How to Convert Residential Property to Commercial Philippines

Land-use conversion in the Philippines converts a piece of agricultural land’s existing physical use into another use. You can use it for commercial, residential, industrial, or other agricultural use other than cultivation of the soil, crop planting, or tree growth, as allowed by DAR (Department of Agrarian Reform). In this guide, we will discuss how to convert residential property to commercial Philippines.

The DAR may permit the reclassification or conversion of land. Its disposal upon application by a beneficiary, with adequate notification for affected parties according to existing laws: however there is one condition that needs fulfilling first-the duty must be completed by both applicant and his guardian before they can apply for such permission from government authorities!

How to Convert Residential Property to Commercial Philippines

How to Convert Residential Property to Commercial Philippines

Follow the below steps to Convert Residential Property to Commercial Philippines

  • Investigate local zoning regulations – Find zoning maps online and compare zoning trends. To convert a residential property to a commercial property, you must request a zone change. This is only possible if you can demonstrate that the transition would benefit the whole community. The primary zoning classifications are as follows: agricultural, commercial, industrial, and residential.
  • Use in both directions.
  • Meet your neighbors – Attend a meeting with any neighborhood associations to discuss the proposed commercial development. Before anything is finished, both the government and the community must give their consent.
  • Attend zoning meetings – Attend meetings to build connections with key actors in the process.
  • Gather formal land description information.
  • Have a backup plan in place.
  • Submit the zoning request.
  • File any paperwork that you can require.
  • Public service announcement to the community.
  • Reactions from the Community.
  • Government adjustments – Any necessary modifications are sought and reviewed.
  • The final vote is when they take the zoning decision.

Businesses can come in different forms; all of them are required to be registered with the Philippine Securities and Exchange Commission (SEC) to avail of special tax exemptions. This includes corporations, partnerships, cooperatives, associations, and others. Businesses engaged in retail trade may operate as single proprietorships or as corporations or associations.

For purposes of this article, we will focus on converting your residential house into commercial use for running a business like food concessionaires. The specific rules governing conversion vary depending on what kind of business you want to establish on the property. And since there is no one-size-fits-all rule, it’s best to consult legal counsel who specializes in real estate matters.

Once the intended use of the property is determined, the next step involves complying with the zoning ordinance and other land use regulations of your city or municipality. Zoning ordinances and land use regulations will determine how and to what extent you can convert the property.

Zoning laws are enacted by local government units (LGUs) which divide their areas into districts according to specific purposes such as residential, commercial, industrial, agricultural, and others. The purpose of these laws is to provide orderly growth and development in a community.

If you want to establish a business like food concessionaires on your residential house, it should be located within an area zoned for commercial purposes. If it’s in an area where home industries are allowed, only small-scale businesses are permitted in a home occupation. Otherwise, a mayor’s permit or business permit will be required.

If your property is in a residential zone, you can get an RB (residential building) license from the municipality or city where it is located. This means that only houses and other living quarters such as nipa hut can be built on this land and not for commercial use like food concessionaries. For the latter, you need to go for a C (commercial) license issued by these LGUs. If your area is zoned agricultural, it does not allow commercial establishments either; only agri-businesses and farmhouses are allowed there.

Keep in mind;

On top of compliance with local zoning ordinances and regulations, building permits must also be secured from your city or municipality. If you want to make additions or modifications to the existing structure like the construction of a second floor, this will also require a building permit(s) and inspection fees (P500 for minor renovation; P5, 000 for a major renovation, and P5, 500 if the property is classified as high-risk).

The next thing you need to address is how to deal with neighborhood right-of-way (easement) problems. These easements don’t appear in your title and they can be considered as part of your neighbor’s property even if they are used by your house only. But it doesn’t mean that you have no say regarding its use since some of them can be laid out, relocated, or abandoned at your expense.

For instance, an easement that is owned by the national government like a sidewalk for pedestrians must be complied with even if it traverses through your house. If you don’t want this public easement to remain in its present location, you need to acquire it. But relocation will require payment of indemnity (P5, 000 per meter) and relocation costs (estimated cost varies depending on the distance covered).

As shown in this article, converting the residential property to the commercial Philippines can be a complicated process that should only be undertaken when one has the expertise to handle the legalities involved in real estate transactions. For our help with all things related to buying, selling, and investing in properties in the Philippines, contacts the experts at Filinvest.

How to Get Residential Property Zoned Commercial

  • Investigate local zoning regulations – Find zoning maps online and compare zoning trends. To convert a residential property to a commercial property, you must request a zone change. This is only possible if you can demonstrate that the transition would benefit the whole community. The primary zoning classifications are as follows: agricultural, commercial, industrial, and residential.
  • Use in both directions.
  • Meet your neighbors – Attend a meeting with any neighborhood associations to discuss the proposed commercial development. Before anything is finished, both the government and the community must give their consent.
  • Attend zoning meetings – Attend meetings to build connections with key actors in the process.
  • Gather formal land description information.
  • Have a backup plan in place.
  • Submit the zoning request.
  • File any paperwork that you can require.
  • Public service announcement to the community.
  • Reactions from the Community.
  • Government adjustments – Any necessary modifications are sought and reviewed.
  • The final vote is when they take the zoning decision.

Convert Residential Property to Commercial Process

How to Convert Residential Property to Commercial Philippines

One of the amendment’s highlights is that no application shall be accepted, docketed, or processed unless the documented criteria for conversion grant are complete and sufficient in form and substance.

Allow our pros to assist you if you want to ensure that everything is done correctly. Land Use Conversion services are provided by CG Garcia Appraisal and Land Title Services.

According to the DAR AO No. 1 series of 2019, all conversion applications and accompanying documentation must be physically filed by the applicant, who must be the landowner or a lawfully authorized representative.

The land-use conversion process is easy

Land-use conversion is not the same as reclassification. The reverse of land-use conversion reclassification recognizes the possibility of arable land to be utilized for non-agricultural purposes. This doesn’t, nevertheless, imply that a proprietor may utilize the same arable site for multiple uses.

Meanwhile, the converted property gives its owner the inherent right to exploit previously classified farming land for its new use.

DAR’s Section 65 of Republic Act No. 6657, as amended by Federal Order 129-A, and paragraph (13), Section 3 of Title XI of the Revised Code Section of 1987, known as EO No. 292, are the precedents.

If you own a residential property, it may be worthwhile to convert it to commercial use, particularly if you live in a congested region, near downtown, or on a busy street that serves as the primary route for your neighborhood.

You may even be familiar with other buildings that have already undergone rezoning and are already from residential to commercial property.

Tips for Converting a Commercial Property to a Residential Property

When converting a commercial property to a residential property, keep in mind the final goal: renting out the property, while various structural upgrades are likely to keep aesthetics and practicality in mind when designing the new property. Here are a few pointers to consider while converting commercial premises into homes:

Allow yourself plenty of time: Every investor wants to reduce holding costs and get tenants in quickly, but rushing a refurbishment project is not the way to do it. While you and your team should stick to a fixed deadline, don’t skimp on the upgrades.

Rely on existing features: Many commercial properties will include one-of-a-kind accents or design elements. When remodeling, use these to your advantage. Leaving an exposed brick wall or high ceilings, for example, might offer your property listings an advantage in your area.

The priority is health and safety: The safety of prospective renters should be a major consideration when purchasing a business property to convert to residential use. A professional must review all remodeling plans to ensure that projects meet high standards.

Consider natural light: Residential tenants will have quite different wish lists than business ones. Your new tenants will almost certainly demand additional windows and access to outside areas. As you design the structure, look for methods to include natural light and community areas.

Frequently Asked Questions

Can the commercial property be converted to residential?

Commercial properties can suffer fixings to residential if zoning and housing laws permit. In addition to zoning laws, investors should also ensure that the commercial property complies with the laws before conversion. Keep in mind that commercial and residential properties don’t serve the same purpose.

How do you convert the commercial property to residential?

  • Examine if an exemption exists.
  • Determine the “use category” of the building.
  • Find out if you need a building permit.
  • Establish a budget.
  • Organize your finances.

Can a residential property be used for commercial purposes?

If your community’s zoning and management rules allow it, you can use your property for commercial activities or rent it out.

What does the law say?

Suppose the zoning rules and housing society management guidelines allow you to utilize or rent your residential property for business purposes. However, each state has its own set of regulations regarding converting residential property to commercial property. Some states allow physicians, attorneys, and chartered accountants to utilize up to 30% of a home for business purposes, whereas others do not.

Finally, highly restricted areas for conversion include:

  • Irrigable areas have definite finance commitments but are not served by water supply schemes.
  • Croplands are used for agro-industrial purposes.
  • Peak districts or regions with altitudes of 500 meters or greater showcase the possibility of producing high or semi-temperate plants.
  • Lands having a land value and acquisition notification.
  • Lands in Ecologically Critical Areas (ECAs)

Bottom Line

Converting a residential property to commercial use can be a little bit difficult in the long term. However, there are some initial costs to consider before starting the process. One of the first costs you will incur is the one that has the application fee with the change of use.

The following must be considered;
  • This particular cost often depends on the size of the land. Estimates range from $500 to $5,000.
  • When the process is over, you will need to be certain that you have the funds to renovate and rebuild the property.
  • Residential and commercial buildings have different construction requirements.
  • Successfully renovating a home may require new wiring and designs.
  • Find an experienced contractor to measure your home and estimate the number of changes needed.
  • Industrial aesthetics are part of the charm of a new home, but it’s also important that the home is safe and livable for new residents.
  • Another major expense when renovating a home is changing the home’s appearance, such as changing the landscaping or decorating.
  • Pay attention to car accessibility and prepare everything to move the space if necessary.

Land use and physical planning is a system for finding and assessing potential land use patterns that promote and assure the state’s varied development plans and goals. Simply put, land use planning is the process of determining the most sustainable, suitable, and useful use of land.

Though largely linked with the delegated role of local government units (LGUs), the national government effectively retains a large chunk of land use planning powers. This is partly because land-use planning is fundamental to national development planning and program execution.

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