Are Lease Contracts Terminated When Owner Dies?
Inheriting property comes with rights and responsibilities. But what happens to a lease agreement if the owner dies? Does the new owner have to honor the lease?
A landmark case sheds light on this situation. DKC Holdings Corporation entered into a contract with Encarnacion Bartolome, giving DKC the option to lease or buy her property. Sadly, Encarnacion passed away before DKC exercised the option to buy. This led to a court case to determine whether DKC's rights under the contract remained valid with Encarnacion's heir, Victor Bartolome.
The court ruled in favor of DKC. Here's why:
- Heirs inherit obligations: Generally, heirs are bound by the contracts signed by the person they inherit from. This is because they inherit the property along with any existing agreements.
- Contract details matter: The specific terms of the lease agreement are important. If the contract doesn't say the rights can't be passed on, and the obligations can be fulfilled by the heir (like leasing property), then the contract likely remains valid.
- Exercising the option: DKC properly exercised its option to lease the property by notifying Victor within the timeframe outlined in the contract.
Key takeaways:
- When inheriting property, you might also inherit the existing lease agreements.
- The validity of the lease after the owner's death depends on the contract's wording and the nature of the obligations.
- The death of the owner doesn't automatically terminate the lease, and the new owner may still be obligated to uphold it.
Note: This article is for informational purposes only and should not be considered legal advice. If you have questions about a specific lease agreement, consult with a lawyer.
Reference:
G.R. No. 118248. (2000). G.R. No. 118248 (lawphil.net)
Civil Code of the Philippines. R.A. 386 (lawphil.net)