberalizing The Lease Of Private Lands By Foreign Investors, Establishing The Stability Of Long-Term Lease Contracts,” substantially amends Republic Act No. 7652, otherwise known as the Investors’ Lease Act (“RA 7652”).

The declared policy of the State is to encourage foreign investments while conserving and developing the national patrimony. To achieve this, RA 12252 adopts a flexible and dynamic policy regarding long-term lease grants on private lands to foreign investors. These leases are intended for critical priority productive endeavors, including industrial estates, factories, agro-industrial enterprises, tourism, and ecological conservation. A central objective is to ensure the reliability of investors’ lease contracts to provide a stable environment for foreign capital.

Liberalization of Lease Term and Scope

 The most impactful liberalization introduced by RA 12252 pertains to the maximum permissible duration of the lease contract. Under the previously existing regime, foreign investors could lease private lands for an initial period of fifty (50) years, renewable once for not more than twenty-five (25) years.

However, this has been changed by RA 12252. Under the amendments introduced in Section 2 of RA 12252, which amends Section 4(1) of RA 7652, the aggregate period of the lease contract shall not exceed ninety-nine (99) years. This significant extension seeks to promote foreign investment by providing enhanced security for long-term lease arrangements. Thus, Sec. 4 of RA 7652, as amended by RA 12252 now reads:

“SEC. 4. Coverage. – Any foreign investor investing in the Philippines shall be allowed to lease private lands in accordance with the laws of the Republic of the Philippines subject to the following conditions:   

(1) The aggregate period of the lease contract shall not exceed ninety-nine (99) years: Provided, That upon the recommendation of the Fiscal Incentives Review Board (FIRB) or other relevant government agencies, the President of the Philippines may impose a shorter lease period for investors engaged in vital services or industries considered as critical infrastructure, in the interest of national security or pursuant to government-identified priorities for national development;   

(2) The leased area shall be used solely for the purpose of the approved and registered investment upon the mutual agreement of the parties;   

(3) The leased premises shall comprise such area as may be reasonably be required for the purpose of the approved and registered investment upon the mutual agreement of the parties;   

(3) The leased premises shall comprise such area as may be reasonably be required for the purpose of the approved and registered investment subject however to the Comprehensive Agrarian Reform Law and the Local Government Code; and   

(4) The foreign investor must have an approved and registered investment under Republic Act No. 7042, otherwise known as the ‘Foreign Investments Act of 1991’, as amended; Republic Act No. 11534, otherwise known as the ‘Corporate Recovery and Tax Incentives for Enterprises Act’ or ‘CREATE’, as amended by Republic Act No. 12066, otherwise known as ‘CREATE MORE’ Act; or under applicable laws, or has compiled with the investment requirements prescribed by the appropriate Investment Promotion Agency (IPA) pursuant to existing laws;   

(5) The lease contract shall be registered with the Registry of Deeds of the province or city where the leased area is located and annotated on the certificate of title covering the leased area; and   

(6) The Register of Deeds shall register the lease contract if all of the following conditions exist:   

(a) The investor presents proof of an approved and registered investment under subparagraph 4 hereof;  

(b) The date of commencement and maximum duration of the lease are certain;   

(c) The technical description of the property subject of the lease is clearly specified;   

(d) The lessee has performed preparatory acts for the commencement of its investment project; and   

(e) There is a provision in the lease contract providing for its termination in case of a change in the purpose or project for which the lease was intended, or in case of failure to commence the investment project within a reasonable period from the signing of the lease contract.   

The leasehold right acquired under the long-term lease contracts entered into pursuant to this Act may be sold, transferred, assigned, or may serve as security for a loan: Provided, That when a buyer, transferee, assignee, or creditor is a foreigner or foreign-owned enterprise, the conditions and limitations in respect to the use of the leased property as provided under this Act shall continue to apply.”   

In summation, the aggregate period of 99 years for a lease contract can be availed of by a foreign investor subject to the following conditions:

Purpose Limitation: The leased area must be utilized solely for the approved and registered investment purpose, based upon the mutual agreement of the contracting parties.

Area Limitation: The leased premises must comprise only such area as may be reasonably required for the purpose of the approved and registered investment, further subject to the Comprehensive Agrarian Reform Law and the Local Government Code.

Investment Requirement: The foreign investor must possess an approved and registered investment under relevant Philippine laws, such as Republic Act No. 7042 (Foreign Investments Act of 1991), or Republic Act No. 11534 (CREATE Act), as amended by Republic Act No. 12066 (CREATE MORE Act), or must have satisfied investment requirements prescribed by the appropriate Investment Promotion Agency (IPA).

Furthermore, Section 2 of RA 12252, amending Section 4(1) of RA 7652, specifies that the President of the Philippines holds the authority to impose a shorter lease period if the investment involves vital services or industries considered critical infrastructure, particularly in the interest of national security or pursuant to government-identified national development priorities, based on the recommendation of the Fiscal Incentives Review Board (FIRB) or other relevant government agencies.

 

Stability of Lease Contracts through Registration

RA 12252 significantly enhances the stability and security of the lease contracts by mandating and defining the process of registration, a requirement that was absent under the previous law.

Section 3 of RA 12252, which inserts a new Section 4-A into RA 7652 establishes that the registration of the long-term lease contract shall be the operative act that renders the lease binding against third persons. This registration must be executed in accordance with Presidential Decree No. 1529, as amended).

The registration process provides robust legal protection: a registered lease contract shall not be subject to collateral attack and cannot be altered, modified, or cancelled, except through a direct proceeding conducted in accordance with law.

For the Register of Deeds to register the contract, specific criteria must be met, including:

• Presentation of proof of an approved and registered investment
• Certainty regarding the date of commencement and maximum duration of the lease
• A clear specification of the technical description of the property subject to the lease
• Proof that the lessee has performed preparatory acts for the commencement of its investment project
• Inclusion of a contract provision stipulating termination if the purpose of the lease changes or if the investment project fails to commence within a reasonable period from signing

Furthermore, the leasehold right acquired under these long-term contracts is made transferable; it may be sold, transferred, assigned, or serve as security for a loan. Critically, if the recipient of the transfer (buyer, transferee, assignee, or creditor) is a foreigner or foreign-owned enterprise, the original conditions and limitations governing the use of the leased property, as provided under RA 12252, must continue to apply. The Act also permits subleasing, provided there is consent from the lessor, unless expressly prohibited, and requires the sublease contract to be registered with the Registry of Deeds and annotated on the Certificate of Title.

 Limitations, Termination, and Penal Provisions

To balance the liberalization with the protection of national interest, RA 12252 imposes specific safeguards and penal measures.

Section 4 of RA 12252, amending Section 5 of RA 7652 stipulates that the withdrawal of the approved and registered investment in the Philippines within the lease period, or the use of the leased area for an unauthorized purpose, shall automatically warrant the ipso facto termination of the lease contract.

Regarding renewals, while a contract may stipulate renewal at the option of the lessee subject to the same terms, this shall be interpreted as a renewal upon the mutual agreement of the parties. Additionally, the foreign lessee must demonstrate that it has made social and economic contributions to the country as a prerequisite for renewal.

Specific limitations apply to tourism projects where qualified foreign investors are restricted to projects with a minimum investment of Five million US dollars (USD 5,000,000.00), with seventy percent (70%) of that amount required to be infused into the project within three (3) years from the signing of the lease contract.

Non-compliance with project timelines is addressed in Section 7 of RA 12252, amending Section 6 of RA 7652. If the investment project is not commenced within three (3) years from the signing of the lease contract, the FIRB, Board of Investments (BOI), or relevant IPA may require the lessee to explain the delay and mandate commencement within a reasonable period. Failure to comply with this order and initiate the project may result in the revocation of all entitlements granted under the Act, following due notice and hearing.

Furthermore, Section 8 of RA 12252, amending Section 7 of RA 7652, establishes that certain violations render the contract null and void ab initio, and both contracting parties are subject to criminal penalties, including fines ranging from One million pesos (P1,000,000.00) to Ten million pesos (P10,000,000.00) or imprisonment of six (6) months to six (6) years. These prohibited acts include:

• Stipulating a lease period exceeding that provided.
• Using the leased premises for a purpose contrary to existing laws, public order, public policy, morals, or good customs.
• Any agreement resulting in the lease of land exceeding the approved area.

Republic Act No. 12252 liberalized the lease of lands by foreign investors. By expanding the maximum lease term to ninety-nine (99) years and establishing the registration of the lease contract as the operative act, the law provides unprecedented stability and security for long-term foreign investment commitments. Concurrently, the rigorous oversight mechanisms concerning investment purpose, capital infusion requirements, and penal provisions ensure that the liberalization remains balanced by safeguards aimed at protecting public interest and ensuring productive utilization of leased lands.

 

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