New law extend lease term for foreign investors

Metro Manila, Philippines - Foreigners can now lease lands for a continuous period of 99 years under a new law that aims to improve the investment climate and attract capital while placing new safeguards on land use, Malacañang said on Friday, Sept. 5.

President Ferdinand Marcos Jr. signed Republic Act 12252 on Sept. 3 that extended the shorter 50-year lease and renewable for 25 years for foreigners, and tightened oversight of contracts.

“It is hereby declared the policy of the State to encourage foreign investments consistent with the constitutional mandate to conserve and develop our own patrimony,” the law stated.

The measure authorizes leases of private lands for industries such as factories, agro-industrial enterprises, commercial developments, tourism, agriculture and ecological conservation. To support these ventures, the law outlines what it calls a “flexible and dynamic policy on the granting of long-term leases on private lands to foreign investors.”

Foreign businesses have always raised the constitutional limit to land ownership as a disincentive to foreign investments. While foreigners cannot still own land, the new law intends to offer a level of security and predictability for major investments.

Stricter conditions

While the new law has extended the term, the president may still 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.”

The law requires that the land area leased be proportional to the approved investment and used only for its registered purpose.

Investors must also show proof of registration under the Foreign Investments Act or other applicable laws before contracts can be approved.

Leases may be terminated if investors withdraw or fail to implement projects within a reasonable time. Contracts must also include provisions allowing cancellation in case of a change in project purpose.

The law set a penal clause: violations such as misuse of land or exceeding lease limits will render contracts void and could bring fines of up to P10 million, prison terms of six months to six years, or both.

It authorized the Board of Investments and other promotion agencies to monitor compliance and require explanations from firms whose projects stall.

The Department of Trade and Industry, in tandem with the Land Registration Authority, will issue implementing rules within 90 days.