Clark airport terminates lease agreement with Farm Fresh 25

MANILA, Philippines - The Clark International Airport Corp. (CIA) has terminated its lease agreement with a company found to have violated its agreement regarding the lease of certain areas at the Clark Civil Aviation Complex.

CIAC president and CEO Victor Jose Luciano wrote Patrick Pelayo, son of Candaba mayor Jerry Pelayo and the president of Farm Fresh 25, citing his company’s violations of the lease agreement that was signed on July 31, 2009 and the company’s failure to correct them.

Because of the violations, CIAC issued a notice of termination of the lease effective Aug. 1, 2010, which was received by Farm Fresh 25 office in Clark.

The violations also prompted CIAC not to endorse Farm Fresh 25’s request for permit to operate to the Clark Development Corp. (CDC), CIA’s mother company.

Farm Fresh 25, which is involved in food hub business with just-in-time capability for exports, had leased 25,879 sq. m. in Clark’s Building 7194 and 4,298 sq. m. in Building 7204 located at the Clark Civil Aviation Complex.

Among the violations cited by Luciano in his letter on July 26, 2010 to Pelayo is the non-payment of advance lease and performance security upon the execution of the agreement. The non-payment was not corrected despite written and verbal reminder by the legal and finance department of CDC.

The advance lease payment, equivalent to six months’ lease to be paid upon the execution of the agreement, was paid only on Dec. 3, 2009 or five months after the signing of the lease agreement.

Also, the performance security, equivalent to five percent of the investment commitment or P500,000 required to be paid upon the execution of the agreement, was also paid only on Jan. 19, 2010 but the check used for the settlement of this company’s obligation under the lease was drawn against an insufficient fund and was settled only three days later.

Luciano also said Farm Fresh 25 was also found to have started construction on its assigned site on May 29, 2009 without the necessary building permits, and this was done two months before the execution of the lease agreement.

CIAC said several verbal reminders and letters were given to Farm Fresh 25. The CDC building utilities regulatory department (BURD) had also sent notices of violation but the company never responded.

In fact the legal department of CDC had scheduled two meetings with the BURD and Farm Fresh 25, but the latter still failed to send any representative to the meetings, according to CIAC.

Also Farm Fresh 25 was found renovating Building 7029, a structure at the back of the Flying V station which is not covered by the lease agreement, and is therefore considered by CIAC as illegal. The company also ignored repeated notices to stop the renovation.

CIAC revealed that the company has subleased the area under the lease agreement to Hyundai IT Corp., a company engaged in the manufacture of digital display products, which used it as an IT warehouse, but such sublease is in violation of the lease agreement with Farm Fresh 25.

Another violation cited by CIAC is the failure of Farm Fresh 25 to pay the minimum guaranteed lease (MGL) provided for under the lease agreement from February 2010 to July 2010. The unpaid MGL, which was set at the rate of $0.10 per sq. m., has amounted to $12,728.82.

In its notice of termination, CIAC asked Farm Fresh 25 to pay its arrearages with CIAC and to return the premises leased to it.