Mandaue City padlocks two hotels built on city-owned lots due to ‘anomalous’ land lease contract

Mandaue City Legal Office (CLO) personnel post the closure order at the entrance of Big Hotel at the Mandaue Reclamation Area, ,Mandaue City past 10 a.m. on Wednesday, Feb.27, 2019 over alleged irregularties involved in the lease agreement for the city-owned property where the hotals were constructed. |CDND Photo/ Tonee Despojo

MANDAUE CITY, Cebu— The closure order served against two hotels in this city was to put an end to an “irregular and perceived to be an anomalous transaction” involving a city-owned property, Lawyer Elaine Bathan, the mayor’s executive secretary, said onWednesday.

The Mandaue City Legal Office (CLO) implemented the closure orders signed by Mayor Gabriel Luis Quisumbing against Big Hotel and Big Hotel Suites at around 10 a.m. today, February 27.

“Ato  man gud nga gitan-aw nga dako kaayo nga alkanse ang syudad sa Mandaue from that transaction and all we wanted is to ensure nga ang asset sa syudad is protected and that we maximize the resources of the city and to correct the wrongdoing and rectify it,” Lawyer Elaine Bathan, executive secretary of the mayor, told the press.

The CLO also aserved the closure order to a lessee of Big Hotel, Linear Coffee Shop, for allegedly operating without business registration.

It then proceeded to serve the closure order at the adjoining Big Hotel Suites and to the main Big Hotel located beside the City Time Square.

The closure order stemmed from an alleged irregularity in the terms of the lease agreement on the 1.4-hectare lot that these establishments occupy along Mantawi Drive in Barangay Tipolo.

The property was first leased to Katumanan Hardware in 2007, with a validity of 15 years.

But barely halfway through the lease contract, or in 2013, the city government and Katumanan Hardware, represented by its president Elbert Paragoso, signed an agreement to extend the lease period to 25 years instead.

Under the contract, the lessee shall pay the city P12 per square meter for occupying the property.  But even during that time, according to Bathan, the rental for the property was extremely low.

“The lease is the part of the proprietary function of the city to entities that have the capability of developing the areas but we are also mandated that ang atong value sa pagpa-abang should be based on the prevailing fair market value. P12 per square meter is not the prevailing fair market value,” Bathan said.

“Given the developments, it should go (for)  P1,500 to P2,000 per square meter,” she added.

Bathan said the property was subleased by Katumanan Hadware to Cenore Corp. the company that runs Big Hotel, after the extension of the lease period was ratified.

Subleasing a leased property from the city is allowed under Section 8 of the lease agreement. However, Bathan said that there should have been an authority from the city government first before the property was subleased.

“The lessee may, upon prior approval of the lessor, assign and convey its right to lease in favor of any affiliate or subsidiary,” read the Assignment of Rights; Sublease; Prohibitions sectionof the lease agreement.

But Bathan pointed out that the deed of assignment, which transferred the leasing rights of Katumanan Hardware to Cenore Corp., did not follow the proper timeline as specified by the said section.

Two deeds of assignments were entered into by Cenore Corp. and Katumanan Hardware, one dated March 2013 and the other  dated June 2013.

The earlier deed of assignment was only between the two businesses while the second had the conforme of then mayor and Cebu sixth district Representative Jonas Cortes.

(Cortes is now running for mayor against Quisumbing in the May 13, 2019 midterm elections.)

Bathan added that Cortes did not have the authority from the city council to sign the conforme section of the deed of assignment.

“It is a series of questionable and anomalous transactions that you cannot cover up with ratification because sa sugod pa lang, the deed of assignment did not have the written consent of the mayor and that the mayor did not have the authority from the Sanggunian and that was correctly found by the Commission on Audit and that was what we wanted to rectify,” Bathan said.

Lawyer Jamaal Calipayan, Cortes’ chief of staff, however said that then mayor did not need the authority from the council since the contract allowed that the property may be subleased.

“They (Katumanan Hardware) assigned the contract of lease and it was our legal interpretation that time that there was no need to get another approval [from the council] since it was just an implementation of the provision of the contract,” Calipayan said in a separate interview. /elb