Bureau of Local Government Finance Opinion

October 31, 2006 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION The City Assessor Dapitan City S i r : This refers to your letter dated March 6, 2006, requesting opinion relative to the appraisal of agricultural land (fishpond) for purposes of just compensation to the landowners whose properties are being acquired by that city for public use. The request was made in view of the position paper submitted by Atty. Jeneth Napigquit Baje and Mr. Wilfredo T. Baje, Jr., landowners, of a fishpond located thereat which was affected by the implementation of the River Bank Protection Embankment and Development Project along Liboran River (known as "Sunrise Boulevard"). Apparently, the landowners alleged that the initial appraisal of P41,000.00/hectare is "very low", in view of the following contentions: 1. The subject real property is located within the city limits giving a higher value compared to those located in the city outskirts; 2. The prevailing fair market value of fishponds (undeveloped) situated within the city limits is alleged to be ranging from P300,000.00 to P500,000.00 per hectare; and 3. The subject fishpond was acquired in 2004 at P350,000.00/hectare. Its development (excavation works and construction of dikes) cost was P350,000.00/hectare excluding its financing charges and the installation of a water gate amounting to P80,000.00. DAHaTc It may be recalled that this Bureau, under its letter dated April 21, 2006, copy enclosed, had already addressed a similar issue/concern from your office. The pertinent portions of the said letter read below: "However, with respect to the legal basis in the exercise of the power of Eminent Domain by LGUs in acquiring real property for public purpose, Article 32 Rule VI (Eminent Domain) of the IRR implementing the Local Government Code of 1991 as cited under Section 1 (D), Chapter VIII (Miscellaneous Provisions) of the Manual on Real Property Appraisal and Assessment Operations (Local Assessment Regulation No. 01-2004 dated October 1, 2004 of the Department of Finance) shall apply, pertinent portions of which are quoted below: "Section 1. Provincial/City Appraisal Committee . "xxx xxx xxx "D. Modes of Acquisition of Real Property "1. Acquisition through Negotiated Sale As an initial step, the government implementing agency/instrumentality concerned shall negotiate with the owner of the land that is needed for the project for the purchase of the said land, including improvements thereon. In the determination of the price to be paid, the Department of Finance and the Provincial/City Assessors shall extend full assistance and coordination with the personnel of the concerned government implementing agency in the valuation of current market value declared by the owner or administrator of the land, or such current market value as determined by the assessor, whichever is lower, prior to the negotiation. "A.O. No. 50, as amended by R.A. No. 8974, provides that the zonal value shall be the basis of the offer to acquire property for public purpose less the additional 10% increase in the existing zonal value . However, both A.O. No. 50 and R.A. No. 8974 do not provide for the basis and procedure in the acquisition of buildings and improvements as well as the valuation of machinery and equipment to be affected by the project nor do they apply to the acquisition of properties by the local government for public purpose. It is, therefore, necessary that an appraisal committee be created in Local Government Units for the appraisal of properties to be acquired for public purposes. (Emphasis ours) "xxx xxx xxx." "2. Expropriation If a negotiation fails to acquire a private property for public use, purpose, or welfare through purchase, the LGU may expropriate said property through a resolution of the sanggunian authorizing its chief executive to initiate expropriation proceedings. "The local chief executive shall cause the provincial, city or municipal attorney concerned or, in his absence, the provincial or city prosecutor, to file expropriation proceedings in the proper court in accordance with the Rules of Court and other pertinent laws. "The LGU may immediately take possession of the property upon filing of expropriation proceedings and upon making a deposit with the proper court of at least fifteen percent (15%) of the fair market value of the property based on the current tax declaration of the property to be expropriated. "The amount to be paid for the expropriated property shall be determined by the proper court, based on the fair market value at the time of the taking of the property . (Emphasis supplied) HETDAa "xxx xxx xxx." Obviously, the basis of the offer to acquire the subject property for public purposes shall be its existing zonal value less the additional 10% increase pursuant to A.O. No. 50, as amended by R.A. No. 8974. In case the said negotiated sale fails, expropriation proceedings shall apply. It may be worth mentioning, however, that if the real property owners are willing to sell their property, like the parties involved in this case, but at a price higher than what is offered to them by the local government unit, the local chief executive is authorized to hold a conference with the parties concerned for purposes of reaching an agreement on the selling price. If the parties agree on the selling price, a contract of sale shall be drawn and executed (Chapter VIII, Manual on Real Property Appraisal and Assessment Operations). In view of the apparent willingness of the affected landowners to sell their property and to expedite the proceedings, this Bureau recommends the conduct or a conference between the local chief executive and the landowners to settle the issue. AcCTaD Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director