On interest due on housing loans

Housing loans account for a bulk of outstanding consumer loans in the Philippines.

In a study conducted by the Bangko Sentral ng Pilipinas in June 2020, the total amount of residential real estate loans (RREL) is the highest with P772 billion out of the P10.6 trillion, which was the total loan portfolio for consumer loans, including, among others, motor vehicle loans, credit card receivables and salary-based general-purpose consumption loans, under the Philippine banking system.

Nevertheless, nonperforming RREL—that is, where the borrower is usually 90 days past due in making any scheduled payments of principal or interest thereon—account for the highest percentage of nonperforming consumer loans (NPL) at P26.77 billion out of the total NPL of P232 billion.

Meanwhile, the nonperforming RREL account for 3.47 percent of the total RREL.

Settling a nonperforming RREL usually means paying the interest due. Take note, however, that under the Civil Code, interest shall be due only when it is expressly stipulated in writing.

Thus, in a string of cases involving the Philippine National Bank (PNB), the Supreme Court declared void the clause in its credit and housing loan agreements, which does not specify the applicable rates of interest.

Instead, this clause merely authorized the PNB to unilaterally determine and impose said rates and notify beforehand its borrowing clients of any increase.

According to the Supreme Court, this clause violates the principle of mutuality of contracts under the Civil Code. Pursuant to this principle, a contract must bind both contracting parties. Its validity or compliance cannot be left to the will of one of them.

This binding effect is premised on the following: that any obligation arising from a contract has the force of law between the parties; and that there must be mutuality between the parties based on their essential equality. Any contract, which appears to be heavily weighed in favor of the parties so as to lead to an unconscionable result, is void.

Meanwhile, as in the PNB cases, the borrower is not prevented from questioning the unilateral increase in the interest made by the lender despite repeatedly paying the imposed interest rates and renewing the loan several times.

In this regard, the Supreme Court declared that the borrower’s silence cannot be construed as an acceptance of the lender’s imposition of these rates.

If the borrower would pay interest when it was not stipulated, the provisions of the Civil Code on solutio indebiti or natural obligations shall apply. In this regard, the legal principle of solutio indebiti requires that if something was received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. Moreover, the lender who accepts an undue payment in bad faith shall pay legal interest thereon and damages, if applicable.

Meanwhile, where the law on natural obligations applies, the borrower does not enjoy a right of action for reimbursement upon proof that he voluntarily paid the interest. Interest may be paid in money or in kind. If it was payable in kind, its value shall be appraised at the current price of the products or goods at the time and place of payment.

As a general rule, interest due and unpaid shall not earn interest. Nevertheless, the contracting parties may capitalize the interest due and unpaid as an added principal by stipulating that it shall earn new interest.

Moreover, interest due and unpaid shall earn legal interest from the time it is judicially demanded—that is, from the time a claim is being filed in court, even when the disputed contract fails to stipulate the same.

In this case, the legal rate of interest shall be 6 percent a year to be computed from either judicial or extrajudicial demand as defined under Article 1169 of the Civil Code.

In one case, the Supreme Court held that this rate is an affirmation of the contracting parties’ intent—that is, by their contract’s silence on a specific rate, then the prevailing legal rate of interest shall be the cost of borrowing money, and which shall not be susceptible to shifts in rate.

Source: Inquirer

Understanding the nature of sublease

“Any blockhead can arrange a sublet. All I ever wanted was to support myself on art,” said frustrated visual artist Walter Keane, who claimed to have painted the images of wide-eyed children actually painted by his then-wife, Margaret Keane.

Despite (or because of) this oversimplified view of a sublet or sublease agreement, it can be the source of conflict between the contracting parties, as shown in the cases decided by the Supreme Court below. Understanding the nature and legalities concerning this agreement is thus key.

In Mallarte v. Court of Appeals, for instance, Spouses Nicolas and Ramona Gopiao leased to Vicente Mallarte a certain apartment on a monthly basis. In this regard, the parties stipulated in their corresponding agreement that Mallarate was prohibited from subleasing or otherwise transferring to another the leased premises, or any portion thereof, without Spouses Gopiao’s prior written consent. Failure to comply with this provision shall be ground for Mallarte’s ejectment therefrom.

During one of their routine inspections, Spouses Gopiao discovered that Mallarte had converted certain areas of the apartment into bed spaces for eight boarders. Thinking that Mallarte had violated the pertinent provision of their agreement, Spouses Gopiao demanded him to vacate the leased premises. He refused to do so, constraining Spouses Gopiao to file an ejectment suit against him before the then City Court.

Meanwhile, Mallarte argued that the boarders were his nephew, nieces, grandchildren and other relatives who had been studying at a nearby university. Moreover, he accused Spouses Gopiao of filing the instant suit because he had refused to pay the increased rent.

This case was eventually appealed to the Supreme Court, which ruled in favor of Mallarte. It held that accepting boarders was not tantamount to a sublease agreement, which necessitated the lessee to surrender his control and possession of the leased premises or any part thereof.

Meanwhile, the sublessee rents from the lessee the same premises for a term less than that stated in the lease agreement.

While a lessee may be expressly restricted from subleasing the premises in the lease agreement, the Supreme Court held that it effectively restrains alienation and is, thus, looked with disfavor by the courts.

In this case, Mallarte remained the actual occupant and possessor of the leased apartment. He merely accepted his relatives as boarders therein and assigned them their rooms or bed spaces, while agreeing to provide them with meals and/or lodging for a price.

Meanwhile, Blas v. Court of Appeals concerned the Premier Theater Building, whose owner, Alfonso Bichara, leased to Emilia Blas. In their lease agreement, Bichara authorized Blas to sublease the premises for a five-year period. Thus, Blas orally agreed to sublease to Arthur Yao a portion of the leased premises for a monthly sublease rental fee.

Afterwards, however, Bichara demanded Yao to pay to him the sublease rental fee since his lease agreement with Blas had already expired. Yao complied with Bichara’s demand, upon which the latter filed against Blas an ejectment suit before the Metropolitan Trial Court (MeTC).

The MeTC and upon appeal, the Regional Trial Court ruled to extend Blas and Bichara’s lease contract for another five years. This development compelled Blas to demand Yao to pay the accrued sublease rentals. Nevertheless, Yao continued to remit his payments to Bichara and refused to vacate the subleased premise when Blas demanded to do so.

This time, Blas filed against Yao an ejectment suit before the MeTC. The MeTC ruled in favor of Blas and directed Yao to vacate the subleased premises. Upon appeal, however, the RTC and Court of Appeals effectively reversed the MeTC’s findings.

In this regard, the Court of Appeals particularly held that Blas was not entitled to eject Yao since the period of the sublease agreement had not yet expired and was effectively renewed upon the renewal of the lease contract. Moreover, Yao had not defaulted on his payment of the sublease rentals since he had done so with Bichara, who in turn was crediting the same to Blas.

In Blas v. Court of Appeals, the Court of Appeals found, among others, that based on the stipulation in Emilia Blas’ lease contract with Alfonso Bichara that the term of the sublease agreement shall be coterminous with the terms of the latter, the sublease agreement was effectively renewed upon the renewal of the lease contract.

Thus, Blas’ sublessee, Arthur Yao, was entitled to stay in the subleased premises.

The Supreme Court reversed and set aside the Court of Appeals’ decision, stating that the disputed stipulation in the lease contract did not prohibit the lessee or sublessor from subletting the premises involved for a period shorter than the duration stated in the lease contract. This is consistent with earlier jurisprudence that the sublessee’s right to remain in the premises depends on the lessee’s right to remain himself.

In this case, Blas was entitled to sublease to Yao the subleased premises on a monthly basis in accordance with the sublease agreement, instead of renewing the sublease for the full period of five years stated in the lease contract.

Moreover, the Supreme Court found that Yao default on his payment of the sublease rental in favor of Blas, despite having paid the same to Bichara. To be sure, a sublease agreement involves two distinct leases—that is, the principal lease and the sublease. The lessee’s personality as the sublessee does not disappear, such that his rights and obligations to the lessor are not acquired by the sublessee.

In this case, Yao’s payment of the sublease rental to Bichara was not payment to Blas.

Meanwhile, Inocencio v. Hospicio de San Jose concerns a parcel of land owned by Hospicio de San Jose (HDSJ), which was leased to German Inocencio. The lease contract stated, among others, that it is non-transferable unless HDSJ’s prior written consent to the transfer is obtained.

German constructed two buildings on the property, which he thereafter subleased, and designated his son, Ramon, to administer them.

German passed away, after which Ramon started collecting the sublease rental. He did not notify HDSJ of German’s death, but was paying the rent to the latter and taxes on the property.

In a subsequent letter to Ramon, HDSJ stated that it recognized that an implied lease contract existed between them, considering that it had been accepting Ramon’s rental payments. Nevertheless, considering that Ramon had been paying the rent on a monthly basis, despite the parties failing to agree on the lease period, HDSJ decided to terminate the lease contract by the end of a particular month.

Ramon sought to renegotiate the terms of the lease contract for the sublessees’ welfare, to which HDSJ refused since neither was it notified nor did it give its consent to Ramon subleasing the premises to 20 families on top of a commercial establishment. HDSJ also refused to accept Ramon’s rental payments.

HDSJ then filed a complaint for unlawful detainer against Ramon and the sublessees before the Metropolitan Trial Court (MeTC). Ramon countered, among others, that HDSJ was estopped from challenging the non-transferability of its lease contract with German since after his death, it admitted that it had an existing lease contract with the former.

MeTC ruled in favor of HDSJ, affirming the non-transferability provision in HDSJ and German’s lease contract. Since it could not be transferred to Ramon as German’s heir, he could not sublease the disputed premises. The Regional Trial Court and Court of Appeals affirmed the MeTC’s findings.

The Supreme Court partly granted Ramon’s appeal. It upheld the non-transferability provision in the lease contract, which merely reiterated the Civil Code provision that the lessee cannot assign the lease without the lessor’s consent, unless there is a contrary stipulation. Nevertheless, in acknowledging its month-to-month lease with Ramon, HDSJ is deemed to have continued its lease with Ramon in his capacity as a lessee, and not as German’s heir.

As such lessee, Ramon was entitled to sublease the premises. To be sure, the assignment or transfer of lease under the Civil Code, and which has been prohibited from the lease contract, is different from a sublease agreement, where the lessee becomes a lessor to the sublessee. The sublessee then becomes liable to pay rent to the original lessee. But, the juridical relation between the lessor and lessee is not dissolved.

Source: Inquirer

What to consider when purchasing solar flood lights

In a world that increasingly values sustainable alternatives, solar flood lights stand at the forefront of innovation in outdoor lighting. It’s the simple and genius solution of harnessing the sun’s power to generate light and create security.

What are some of the most important factors to consider when purchasing fixtures for your property?

LOOK AT LUMENS, NOT WATTS

Traditionally, wattage has been the standard metric for measuring the brightness of light bulbs. But when it comes to solar flood lights, lumens are a more accurate indicator of brightness. Lumens measure the total amount of visible light emitted by a source, providing a better gauge of a light’s actual brightness. For outdoor spaces, consider higher lumen values for increased visibility and security. Look for solar flood lights that provide sufficient lumens to meet your specific illumination needs.

CONSIDER COLOUR TEMPERATURE

Beyond brightness, consider the color temperature of the solar flood lights. Color temperature is measured in Kelvins, with lower values (around 2700K) producing warm, yellow light and higher values (5000K and above) delivering cool, bluish-white light. Our new solar flood lights have high values of around 6000-6500K to deliver clear visibility.

SELECT MOTION SENSOR DESIGNS FOR ENHANCED SECURITY

Many high-quality solar flood lights come equipped with motion sensors, enhancing security and energy efficiency. Motion sensor lights activate when movement is detected, providing an added layer of safety, and discouraging potential intruders. When purchasing solar flood lights, consider models with adjustable sensitivity and duration settings to tailor them to your specific requirements.

CHECK FOR ROBUST MATERIALS

Outdoor lighting faces exposure to various weather conditions, so it’s important to choose solar flood lights designed for durability and weather resistance. Look for lights with an IP65 or higher rating, indicating protection against dust and water ingress. Additionally, consider the build quality, materials used, and any certifications for durability in challenging outdoor environments. The newest solar floods are crafted from ABS, PC, metal and anti-UV materials.

UNDERSTAND THE ADVANTAGES OF LIFEPO4 BATTERIES

The type of battery technology used in any solar flood light has a huge impact on the fixture’s performance and lifespan. LiFePO4 batteries (lithium iron phosphate) are gaining prominence for their superior characteristics. These batteries offer a longer cycle life and can endure more charge-discharge cycles. They’re also known for their impressive thermal stability and safety profile, reducing the risk of overheating or thermal runaway. The LiFePO4 batteries found the newest solar flood lights are one of their major selling points with homeowners, architects and project managers alike, recognizing their superiority.

OPT FOR MONOCRYSTALLINE SILICON PANELS

Another standout feature of these fixtures is their monocrystalline silicon panels. Their benefits are numerous, ranging from high efficiency because of their single-crystal structure to their compact size. They also perform superiorly in low-light conditions. With a longer lifespan, exceptional durability, and the ability to harness energy even in less-than-ideal weather conditions, monocrystalline silicon panels make flood lights a robust and efficient outdoor lighting solution.

THINK ABOUT ADJUSTABLE MOUNTING

Consider the flexibility of mounting options when selecting solar flood lights. Lights with adjustable brackets or flexible mounting arms allow you to direct the light exactly where it’s needed. This adaptability ensures optimal coverage and illumination of specific areas within your outdoor space.

So, while there may be a great many flood lights on the market, these handy tips will help you make a wise selection, to ensure both longevity and performance. Happy buying!

Source: Leading Architecture