Liberalization of long-term lease agreements for foreign investors pursuant to R.A. No. 12252

Under the Philippine Constitution, foreign ownership of land is generally prohibited, reflecting the country's policy of reserving land ownership for Philippine citizens and companies with at least 60 % Philippine ownership. However, there are various exceptions, including long-term lease agreements that allow foreign investors to use private land for an extended period of time without owning it.

On September 3, 2025, the Republic of the Philippines passed Act No. 12252, which amended the Investor Lease Act (Act No. 7652). The amendment essentially extends the maximum total lease term for private land owned by foreign investors from seventy-five (75) years (= previously 50 + 25 extension) to ninety-nine (99) years.

The amended law significantly liberalizes long-term lease terms for foreign investors. However, the benefits are neither blanket nor automatic. Rather, they are sector-specific, project-dependent, and subject to registration and regulatory oversight, as explained in more detail below.

Under the amended law, foreign investors are encouraged to pursue projects in a variety of sectors. These include:

Industrial zones, factories, assembly or processing plants,
agro-industrial enterprises, land development for industrial or commercial purposes,
tourism, agriculture, agroforestry, ecological conservation, and other similar priority productive endeavors.

The law also contains special provisions for certain sectors, such as those dealing with critical infrastructure and tourism projects.

Critical infrastructure

Foreign investors operating in industries considered important to national security or consistent with the government's development priorities may be subject to shorter lease terms, as determined by the President on the recommendation of the Fiscal Incentives Review Board (FIRB) or other competent authorities.

Tourism projects

Lease agreements for investments in the tourism sector are limited to projects with a minimum investment of USD 5,000,000, with 70% of the capital to be contributed within three (3) years of the agreement being signed.

In addition to extending lease terms, the amendment introduces greater flexibility in leasehold arrangements. Subleasing is now permitted with the lessor’s consent, unless expressly prohibited in the lease contract. Leasehold rights may be sold, transferred, or assigned, and may now also be used as security for securing loans.

Registration and Legal Effect of Lease Contracts

The lease contracts are required to be registered with the Register of Deeds to render it legally binding against third persons. A registered lease contract shall not be subject to collateral attack, nor can it be altered, modified, or cancelled, except in direct proceedings in accordance with the law.

Moreover, the lease contracts may only be registered if all of the following conditions are met:

Proof of an approved and registered investment under R.A. No. 7042 (Foreign Investments Act), R.A. No. 11534 (CREATE Act), R.A. No. 12066 (CREATE MORE Act), or other applicable laws;
Clear specification of the commencement date and maximum duration;
A technical description of the leased property;
Proof of performance of preparatory acts for the investment project; and
A clause allowing termination in case of project failure or change in purpose.

Lastly, the law reiterates that investment projects must commence within three (3) years of signing the contract. Failure to comply results in the termination of the lease contract and the revocation of entitlements under the Act. However, the amendment expands the roster of responsible agencies to include the FIRB, Board of Investments (BOI), and other relevant Investment Promotion Agencies (IPAs), thereby strengthening regulatory oversight.

Renewal of Lease Contracts

Previously, lease renewals were restricted until after fifty (50) years. Under the new law, this limitation has been removed. However, renewals remain subject to mutual agreement between the parties and demonstration of social and economic contributions by the foreign investor. This change provides greater flexibility while maintaining accountability.

Implementation and Outlook

Looking ahead, the government is expected to issue the Implementing Rules and Regulations (IRR) within ninety (90) days from the law’s effectiveness. These rules will clarify procedural requirements and ensure consistent application across sectors.

Ultimately, Republic Act No. 12252 marks a significant milestone in the Philippines’ investment policy framework. By extending lease terms and enhancing investor protections, the law is poised to foster greater investment stability, promote economic development, and align the country with regional best practices.