Dear Atty. Gab,

Musta Atty! My name is Ana Ibarra, and I’m writing to you because I’m in a very confusing situation regarding the condominium unit I’m renting in Quezon City. I signed a one-year lease contract last January with Mr. Roberto Valdez. The monthly rent is P20,000, and I paid a two-month deposit.

A few months ago, I learned that Mr. Valdez had actually mortgaged the unit to BDO Unibank long before I started renting. Apparently, he defaulted on his loan, and the bank foreclosed on the property. The certificate of sale was registered in April this year. Last month, BDO offered to sell me their rights to the property, as the winning bidder in the foreclosure sale. Since I liked the unit and the price seemed reasonable (P2.5 Million), I decided to buy it. We signed a Deed of Sale, though it mentioned Mr. Valdez still has until April next year to redeem the property.

Since I technically ‘bought’ the property from the bank, I thought I didn’t need to pay rent to Mr. Valdez anymore starting this month (July). However, Mr. Valdez sent me a demand letter yesterday asking for the July rent and threatening to file an ejectment case if I don’t pay and vacate. He insists he’s still the owner until the redemption period expires.

I’m so confused. Do I still need to pay rent to Mr. Valdez even if I already bought the property rights from the bank? Doesn’t buying it make me the owner, or at least give me the right to possess it without paying him? Who is entitled to the rent now? I really don’t want to face an eviction case, but I also feel it’s unfair to pay rent for something I’ve already purchased. Hope you can shed some light on this, Atty. Gab.

Respectfully,
Ana Ibarra

Dear Ana,

Thank you for reaching out. Your situation, involving a leased property that gets foreclosed and subsequently purchased by the tenant during the redemption period, indeed presents a common area of confusion. It’s understandable why you’d question your obligation to pay rent after purchasing the rights from the bank.

In brief, under Philippine law, the original owner (the mortgagor, Mr. Valdez in this case) generally retains ownership and the right to receive rents during the one-year redemption period after a foreclosure sale, even if the purchaser (the bank, and now you, by assignment) holds a certificate of sale. Your purchase gives you the bank’s rights, but full ownership typically only consolidates after the redemption period expires without the original owner redeeming the property. Therefore, your obligation to pay rent to Mr. Valdez likely continues until the redemption period ends, unless specific legal steps are taken by the purchaser to gain possession earlier.

Navigating Ownership and Rent Rights During the Redemption Period

The situation you described involves several intertwined legal principles concerning lease agreements, property foreclosure, and the rights of parties during the redemption period. Let’s break down the key concepts to clarify your position.

First, there’s the general rule about landlord-tenant relationships. Ordinarily, a tenant cannot question the landlord’s title. This is based on the principle of estoppel against tenants. However, this rule has a specific limitation as stated in the Rules of Court:

Sec. 2. Conclusive presumptions. – The following are instances of conclusive presumptions:
(b) The tenant is not permitted to deny the title of his landlord at the time of the commencement of the relation of landlord and tenant between them.
(Rule 131, Section 2(b), Rules of Court, Emphasis supplied)

This means you are generally bound to recognize Mr. Valdez’s title as it existed when you signed the lease. However, the rule does not prevent you from asserting a right or title acquired after the lease began. Since you purchased the bank’s rights subsequent to the start of your lease, the estoppel principle doesn’t strictly prohibit you from claiming these new rights. The core issue, however, isn’t just about denying his initial title, but understanding who holds the superior right to possession and rent during the redemption period.

Crucially, during the redemption period following an extrajudicial foreclosure sale (which typically lasts one year from the date the certificate of sale is registered), the purchaser’s right is considered inchoate or merely expectant. The original owner (the mortgagor, Mr. Valdez) does not immediately lose ownership. Ownership only transfers definitively if the mortgagor fails to redeem the property within the allowed period.

Because Mr. Valdez is still considered the owner during the redemption period, he generally retains the right to the property’s physical possession and the income derived from it, including rent. The law provides a specific mechanism for the purchaser at the foreclosure sale (the bank, whose rights you acquired) to gain possession before the redemption period expires, but it’s not automatic:

Sec. 7. In any sale made under the provisions of this Act, the purchaser may petition the Court… to give him possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act…
(Act No. 3135, Section 7, as amended)

This means that for you (standing in the shoes of the bank as the purchaser) to lawfully take possession during the redemption period and potentially stop paying rent, you would typically need to file an ex parte petition for a writ of possession with the court and post the required bond. Merely purchasing the rights from the bank does not automatically grant you possession against the mortgagor or extinguish your pre-existing obligation as a tenant to pay rent to the current owner (Mr. Valdez).

Furthermore, the law explicitly addresses who is entitled to the income from the property during this period, reinforcing the mortgagor’s rights:

Sec. 32. Rents, earnings and income of property pending redemption. – The purchaser or a redemptioner shall not be entitled to receive the rents, earnings and income of the property sold on execution, or the value of the use and occupation thereof when such property is in the possession of a tenant. All rents, earnings and income derived from the property pending redemption shall belong to the judgment obligor until the expiration of his period of redemption.
(Rule 39, Section 32, Rules of Court, Emphasis supplied)

While this rule specifically mentions execution sales, the Supreme Court has applied this principle analogously to extrajudicial foreclosure sales under Act No. 3135. Therefore, until the redemption period expires in April next year, Mr. Valdez, as the mortgagor (judgment obligor analogue), remains entitled to the rents from the property, including yours. Your obligation to pay him rent under the lease contract generally continues despite your purchase from the bank, unless and until you secure a writ of possession through the court by filing the necessary petition and bond.

Once the redemption period expires without Mr. Valdez redeeming the property, your inchoate right as the purchaser (or the bank’s successor-in-interest) ripens into consolidated ownership. At that point, you become the absolute owner, and Mr. Valdez loses all rights, including the right to collect rent or demand possession. Your obligation to pay rent under the original lease effectively ceases then, as you cannot be both the owner and the tenant paying rent to a former owner.

Practical Advice for Your Situation

• Verify the Redemption Period: Confirm the exact expiration date (one year from the registration of the Certificate of Sale in April). This date is crucial for determining when ownership might consolidate in your favor if Mr. Valdez doesn’t redeem.
• Continue Paying Rent (For Now): To avoid a potential ejectment suit based on non-payment of rent during the redemption period, it is generally advisable to continue paying rent to Mr. Valdez as stipulated in your lease contract, unless you obtain a court order (writ of possession) allowing you to take possession based on your purchase.
• Consider Petitioning for Possession: If you wish to possess the property without paying rent before the redemption period expires, consult a lawyer about filing a petition for a writ of possession under Act No. 3135, Section 7. Be prepared to post the required bond.
• Communicate Clearly: Inform Mr. Valdez in writing that while you acknowledge his right to rent during the redemption period (if you choose to continue paying), you have acquired the purchaser’s rights from the bank and expect full ownership rights upon the expiration of the redemption period if he fails to redeem.
• Document Everything: Keep copies of your lease contract, the Deed of Sale with the bank, official receipts for rent payments, demand letters, and any correspondence with Mr. Valdez and the bank.
• Prepare for Consolidation: Once the redemption period expires without redemption, take steps to formally consolidate the title in your name. This usually involves executing an Affidavit of Consolidation and registering it with the Registry of Deeds.
• Offset Deposit: Remember your two-month deposit. Ensure this is properly accounted for against any unpaid rent or applied towards the last months of your obligation before ownership consolidation, subject to the terms of your original lease.

Navigating this requires understanding that your rights as a tenant under the lease and your rights as a successor-purchaser in a foreclosure sale coexist for a time, creating distinct obligations and entitlements. The critical factor during the redemption period is that the original owner’s rights persist until legally extinguished either by the expiration of the period or by court order upon the purchaser posting a bond.

Hope this helps clarify your position, Ana!

Sincerely,
Atty. Gabriel Ablola

For more specific legal assistance related to your situation, please contact me through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This correspondence is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please schedule a formal consultation.