ADVANCE RENT DONE RIGHT

Many lease contracts in the Philippines require tenants to pay advance rent—often applied to the first months of the lease—alongside a security deposit.

At first glance, it seems straightforward: pay a few months ahead, start the lease, done. But here’s where many contracts (and brokers) get it wrong.

Advance rent is meant to protect the lessor throughout the lease term—not just at the start. It should be applied to the last two months of the lease, not the first two. The security deposit, on the other hand, serves a completely different purpose: to cover unpaid utilities or damages at the end of the lease.

When advance rent is wrongly applied to the initial months, the lessor becomes exposed right after that period ends—exactly when payment defaults tend to occur.

In practice:

A properly structured lease means the lessor receives three months upfront—one month for the start of occupancy, and two months reserved for the final months of the contract.

Why This Matters

During the pandemic, countless tenants defaulted or walked away early. Many lessors, desperate to recover losses, ended up using the security deposit to cover missed rent—a serious mistake. Once you do that, you lose your cushion for repairs or unpaid bills.

If advance rent had been correctly allocated to the last months, the lessor would have remained protected. In cases of pre-termination or bounced checks, they could’ve enforced the lease’s pre-termination clause, evicted the tenant, and forfeited the unused advance rent as a penalty—without touching the security deposit.

Moral of the story:

Advance rent guards your timeline.

Security deposit guards your property.

Mix them up, and you lose both.