Bureau of Local Government Finance Opinion

June 4, 1999 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Victor P. Bichara, Jr . Administrator, Jo-an Enterprises, Inc. (JEI) 3rd Floor, Bichara Commercial Complex General Luna Street, Naga City S i r : This refers to your letter dated July 16, 1998 requesting the reclassification, from commercial to residential, of a certain parcel of land covering an area of 1,240 square meters declared in the name of that company located at Barangay San Francisco, that city. It appears that the subject land was appraised by the City Assessor's Office of Naga City on the basis of the approved Schedule of Base Market Values thereat, which indicate that the same is located in a predominantly commercial area, hence the unit value of P4,300.00 per square meter was used in computing its market value. It also appears that although the basis in appraising the same was the indicated unit value for commercial, the subject real property was assessed under Tax Declaration No. 96-023-0295, applying the assessment level for residential land. In your abovementioned letter, you submitted that the subject land was used purely for residential purposes and that the same land is located in the interior portion unsuited for commercial purposes. Although the City Assessor, in his 2nd Indorsement dated August 28, 1998, which is in reply to our 1st Indorsement dated August 13, 1998, did not offer any disagreement about your claim, he nonetheless submitted the following in order to justify his position as embodied in his letter to you dated June 5, 1998, viz: a. City Ordinance No. 93-037, approving and adopting the Schedule of Base Unit Market Value which indicate that the subject land is within a commercial area; b. City Ordinance No. 96-050, fixes the assessment level to be applied to the fair market value of real property to determine the assessed value; c. Updated Tax Map of Sections 04 and 05 of Barangay San Francisco with corresponding Tax Mapping Control Roll; d. The subject Tax Declaration No. 96-023-0295 (PIN-135-02-04-011) and those for the adjacent lots declared under Tax Declaration Nos. 96-023-0299, 96-023-0304, 96-023-0341, 96-023-0342, 96-023-0343, 96-023-0393, 96-023-0398 and 96-023-0403. TcCDIS Under our 3rd Indorsement dated January 15, 1999, the Regional Director for Local Government Finance, Department of Finance, Region V, was requested to submit to this Bureau its full comment and/or recommendation on the subject matter. In reply, the said Regional Director in her 4th Indorsement dated March 11, 1999 recommended that based on the report dated March 11, 1999 submitted by her staff who conducted an ocular inspection on the subject real property, the action made by the City Assessor of Naga as regards the classification, appraisal and assessment of the said property be upheld for reasons that it is in substantial compliance with the existing laws, rules and regulations. Moreover, among the considerations that the said City Assessor has taken in the appraisal and assessment of your subject real property are the provisions of Section 217 of R.A. No. 7160, otherwise known as the Local Government Code of 1991, and Section 20 of Local Assessment Regulations (LAR) No. 1-92 dated October 6, 1992, which are quoted hereunder: Section 217, R.A. No. 7160: "Section 217. Actual Use of Real Property as Basis for Assessment . Real Property shall be classified, valued and assessed on the basis of its actual use regardless of where located, whoever owns it, and whoever uses it. Section 20, LAR No. 1-92: "Section 20. Schedule Reflective of Fair Market Value . The schedule of market values of real property shall reflect the fair market values of real properties in the locality, irrespective of the manner in which they are actually used. However, paragraph (c) of Section II of Local Assessment Regulations No. 1-92 dated October 6, 1992 of the Department of Finance, provides as follows: "xxx xxx xxx "c. A lot or parcel of land classified and valued as commercial or industrial occupied by a building used both for residential and commercial or industrial purposes shall be assessed on the basis of the predominant use of the building or buildings. If the predominant use of the building is residential, the assessment level fixed thereon for residential land shall be applied on the market value of the lot or parcel determined on the basis of the schedule of base market value ... Accordingly, in "appraisal", the basis in determining the fair market values of real property shall be the Schedule of Market Values, which pursuant to Section 212 of the Code, shall be prepared by the Assessor and enacted into an Ordinance by the Sanggunian concerned. Thereupon, after the fair market value has been determined, the ultimate procedure in "assessment"; which is the determination of the value of the property subject to tax, would be to ascertain the "actual use" of the property being assessed as the same shall serve as guide as to what "assessment level", prescribed under Section 218 of R.A. No. 7160, shall be applicable. In view thereof, and since the foregoing considerations appear to have been properly observed in the appraisal and assessment of the subject real property of that company, this Bureau finds the action of the City Assessor of Naga City in order. HDTSIE We trust that this will clarify matters. Very truly yours, (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge