Bureau of Local Government Finance Opinion

June 15, 2012 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Ricardo J. Nieva Municipal Assessor Boac, Marinduque Sir : This has reference to your letter dated April 28, 2011, requesting for clarification on whether it is appropriate to assess boarding houses, hotels, lodging inns, motels, pension houses and dormitories as residential, based on their actual use. Actual use as defined under Section 199 of the Code "refers to the purpose for which the property is principally and predominantly utilized by the person in possession thereof. " HSATIC While Section 217 of the same Code states that: "Sec. 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." It is significant to note that the Local Government Code of 1991 focuses on actual use of the property for classification, valuation, and assessment for real property taxation purposes, regardless of ownership. It may be recalled that the Bureau under its 2nd Indorsement dated October 8, 2003, copy enclosed, opined as follows: "Moreover, be reminded that when PD 464, (otherwise known as the Real Property Tax Code, as amended), was still in force and in effect, that is before the promulgation of R.A. No. 7160, the Department of Finance, in clarifying the principle of "actual use" as basis for assessment of real property, issued Department Order No. 3-74 dated January 31, 1974, copy attached. The pertinent portion thereto reads, to wit: "xxx xxx xxx "3. A building actually used for residential purposes by persons other than the owner on rental basis shall be classified and assessed as residential based on its current level of assessment . . ." "Clearly, this Bureau maintains that Boarding houses and apartments which are used as residences by the occupants should be classified as residential, notwithstanding that the same are for rent." In the Philippines, boarding house is usually similar to lodging house , "a house where lodging are let; houses containing furnished apartments which are let out by week or by month, without meals, or with limited meals" (Blacks Law Dictionary, 5th edition) wherein occupants of a room are renting on a monthly basis. If the lease contract stipulates the inclusion of meals, this will be called "board and lodging." Similarly, dormitory , "a room for sleeping; esp: a large room containing several beds" (Webster's 9th new Collegiate Dictionary), are commonly found within university belts since tenants are mostly students who prefer to live nearby their school campuses. TDcEaH Thus, it could be inferred that lodging houses and dormitories, though devoted by the owner for the object of gaining profit, the consideration would still be that said properties are principally and predominantly being utilized as residences by the occupants thereof. On the other hand, hotel, motel and pension house are defined below: Hotel "is a building held out to the public as a place where all transient persons who come will be received and entertained as guests for compensation and it opens its facilities to the public as a whole rather than limited accessibility to a well-defined private group." (Blacks Law Dictionary 5th edition) Motel "an establishment which provides lodging and parking and in which the rooms are usually accessible from an outdoor parking area." (Webster's 9th new Collegiate Dictionary) Pension House "is a family-run establishment, often guest houses, which offer accommodation services to their guests, and it allows the guests to become familiar with the locals there. Food and drink are all from local produce. Bathroom use is most likely shared, but nonetheless clean." (wikianswers.com). Evidently, hotels and motels are different in nature. Occupants here are treated as guests who can avail of the different facilities, i.e. , for a short period of time, say, just for a number of hours of stay, or days, at the pleasure of the guests. Similarly, pension house in the Philippines is actually just the same as a hotel, but less fancy and usually more affordable with per hour or per day rate. Hence, hotels, motels and pension houses are deemed not devoted and used principally and predominantly for residential purposes . In view of the above discussion, this Bureau is of the opinion that the actual use of the following real properties should be "residential" for taxation purposes: 1. Boarding house; 2. Apartment; 3. Lodging house; and 4. Dormitories. AcICHD On the other hand, it is deemed appropriate that the actual use of the following real properties should be "commercial" for taxation purposes: 1) Hotel; 2) Motel; and 3) Pension house. We trust that this clarifies matters. Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director