THE CONCEPT OF RENT

Newly appointed to the municipal bench, I had the most difficult time determining “reasonable compensation for the use of the premises” in some Ejectment cases where the lawyers failed to discuss the topic beyond specifying a lump sum in their position papers.

Ejectment is the cause of action for eviction. Where the Court finds that a defendant may be evicted, it awards "reasonable compensation" to the plaintiff for the period during which he has been deprived of the use of the disputed premises. Ordinarily, this would be equivalent to rent the plaintiff might have earned had he leased the premises to the defendant or any other party.

Sometimes, when the suit is brought for the violation of a contract of lease, all the Court needs to do is award rentals in arrears. But what if the suit is filed on some other basis than a written contract?

I first brought up this quandary to an expert on Civil Procedure during one of the seminars intended to enhance the knowledge of members of the judiciary and was rewarded with a brusque, “You have to find your own method!”

So off I went to find “my own method”. Poring over the Corpus Juris Secundum, I found this little gem;

“Interest bears the same relation to money that rent does to land.”

Previously, my feeble mind had failed to relate interest with rent. Also coming to my rescue was the ancient Velayo’s Digest (1966), from whence came this contribution:

“And in the absence of any other evidence the assessed value should be considered.”

These two maxims thus allowed me to come up with what I proudly call, “The Navarro Rule of Thumb in fixing reasonable compensation.” Well, that’s what I call it, even though no one else is aware of it.

Where the exact amount of reasonable compensation for the use of the land is not thoroughly discussed by the parties, I take a look at the assessed value in the Tax Declaration of the land or the premises (if there is one). I then fix reasonable compensation at the legal rate of interest of 6% per annum.

Interestingly, many Rent Control Laws worldwide have fixed the legal rate of interest as the maximum allowable rent for a contract of lease (that's what made me crack open the CJS). In ejectment cases, however, I use the legal rate of interest to determine fair compensation.

For those of you who wonder if it shouldn’t be set at 12% per annum, remember that the rate of 12% in the Philippines is for loans or forbearances of money. Otherwise, it should only be 6%. The rate of 12% would best be applied on rentals in arrears or on the amount of compensation granted by the Court itself when the judgment becomes final.