A lease is expressly permitted
The permission is as old as the prohibition. Krivenko v. Register of Deeds, as quoted in Philippine Banking Corporation v. Lui She (G.R. No. L-17587, September 12, 1967, En Banc):
[A]liens are not completely excluded by the Constitution from the use of lands for residential purposes. Since their residence in the Philippines is temporary, they may be granted temporary rights such as a lease contract which is not forbidden by the Constitution. Should they desire to remain here forever and share our fortunes and misfortunes, Filipino citizenship is not impossible to acquire.
A lease gives you possession and use for a defined term while ownership stays with the Filipino lessor — a real, lawful position, provided the contract stays a lease.
The investor lease: what RA 7652 actually is
Brochures love to promise foreigners a fifty-year lease renewable for twenty-five. That term exists, but it belongs to Republic Act No. 7652, the Investors' Lease Act, and it comes with a gate:
Section 4. Coverage.— Any foreign investor investing in the Philippines shall be allowed to lease private lands in accordance with the laws of the Republic of the Philippines subject to the following conditions:
(1) No lease contract shall be for a period exceeding fifty (50) years, renewable once for a period of not more than twenty-five (25) years;
And “investing in the Philippines” is a defined term, not a mood:
(1) "Investing in the Philippines" shall mean making an equity investment in the Philippines through actual remittance of foreign exchange or transfer of assets, whether in the form of capital goods, patents, formulas, or other technological rights or processes, upon registration with the Securities and Exchange Commission
Section 5 of the same Act keeps foreigners not otherwise investing as so defined under the general law on leases to foreigners, and terminates the lease if the investment is withdrawn or the land is put to another use. RA 7652 is an investor regime, not a residential entitlement: a retiree leasing a house lot to live on is not in this statute, and holds instead an ordinary residential lease under the Civil Code, written within the terms of the general foreign-lease law.
The line you must not cross
In Lui She, a Chinese lessee obtained from a 90-year-old widow, within about one year: a 50-year lease, its extension to her whole property, an option to buy conditioned on his becoming a Filipino citizen, then a 99-year term. The Court annulled every contract and returned the land to her estate:
Taken singly, the contracts show nothing that is necessarily illegal, but considered collectively, they reveal an insidious pattern to subvert by indirection what the Constitution directly prohibits. To be sure, a lease to an alien for a reasonable period is valid. So is an option giving an alien the right to buy real property on condition that he is granted Philippine citizenship.
Each piece was legal. The assembly was not:
But if an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of which the Filipino owner cannot sell or otherwise dispose of his property, this to last for 50 years, then it becomes clear that the arrangement is a virtual transfer of ownership whereby the owner divests himself in stages not only of the right to enjoy the land ( jus possidendi, jus utendi, jus fruendi and jus abutendi) but also of the right to dispose of it ( jus disponendi) — rights the sum total of which make up ownership.
A lease stacked with an option or terms that strip the owner of any real right to deal with her land is the arrangement the Court unwinds — see why the workarounds fail.
An over-long investor lease is void — and criminal
Section 7. Penal Provision.— Any contract or agreement made or executed in violation of any of the following prohibited acts shall be null and void ab initio and both contracting parties shall be punished by a fine of not less than One Hundred thousand pesos (₱100,000) nor more than One million pesos (₱1,000,000), or imprisonment of six (6) months to (6) years, or both, at the discretion of the court:
(1) Any provision in the lease agreement stipulating a lease period in excess of that provided in paragraph (1) Section 4;
Both parties — including you, the lessee. Before you sign a long lease, we read it the way the Court read the widow's contracts: as a package. That review is part of our due diligence for Chinese buyers, delivered as a written report before money moves. If a lease is on the table, book a consultation.
Frequently asked questions
Can a Chinese citizen lease land in the Philippines?
Yes. A lease for a reasonable period is lawful, and the Supreme Court has said so consistently since the alien land ban itself. What is not lawful is a lease stacked with options and irrevocable powers until the package adds up to ownership; that arrangement is void.
Is the 50 plus 25 year lease available to anyone?
No. That term belongs to RA 7652, the Investors' Lease Act, and it requires an equity investment registered with the Securities and Exchange Commission, with the leased land used solely for the purpose of the investment. A lease of a house lot to live on does not qualify for it.
Can I take a lease with an option to buy the land?
An option conditioned on your becoming a Filipino citizen is valid on its own. But in Philippine Banking Corporation v. Lui She the Supreme Court annulled a lease, an option and their companion contracts taken together, because collectively they amounted to a virtual transfer of ownership to an alien. Courts examine the package, not each piece.
What happens if a lease runs longer than the law allows?
Under Section 7 of RA 7652, a stipulation exceeding the allowed period is null and void ab initio and both contracting parties face a fine, imprisonment, or both. An over-long lease is not a bargain; it is a contract that does not exist, plus a criminal exposure for the lessee as well as the lessor.