Do Lease Contracts Bind Heirs and Successors-in-Interest?

Dear Property Heir-Lessor,

Thank you for reaching out. The short answer to your question is—yes, as the heir to the commercial property, you are generally bound by the lease agreement entered into by your father. However, there are important legal qualifications, so let me explain in detail.

First, What is a Lease Contract?

Under Article 1643 of the Civil Code of the Philippines (R.A. 386), a lease contract or contract of lease is an agreement whereby one party (lessor) binds himself to give another party (lessee) the enjoyment or use of a thing for a price certain and for a period which may be definite or indefinite, however, not exceeding 99 years. To wit: 

“Article 1643. In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite. However, no lease for more than ninety-nine years shall be valid.”

Since your father entered into the lease, the lessee acquired the contractual right to use the property under the agreed terms. However, you should also verify that the lease was validly executed and remains legally binding.

Do Lease Contracts Bind Heirs and Successors-in-Interest?

For clarity, an “heir” is a person entitled by will or law to inherit from a decedent, while a “successor-in-interest” is anyone who legally acquires another’s property rights or ownership. Thus, all heirs are successors-in-interest, but not all successors-in-interest are heirs.

As an heir who succeeded to your father’s rights over the leased commercial property, you may therefore be bound by the obligations arising from the lease. Your father’s death, by itself, does not extinguish a valid lease or automatically terminate the lessee’s right to occupy the property. Under Article 1311 (1) of the Civil Code:

“Article 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.”

This provision is further supported by Article 428 of the Civil Code, which recognizes the owner’s right to enjoy and dispose of property subject to the limitations established by law.

“Article 428. The owner has the right to enjoy and dispose of a thing, without other limitations than those established by law.

The owner has also a right of action against the holder and possessor of the thing in order to recover it.”  

When ownership passes to an heir, the property is transferred together with existing rights and obligations affecting it. Thus, inheritance does not necessarily give the new owner the right to disregard a lease and its corresponding obligations previously validly executed by the predecessor.

What Are the Legitimate Grounds for Lease Termination by an Heir?

In Sui Man Hui Chan v. Court of Appeals, G.R. No. 147999 (February 27, 2004), the Supreme Court held that lease contracts are not essentially personal in character;  thus, the rights and obligations therein are transmissible to the heirs. 

Further, the general rule is that heirs are bound by contracts entered into by their predecessors-in-interest except when the rights and obligations arising therefrom are not transmissible by their nature, stipulation, or provision of law (Article 1311). Thus, the death of a contracting party does not, by itself, terminate a contract involving property rights; its rights and obligations generally pass to the deceased’s successors or representatives.

There is, however, an important qualification under Article 1673 of the Civil Code about the termination of a lease and judicial ejectment of a lessee. To wit: 

“Article 1673. The lessor may judicially eject the lessee for any of the following causes:

(1) When the period agreed upon, or that which is fixed for the duration of leases under articles 1682 and 1687, has expired;

(2) Lack of payment of the price stipulated;

(3) Violation of any of the conditions agreed upon in the contract;

(4) When the lessee devotes the thing leased to any use or service not stipulated which causes the deterioration thereof; or if he does not observe the requirement in No. 2 of article 1657, as regards the use thereof.

The ejectment of tenants of agricultural lands is governed by special laws.”

Therefore, it is essential to check the lease agreement for specific clauses governing lease duration, termination, assignment, or the effects of the lessor’s death. Under Article 1306, contracting parties have the freedom to establish their own terms—provided they comply with law, morals, good customs, public order, and public policy—which may include specific stipulations for early termination.

How Does Estate Administration Affect an Heir’s Direct Possession and Control Over a Leased Property (An Important Note)?

Under Article 777 of the Civil Code, rights to the succession are transmitted from the moment of the death of the decedent. However, a critical legal distinction exists between inheriting these ownership rights and actually exercising individual authority over the leased property.  

Particularly if the deceased lessor’s estate is undergoing formal judicial settlement or probate proceedings, an individual heir cannot independently take direct legal action against a tenant.  During judicial settlement, the property forms part of the estate under court custody. As a result, formal legal acts—such as collecting rent, issuing formal demand letters, or filing judicial ejectment suits—must be carried out exclusively by the court-appointed executor or administrator.

Until the court formally settles the estate and distributes the specific property to the designated heirs, the executor or administrator remains the sole entity legally authorized to manage the lease and represent the estate in court actions.

So yes, generally, you are bound by your father’s lease as his heir and successor-in-interest. The lease does not end upon his death, unless its terms or the law provides a valid ground for its termination.

I hope this provides a clear explanation and initial guidance. For any further clarification or assistance with the drafting, review, and execution of lease agreements in the Philippines, feel free to contact our team at Duran & Duran-Schulze Law. We are located in Bonifacio Global City (BGC), Taguig, Metro Manila. You may call us at (02) 8928 9535 (landline) or +639171940482 (mobile), or email info@duranschulze.com.