Legal Updates

By Juan Paulo V. Amador, Kris John P. Nilo, and Julius Ernhest P. Berame

Foreign investment has historically been a key driver of growth and stability in the Philippine economy. In 2024, the country recorded a net Foreign Direct Investment (FDI) inflow of USD 110 million, primarily directed toward the manufacturing, real estate, and information and communications sectors. In response to this trend, the Philippine legislature enacted comprehensive reforms designed to attract, facilitate, and stimulate increased foreign investment and participation.

One of the most significant reforms is Republic Act No. 12252 (RA 12252), which became law on 03 September 2025. RA 12252 builds on and amends earlier reforms under Republic Act No. 7652, or the Investors’ Lease Act, by expanding the allowable lease period for foreign investors. From the previous framework of a fifty-year lease renewable once for twenty-five years, the law now permits an aggregate lease term of up to ninety-nine (99) years, offering greater stability and long-term security of tenure for qualified investments.

At the same time, RA 12252 does not abandon regulatory safeguards. Together with its Implementing Rules and Regulations (IRR), the law establishes a framework that conditions long-term leases on approved and registered investments, proper land use, and continued compliance with Philippine laws and national development priorities. With this, the reform balances the need to attract foreign capital with the constitutional imperative to preserve Filipino ownership and control over land. In effect, the law establishes the State’s flexible and dynamic policy to grant long-term leases on private lands to foreign investors for the establishment of productive endeavors.

Extended Lease Periods for Priority Investments

Previously, foreign investors were only allowed to enter into lease agreements for private lands for a maximum period of seventy-five (75) years.  This comprises an initial lease period of fifty (50) years, renewable for another period not exceeding twenty-five (25) years.  Under RA 12252 and its IRR, qualified foreign investors may lease private lands in the Philippines for an aggregate period of up to ninety-nine (99) years, inclusive of any renewals. This reform is particularly significant for capital-intensive and long-gestation projects that require long-term security of tenure for economic viability.

The framework applies to investments in industrial estates, factories, agro-industrial enterprises, tourism projects, agriculture, agro-forestry, and ecological conservation, as well as other similar priority productive enterprises. For investments involving vital services or industries considered critical infrastructure, the President may impose a shorter lease period in the interest of national security or pursuant to government-identified development priorities.

By extending the lease period, the law aims to remove barriers to foreign investment arising from the risks and uncertainties of short-term lease agreements.  Stability and predictability are instrumental in attracting foreign investments and stimulating economic activity.

Eligibility and Conditions for Leasing

RA 12252 and its IRR apply exclusively to a foreign investor investing in the Philippines, defined as an individual or juridical entity that does not qualify as a Philippine national and has an approved and registered investment under applicable investment laws.

Leases are subject to strict statutory conditions. The leased land must be used solely for the approved and registered investment, based on the parties’ mutual agreement. The leased area must be reasonably required for the project and remains subject to agrarian reform laws and local government regulations.

All lease contracts must be registered with the Registry of Deeds and annotated on the corresponding certificate of title or tax declaration. Registration serves as the operative act that renders the lease binding against third persons and protects the enforceability of the leasehold right.

For tourism-related projects, additional safeguards apply. The lease of private land is permitted only for projects with a minimum investment of Five Million US Dollars (USD5,000,000.00), with at least seventy percent (70%) of the investment infused within three (3) years from the signing of the lease contract.

Regulatory Oversight and Jurisdiction

RA 12252 and its IRR establish a clear system of regulatory oversight by designating the appropriate government agency responsible for the screening, monitoring, and termination of lease contracts.

The Board of Investments (BOI) exercises jurisdiction over investments located outside economic zones or freeport zones. For investments located within ecozones or freeport zones, jurisdiction lies with the relevant Investment Promotion Agency (IPA). Lease contracts involving tourism enterprise zones fall under the authority of the Tourism Infrastructure and Enterprise Zone Authority (TIEZA). For investments registered under the CREATE Act with capital exceeding Fifteen Billion Pesos (Php15,000,000,000.00), jurisdiction is vested in the Fiscal Incentives Review Board (FIRB), subject to prior recommendation by the concerned IPA.

Mandatory Lease Contract Provisions

To ensure transparency, enforceability, and regulatory compliance, RA 12252 and its IRR require that all registrable lease contracts contain mandatory provisions. These include a clearly defined lease term not exceeding ninety-nine (99) years, a precise description of the leased area, and a clear statement of the investment purpose.

The lease contract must also expressly recognize the authority of the appropriate government agency to terminate or cancel the lease in case of non-compliance. In addition, the lessee must undertake to make social and economic contributions to the country in the event of lease renewal.

The law has also introduced a provision on subleasing, now allowing a lessee to sublease the property unless there is an express prohibition in the lease contract.  The said sub-lease contracts shall likewise be subject to the same coverage and limitations provided by law for the principal lease contracts.

In any event, the law provides that the registration of the lease and the sub-lease contract with the Registry of Deeds of the province or city where the leased area is located shall be the operative act that renders the lease binding against third persons.

Stability, Transferability, and Enforcement

Once registered, a lease contract enjoys heightened legal stability. It cannot be collaterally attacked and may only be altered, modified, or cancelled through a direct proceeding in accordance with law. Leasehold rights acquired under this framework may be sold, transferred, assigned, or used as security for a loan, subject to the same statutory conditions and limitations imposed on the original lease.

Consistent with its objective of encouraging foreign investors’ commitment to long-term projects, the law seeks to generate employment, develop local industries, and enhance human capital for the benefit of the State and the Nation as a whole.  Furthermore, the stability in long-term lease contracts enables foreign investors to confidently plan and execute long-term projects.

 Termination and Sanctions

RA 12252 and IRR provide clear grounds for the termination or cancellation of lease contracts, subject to due process. These include the withdrawal of the approved investment, the use of the leased premises for unauthorized purposes, or violations of RA 12252 or its IRR.

Withdrawal of investment includes the failure to operate the project for three (3) consecutive years or its outright abandonment. Failure to pay lease rentals for three consecutive months, when coupled with non-operation, also constitutes abandonment. In such cases, the lease may be terminated ipso facto, without prejudice to the lessor’s right to recover damages.

Contracts executed in violation of prohibited acts are null and void ab initio. Additionally, both parties may be penalized with an increased fine ranging from One Million Pesos (Php1,000,000.00) to Ten Million Pesos (Php10,000,000.00), or increased imprisonment term of six (6) months to six (6) years, at the discretion of the court.

Conclusion: Strengthening the Philippines’ Investment Framework

RA 12252 and its IRR mark a decisive step forward in modernizing the Philippines’ legal policy and framework for foreign investment, while adhering to constitutional limitations on land ownership. By extending allowable lease periods, strengthening the stability and enforceability of lease contracts, and clearly defining regulatory oversight, the law provides foreign investors with greater security and predictability, all without compromising national interests.

The availability of extended lease arrangements enables qualified foreign investors to plan, finance, and implement projects and enterprises on a long-term basis, thereby encouraging deeper and more meaningful capital commitments, technology transfer, and skills development.

This article is only for informational and educational purposes, and it is not intended as a legal advice or opinion. For assistance and legal queries, please contact general@srmo-law.com.