The IRR of RA No. 12252: A Guide for Foreign Investors

The Implementing Rules and Regulations (“IRR”) of Republic Act No. 12252, or the Investors’ Lease Act, introduce key reforms to the legal framework governing foreign leases of private land in the Philippines. Updating the regime under RA No. 7652, the IRR provides allowable lease periods and clarifies the registration and compliance requirements. To qualify to lease private land in the Philippines, a foreign investor (defined as an individual or juridical entity not falling under “Philippine national” as defined in IRR of R.A. No. 12252) must maintain an approved and registered investment with the appropriate government agency.

Under the IRR, qualified foreign investors may lease private land for a total period of up to ninety-nine (99) years, provided the property is used exclusively for the approved and registered investment evidenced by any of the following: Certificate of Registration, any document showing compliance with investment requirements prescribed by the relevant IPA pursuant to existing laws, or any other similar document showing government approval under any other applicable laws. Tourism-related projects are subject to a minimum investment of USD 5 million, with at least 70% infused within three (3) years from the signing of the lease contract. The President retains authority to impose shorter lease terms for projects involving vital services or critical infrastructure when required by national security considerations, national development concerns, or upon the recommendation of the IPA, FIRB, or other relevant government agencies.

The IRR establishes the procedure for registration of a lease contract. Investors must first submit an Application Form to the relevant government agency depending on the involved approved and registered investment of the lease contract: the Board of Investments (“BOI”) for investments outside an ecozone or freeport zone, the relevant Investment Promotion Agency (“IPA”) for investments within an ecozone or freeport zone, TIEZA for tourism zones, or the Fiscal Incentives Review Board (“FIRB”) for high-value projects exceeding PHP 15 billion. The appropriate government agency screens the documents. If found compliant, the Registry of Deeds of the province or city where the land is located shall be notified and upon receipt of notification shall register the lease contract and annotate the lease on the land title or if there is no title, record the same in the Registry of Deeds’ Primary Entry Book for Unregistered Lands upon submission of the requirements.

To retain lease validity, investors must comply with ongoing operational and reporting obligations. Failure to commence the project within three (3) years from signing of the lease contract will result in an order by the appropriate government agency to explain the delay and if merited, require the lessee to commence the project within a reasonable period. Failure to comply and to initiate the project within the provided period shall cause the termination or cancellation of the lease.

Additionally, failure to operate the project for three consecutive years or abandonment of the investment constitutes withdrawal and results in automatic termination of the lease. An outright abandonment of the project at any time and the failure to pay lease rental for three (3) consecutive months coupled with the failure to operate shall be deemed an outright abandonment of the project.

It mut be emphasized that the lease renewal is not guaranteed and requires mutual agreement, supported by proof of the investor’s social and economic contributions to the Philippines. The commitment to making social and economic contributions to the country is also a requirement for registration and annotation.Lastly, the IRR imposes significant penalties for non-compliance, including fines ranging from PHP 1 million to PHP 10 million, and possible imprisonment of responsible officers for prohibited acts. Foreign investors are therefore advised to ensure that lease agreements strictly comply with the Act and include all mandatory contractual provisions to safeguard their long-term interests