Republic of the Philippines

National Police Commission

NATIONAL HEADQUARTERS, PHILIPPINE NATIONAL POLICE
OFFICE OF THE CHIEF, PNP
Camp Crame, Quezon City

October 26, 2016

PNP MEMORANDUM CIRCULAR
NUMBER 2016-069

GUIDELINES AND PROCEDURES ON THE LEASE OF PNP-OWNED, OCCUPIED

AND MANAGED LOTS, BUILDINGS, AND SPACES

1. REFERENCES:

a. Section 26, Republic Act (RA) No. 6975 as amended; by RA No. 8551;
b. Commission on Audit (COA) Policy Training and Technical Assistance Facility
(PTTAF) Manual on Lease of Lands, Buildings and Spaces;
c. Commission on Audit Circular No. 88-282A;
d. Section 1.2.5, Chapter 1, Part 3 of Joint Circular No. 1 DBM-DENR-DPWH
Manual on Lease of Government Owned Building Space and Lot by Private
Sector;
e. Various COA Audit Observation Memoranda (AOM); and
f. Book IV, New Civil Code of the Philippines.

2. PURPOSE AND SCOPE:

This Memorandum Circular (MC) sets forth the terms, procedures, guidelines,
and obligations of the Philippine National Police (PNP) regarding the lease of PNP-
owned, occupied and administered lots, buildings and spaces to the private sector.

This Circular shall apply to all PNP lands except:

a. Those lands titled in the name of the Republic of the Philippines in which case
prior authorization for such purpose shall be obtained from the President;

b. Those lands titled in the name of the PNP but subject to the condition that said
land shall be non-alienable and shall not be subject to occupation, entry, sale,
lease or other disposition until again declared alienable by proclamation of the
President;

c. Those lands occupied and administered by the PNP which is covered by a

presidential proclamation;

d. Donated lands in favor of the PNP but subject to the condition that said lot shall
be exclusively utilized for PNP governmental functions; and,

e. Those lands of public dominion pursuant to Article 420 of the New Civil Code.

3. SITUATION:

After continuous monitoring of all PNP-owned and occupied real estate

properties, it has been observed that numerous PNP lots/buildings/spaces are being
leased by private entities and/or other private individuals with no contracts of lease being
entered into between the PNP and the lessee. As a result, no revenue, rent or other
pecuniary benefits are being collected from the use of such PNP lots/buildings/spaces.

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 Further, the PNP observed that a number of Audit Observation Memoranda
(AOM) were received in the past stating the same recurring problems. After thorough
research, it was found out that there exists an administrative regulation specifically
Section 1.2.5, Chapter 1, Part 3 of Joint Circular No. 1 DBM-DENR-DPWH Manual on
Lease of Government Owned Building Space and Lot by Private Sector which is
applicable to the current gap identified. In order to define a clear view of the tasks,
procedures, and obligations of concerned units/individuals, this MC is crafted.

4. DEFINITION OF TERMS:

a. Reserved Land - refers to public lands which were withheld back from sale or
any other kind of disposition and which shall only be utilized for the exclusive
purpose for which it was reserved by the President through Presidential
Proclamation.

b. Donated Land - refers to Land given to the PNP or to its predecessor by private
individuals or private juridical persons out of liberality to the PNP or gratitude
for the service rendered by the PNP or as a measure of support and
cooperation to the government, particularly in combating crimes and all forms
of lawlessness. It may be absolutely donated or subject to certain conditions.

c. Chief of Office - refers to the Regional Directors, Provincial Directors, Chiefs

of Police, CPS/MPS and Directors, National Support Units with a delegated
authority from the Chief, PNP.

d. Lease — refers to a contractual agreement which the PNP conveys its

unoccupied portion of lots/buildings/spaces to a private individual/entities in
exchange for a periodic payment or consideration. The PNP, however, retains
ownership over the property being leased.

e. Leased lots/buildings/spaces - refer to the lots/buildings/spaces subject

matter of the contract of lease.

f. Lessee - refers to the party who rents the lots/buildings/spaces.

g. Lessor— refers to the PNP, as represented by the Chief, PNP, being the
owner/administrator of the lots/buildings/spaces.

h. PNP-owned, occupied and administered buildings, lots and spaces - refer

to idle PNP properties such as lots/buildings/spaces which are not part of the
Camp Development Plan.

i. Lease Contract - refers to a written agreement or document entered into by

the lessor and lessee which provides for the terms and conditions of the lease
of property (Annex A).

j. Rental Rates — refer to the opportunity costs that a firm incurs as a result of
using their own assets for ongoing operations instead of other alternative uses.
The implicit rental rate can be either greater than or less than the firm's cost of
capital (Annex B).

k. Proponent - refers to the one who submits an offer to lease vacant PNP lots.

l. Head of Agency- refers to the Chief, PNP.

m. Public Bidding - refers to the procedure conducted by the Special Bidding

Committee for the award of contracts to private sector involving the utilization

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 of PNP lands for a certain period subject to the payment of reasonable
compensation, which is characterized by offer to the public, open competition,
and transparency.

n. Special Bidding Committee - refers to the committee that may be created to

handle the public bidding.

o. Appraisal Committee - refers to the committee initially tasked by the Chief of

Office to evaluate written proposal for the lease of PNP lands to determine the
reasonableness of the price offered, the kind of commercial activity for which
the land will be used, and the capacity of the proponent to pay the rents.

5. GENERAL GUIDELINES

a. Only the Chief, PNP has the authority to decide on transactions over the lease
of PNP lots/buildings/spaces. However, the Chief of Office can enter into a
lease contract involving PNP lots/buildings/spaces upon prior written approval
of delegation by the Chief, Philippine National Police;

b. PNP lands which are not reserved nor donated with reversion clause,
regardless of source or status that were included in or forming part of any
development plan, whether national, regional or provincial development plan,
shall not also be leased to the private sector. However, lands that were
subsequently excluded from camp development plan which were neither
reserved nor donated may be leased to private entities in accordance with this
MC;

c. All lease contracts to be entered into by the PNP with the private sector
involving the use of lands allowed for such purpose by this MC shall be
approved by the Chief, PNP as Head of the PNP organization;

d. Public bidding shall be the only method for the award of lease contracts
pursuant to this MC; and

e. Repairs or construction in the leased property may only be undertaken upon

prior written approval of the Chief, PNP.

In cases where the lessee shall build permanent structures, the same shall be
subject to the approval of the Chief, PNP and the expenses shall be borne by the
lessee. The minimum duration of lease shall be one (1) year unless the
Engineering Service, after evaluation, shall recommend a longer duration so as to
allow equitable recoup of expenses, which in no case shall exceed the period of
ten (10) years and shall not be subject to renewal after the lapse of the said period.
Should the lessee/occupant be interested to extend its lease after the period, the
same should participate in public bidding as stated in the preceding paragraph.

6. PROCEDURES

a. The following heads of offices are authorized to accept applications from

interested private entities/individuals (proponent) and undertake the
preliminary steps in all lease transactions on PNP lots/buildings/spaces:

Unit Designated Officer

NHQ D, HSS
PROs/PPOs/CPOs/MPS/CPS C, RHSG

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 The application shall contain the following:

1) The exact area the interested private entities/individuals would like to

occupy;

2) The purpose for which the interested private entities/individuals shall use
the area; and

3) The proposed monthly rental rate based on Commission on Audit Circular

No. 88-282A.

b. Upon accepting the application, the authorized heads of offices shall create an
Appraisal Committee composed of the following:

Unit Office Appraisal Committee Designation

CDS, HSS Chairman
NHQ C, SWS, HSS Vice-Chairman
C, PD, LSS Member
Deputy,
Chairman
RHSG
PROs/PPOs/CPOs/MPS/
C, Real Estate
CPS Vice-Chairman
Section
Deputy, RCD Member

c. The Appraisal Committee shall be tasked to:

1) Investigate about the property and the financial capacity of the applicant;

2) Determine if property is not needed for police services and is not included
in the latest Camp Development Plan of the PNP; and

3) Compute of the prevailing rental rates.

d. Within three (3) days after investigation, the Appraisal Committee shall prepare
and submit to the Chief, PNP or his delegated authority the result of
investigation. The flow chart for the Appraisal Committee is attached (Annex
C).

e. If the application for lease of PNP lots/buildings/spaces is approved by the

Chief of Office concerned, a public bidding shall commence and a Bidding
Committee will be created composed of three (3) persons who are not
members of the Appraisal Committee as follows:

Unit Office Bidding Committee Desi nation

DDA, HSS Chairman
DD, ES Vice-Chairman
DD, LSS Member
NHQ Legal Officer,
Member
HSS
Deputy,
Secretariat
Logistics, HSS

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 Logistics, HSS Contract Administrator
C, RHSG Chairman
PROs/PPOs/CPOs/MPS C, RPMU Vice-Chairman
/CPS Legal Officer,
Member
PROS

f. The Approving Authority of the Bidding Committee are the following Chief of
Offices:

1) D, HSS for NHQ;

2) Regional Directors for PROs; and, 3) Directors, NASUs and NOSUs.

g. Before a lease on a government-owned building, space or lot may be executed,

public bidding shall be conducted by the Bidding Committee of three (3)
persons who are not members of the Appraisal Committee, to be constituted
by the Secretary. Notice of the date and time of the bidding shall be sent to the
applicant and to all known prospective bidders by messenger or registered
mail, and shall be posted for, at least, ten (10) days at the size, on the bulletin
board of the DENR, the city or municipal hall of the city or municipality where
the premises is located. If the appraised monthly rental for the subject space or
lot is P 100.00 or more, bidding shall be advertised once a week for two
consecutive weeks in a newspaper of general circulation. The winning bidder
shall reimburse the cost of advertisement. Each bidder shall accompany the
bid with a bidder's bond, in cash, certified check or money order, equivalent to
the amount tendered, as guarantee for his faithful compliance with the contract.
Any bid without the required bond shall be deemed defective and shall not be
considered.

h. The Bidding Committee shall evaluate the bids. Within five (5) days from the
opening and evaluation of the bids, the Bidding Committee shall submit their
reports to the Chief of Office concerned which contain a comparative tabulation
on the pertinent facts and date of all bids and bidders.

i. The Bidding Committee declares the winning bidder and the Chief of Office
concerned awards the lease contract.

j. After the bidding process, a written report containing all the necessary
information of the procedures undertaken shall be forwarded to the C, PNP for
his Approval and signing of a Letter of Authority granting the Chief of Office to
enter into a contract of lease with the winning bidder.

k. The flow chart for the Bidding Procedures is attached. (Annex D)

7. PREPARATION OF LEASE CONTRACT:

a. Immediately after the winning bidder has been declared, a Contract of Lease
may then be executed. The contract shall, among others, contain the following
terms, conditions, stipulations, and limitations:

1) As provided for under Section 1.2.5.6, Chapter 1, Part 3 of the DBM-DENR-

DPWH Manual Section 533, GAAM, Vol. 1, the contract shall be for a term
of two years only. Upon termination of the contract, another bidding shall be
held in the renewal of the same. The lessee, whose lease has just
terminated, shall have the right to equal the highest bid if he manifests such
in writing not more than five (5) days from the opening of the bids;

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 2) Section 533 of GAAM, Volume I also requires that the contract period longer
than one year but not exceeding two years, may be fixed solely to allow the
lessee, contractor, and concessionaire to recover the cost of equipment or
leasehold improvement necessary to be brought into or introduced in the
operation to effectively fulfill its part of the agreement;

3) There will be prohibition against the sale of intoxicating liquor;

4) No subleasing or assignment shall be allowed without the prior written

approval of the Chief of Office concerned;

5) No permanent improvements shall be introduced without the prior written

approval of the Chief of Office concerned;

6) The contract shall take effect only upon the approval of the Chief of Office
concerned; and

7) Manner of payment of lease rentals and provision for payment, penalties,

and charges.

a. The Contract of Lease shall also necessarily include the provisions

pertaining to lease as to the obligations of the lessor and lessee under
Book IV, New Civil Code of the Philippines;

b. Immediately after the Contract of Lease has been approved by the Chief
of Office concerned and signed by the winning bidder, it shall be
subscribed by the Notary Public commissioned by both parties; and

c. Within five days after the approval of the contract of lease, the Chief of
Office shall submit a copy thereof to the Unit Auditor and Collecting
Officer for their information.

8. COLLECTION OF RENTAL INCOME

a. The authorized collection officer shall prepare and submit an order of payment
or bill to the Lessee in accordance with the manner and time stipulated in the
approved lease contract;

b. The lessee shall pay the rental in cash or certified check;

c. The authorized collection officer shall acknowledge acceptance of payment by

immediately issuing official receipt pursuant to Section 69, GAAM, Vol. l; and

d. The payment shall be deposited to the account of the respective Finance

Officers to form part of the PNP Trust Funds (Annex E).

9. LIABILITY:

The Chief of Office or any PNP personnel entrusted with the administration or use
of a particular PNP-owned real property shall be held directly and primarily responsible
for any violation appertaining to that particular property. Appropriate criminal, civil and/or
administrative sanctions shall be imposed accordingly.

10. REPEALING CLAUSE:

All policies, memoranda, issuances, and other circulars, or portions thereof

inconsistent with this MC are hereby rescinded/repealed or modified accordingly.

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11. EFFECTIVITY:

This MC shall take effect after 15 days from filing a copy thereof at the University
of the Philippines Law Center in consonance with Sections 3 and 4, Chapter 2, Book Vll
of Executive Order No. 292, otherwise known as "The Revised Administrative Code of
1987," as amended.

Original Signed
RONALD M DELA ROSA
Police Director General
Chief, PNP

Distribution:
P-Staff ADIG, IAS
D-Staff RDs, PROs
Dirs, NSUs DDS, NCRPO

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 LEASE CONTRACT

KNOW ALL MEN BY THESE PRESENTS:

This CONTRACT OF LEASE made and executed at the City of _ this day of
, 20_, by and between:

The PHILIPPINE NATIONAL POLICE, an agency of the Government created and

existing by virtue of and pursuant to Republic Act No. 6975, as amended by Republic Act
No. 8551, with principal office address at Camp Crame, Quezon City represented herein
, after referred to as "LESSOR."

- AND -

(NAME OF LESSEE), Filipino and with residence and postal address at (Address),
hereinafter referred to as the LESSEE.

WITNESSETH; That

WHEREAS, the LESSOR is the owner of THE LEASED PREMISES, (simple

description of the property) situated at (Address of property to be leased);

WHEREAS, during the public bidding conducted on pursuant to PNP

Memorandum Circular _, the LESSEE is declared as the winning bidder;

WHEREAS, the LESSOR agrees to lease out the property to the LESSEE and the
LESSEE is willing to lease the same;

NOW, THEREFORE, for and in consideration of the foregoing premises, the LESSOR
leases unto the LESSEE and the LESSEE hereby accepts from the LESSOR the
LEASED premises, subject to the following:

TERMS AND CONDITION

1. PURPOSES: That premises hereby leased shall be used exclusively by the LESSEE
for purposes only and shall not be diverted to other uses. It is hereby
expressly agreed that if at any time the premises are used for other purposes, the
LESSOR shall have the right to rescind this contract without prejudice to its other rights
under the law.

2. TERM: This term of lease is for TWO (2) YEARS from (Date) to (Date) inclusive. Upon
termination of this contract, another bidding shall be held in the renewal of the same. The
lessee, whose lease has just terminated, shall have the right to equal the highest bid if he
manifests such in writing not more than five (5) days from the opening of the bids;

3. RENTAL RATE: The rental rate for the leased premises shall be in PESOS: AMOUNT
IN WORDS (P 00,000.00), Philippine Currency. All rental payments shall be payable to
the LESSOR.

4. DEPOSIT: That the LESSEE shall deposit to the LESSOR upon signing of this
contract and prior to move-in an amount equivalent to the rent for _
MONTHS or the sum of _ _ PESOS (₱ 00,000.00), Philippine
Currency, wherein the two (2) months deposit shall be applied as rent for the 11th and
12th months and the remaining one (1) month deposit shall answer partially for damages

526
and any other obligations, for utilities such as Water, Electricity, CATV, Telephone,
Association Dues or resulting from violation(s) of any the provision of this contract.

5. DEFAULT PAYMENT: In case of default by the LESSEE in the payment of the rent,
such as when the checks are dishonored, the LESSOR at its option may terminate this
contract and eject the LESSEE. The LESSOR has the right to padlock the premises when
the LESSEE is in default of payment for one (1) month and may forfeit whatever rental
deposit or advances have been given by the LESSEE.

6. SUB-LEASE: The LESSEE shall not directly or indirectly sublet, allow or permit the
leased premises to be occupied in whole or in part by any person, form or corporation,
neither shall the LESSEE assign its rights hereunder to any other person or entity and no
right of interest thereto or therein shall be conferred on or vested in anyone by the
LESSEE without the LESSOR'S written approval.

7. PROHIBITION AGAINST INTOXICATING LIQUORS: The LESSOR is prohibited

from selling intoxicating liquor. Violation of this prohibition shall automatically terminate
this contract.

8. PUBLIC UTILITIES: The LESSEE shall pay for its telephone, electric, cable TV, water,
Internet, association dues and other public services and utilities during the duration of the
lease.

9. FORCE MAJEURE: If whole or any part of the leased premises shall be destroyed or
damaged by fire, flood, lightning, typhoon, earthquake, storm, riot or any other unforeseen
disabling cause of acts of God, as to render the leased premises during the term
substantially unfit for use and occupation of the LESSEE, then this lease contract may be
terminated without compensation by the LESSOR or by the LESSEE by notice in writing
to the other.

10. LESSOR'S RIGHT OF ENTRY: The LESSOR or its authorized agent shall after giving
due notice to the LESSEE shall have the right to enter the premises in the presence of
the LESSEE or its representative at any reasonable hour to examine the same or make
repairs therein or for the operation and maintenance of the building or to exhibit the leased
premises to prospective LESSEE, or for any other lawful purposes which it may deem
necessary.

11. EXPIRATION OF LEASE: At the expiration of the term of this lease or cancellation
thereof, as herein provided, the LESSEE will promptly deliver to the LESSOR the leased
premises with all corresponding keys and in as good and tenable condition as the same
is now, ordinary wear and tear expected devoid of all occupants, movable furniture,
articles and effects of any kind. Non-compliance with the terms of this clause by the
LESSEE will give the LESSOR the right, at the latter's option, to refuse to accept the
delivery of the premises and compel the LESSEE to pay rent therefrom at the same rate
plus Twenty Five (25) % thereof as penalty until the LESSEE shall have complied with
the terms hereof. The same penalty shall be imposed in case the LESSEE fails to leave
the premises after the expiration of this Contract of Lease or termination for any reason
whatsoever.

12.JUDlClAL RELIEF: Should any one of the parties herein be compelled to seek judicial
relief against the other, the losing party shall pay an amount of One Hundred (100) % of
the amount claimed in the complaint as attorney's fees which shall in no case be less than
₱50,000.00 pesos in addition to other cost and damages which the said party may be
entitled to under the law. The venue for any judicial relief shall be in the proper courts of
Quezon City only.

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13. This CONTRACT OF LEASE shall be valid and binding between the parties, their
successors-in-interest and assigns.

IN WITNESS WHEREOF, parties herein affixed their signatures on the date and place
above written.

(Name of Lessor) (Name of Lessee)

LESSOR LESSEE

Signed in the presence of:

ACKNOWLEDGMENT

Republic of the Philippines)

_) S.S.

BEFORE ME, personally appeared:

Name CTC Number Date/Place Issued

(Name of Lessor)
(Name of Lessee)

Known to me and to me known to be the same persons who executed the foregoing
instrument and acknowledged to me that the same is their free and voluntary act and
deed.

This instrument consisting of _ page/s, including the page on which this

acknowledgement is written, has been signed on each and every page thereof by the
concerned parties and their witnesses, and sealed with my notarial seal.

WITNESS MY HAND AND SEAL, on the date and place first above written.

Notary Public

Doc No. ;
Page No. ;
Book No. ;
Series of 20 .

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529
 Formula:
Estimated Unit Construction Cost = Php 22,000.00/sq.m.
Reproduction Cost = Php 22,000.00 x 1
= Php 22,000.00/sq.m.
Formula Rate = Php 22,000.00/sqm x .015
= Php 330.00/sq.m
Rental Rate = Php 330.00/sqm x .098
= Php 323.4/sq.mm
Area Rentable (occupied by PSMBFI) = 94 sq.m.
Monthly Rental = 94 sq.m. x Php 323.4/sq.m.
= Php 30,399.60

For Concessionaires inside Camp Crame:

Based on Information: Php 100.00/sq.m.
Monthly Rental = 94 sq.m. x Php 100.00/sq.m.
= Php 9,400.00
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