Can the Government Expropriate Part of a Commercial Building?
Introduction
Yes. The government may expropriate a portion of a commercial building when the taking is for a genuine public use, such as a road-widening project. However, the taking must comply with due process and must be accompanied by payment of just compensation.
When only the frontage, sidewalk area, or a part of the structure is acquired, the owner may recover not only the market value of the portion taken but also severance or consequential damages affecting the remaining building or business property. The amount depends on the extent to which the partial taking reduces the value, usability, or income-producing capacity of what remains.
Constitutional Basis for Expropriation
Article III, Section 9 of the 1987 Constitution provides that private property shall not be taken for public use without just compensation. This imposes two requirements: the taking must serve a public purpose, and the owner must receive the full and fair equivalent of the property taken.
Expropriation proceedings generally have two stages. The first determines whether the government has the authority to condemn the property for a public purpose. The second determines the amount of just compensation, including the value of the property taken and any damages to the remaining property.
In [Republic of the Philippines v. Estate of Juan Maria Posadas III, et al. (2020)](#J4.14), the Supreme Court emphasized that the government’s procedural failure does not eliminate its constitutional obligation to pay for property already taken and used for a public project.
Can a Portion of a Commercial Building Be Taken?
A commercial building may be partially expropriated if the portion taken is necessary for a public project. The government may acquire part of the land, a frontage strip, a driveway, a covered area, or a structural portion of the building, depending on the project’s approved plans.
The government cannot, however, simply occupy or demolish a portion of the structure without lawful authority and payment of compensation. If the taking causes the remaining premises to lose commercial functionality or market value, the owner may claim additional compensation for that injury.
The fact that the building itself is not completely acquired does not defeat a claim for damages. In [Republic of the Philippines, et al. v. Bank of the Philippine Islands (2013)](#J3.14), the Court held that actual taking of the remaining building is unnecessary when the expropriation impairs or decreases the value of the remaining property.
What Is Just Compensation?
Just compensation is generally based on the fair market value of the property at the legally relevant time. Market value refers to the price that a willing buyer and a willing seller, neither being compelled, would agree upon.
In [Republic of the Philippines v. Cebu, et al. (2017)](#J7.16), the Supreme Court reiterated that determining just compensation is a judicial function. Tax declarations, zonal values, and administrative valuations may guide the court, but they do not conclusively determine the property’s value.
The court may consider the property’s location, actual use, zoning classification, improvements, accessibility, income-producing capacity, comparable sales, and other evidence existing at the time of taking.
How Are Severance Damages Calculated?
Severance damages, also called consequential damages, compensate the owner for the reduction in value or usefulness of the remaining property after only part of the property has been taken.
Under Section 6 of Rule 67 of the Rules of Court, commissioners assess the consequential damages to the property not taken and deduct any consequential benefits resulting from the public project. The deduction cannot exceed the amount of consequential damages, and the owner cannot be deprived of the actual value of the property taken.
| Component | What It Covers |
|---|---|
| Value of the portion taken | The market value of the land, building area, fixtures, and other improvements acquired by the government. |
| Damages to improvements | The cost of repairing, replacing, or reconstructing portions of the building or other improvements affected by the taking. |
| Severance or consequential damages | The diminution in value, usability, accessibility, or income-producing capacity of the remaining property. |
| Consequential benefits | Any measurable increase in value or benefit to the remaining property directly resulting from the public project, subject to the limits under Rule 67. |
A commonly used valuation approach is:
Just compensation = value of the portion taken + damages to improvements + severance damages − proven consequential benefits.
This formula is not a mechanical rule that replaces evidence. The court must determine the appropriate amount based on the actual condition of the property and the effects of the taking.
When May Severance Damages Be Awarded?
Severance damages may be awarded when the remaining property suffers an impairment or decrease in value because of the partial expropriation.
Examples include situations where the taking:
- reduces the building’s frontage and visibility;
- removes customer parking or loading areas;
- obstructs or restricts access to the commercial premises;
- requires the removal of a lobby, entrance, showroom, façade, or covered walkway;
- reduces the usable floor area or alters the building’s layout;
- causes the remaining structure to violate building, fire-safety, or zoning requirements; or
- substantially reduces rental income or business capacity.
In [Republic of the Philippines v. Bank of the Philippine Islands (2013)](#J3.14), the Court recognized that consequential damages may be proper even when the remaining building is not physically taken. The controlling inquiry is whether the expropriation impaired or decreased the value of the remaining property.
Similarly, [National Power Corporation v. Marasigan, et al. (2017)](#J5.13) held that consequential damages may be awarded when the remaining portion becomes impaired or less valuable, subject to deduction of proven benefits arising from the public use.
When May Severance Damages Be Denied?
Severance damages are not presumed. The owner must present competent evidence showing that the remaining property suffered a measurable loss.
The claim may be denied when the alleged injury is speculative, unsupported by valuation evidence, or unrelated to the government’s taking. For example, an owner’s unsupported assertion that the business will earn less after road widening may not be sufficient without financial records, expert valuation, or other proof.
In [Republic of the Philippines v. Torres, et al. (2026)](#J1.21), the Court upheld the denial of consequential damages where there was no concrete evidence that the remaining property suffered an impairment or decrease in value. The Court distinguished a proven diminution in value from an allegation based only on projected or unrealized losses.
How Is the Building’s Value Determined?
The valuation should distinguish between the land, the building, and other improvements. The owner should establish the value of the affected portion as it existed at the time of taking, rather than relying solely on the cost of constructing an entirely new building.
Relevant evidence may include:
- an independent appraisal of the land and improvements;
- architectural and engineering plans showing the affected area;
- construction records and replacement-cost estimates;
- photographs and videos taken before and after the taking;
- lease agreements and rental records;
- business permits and floor-area records;
- financial statements and sales records; and
- comparable sales or lease transactions involving similar commercial properties.
The appraisal should identify the property’s value before and after the taking. The difference may help demonstrate the extent of severance damage, provided the analysis isolates the loss caused by the expropriation from other market or business factors.
What Is the Relevant Date of Valuation?
As a general rule, just compensation is determined as of the time of the filing of the complaint or the date of taking, whichever is earlier, subject to applicable law and the facts established in the case.
In [National Power Corporation v. Marasigan, et al. (2017)](#J5.13), the Court explained that the legally relevant valuation date may depend on when the government actually took possession or otherwise deprived the owner of the property. Evidence of an earlier taking must be sufficiently established.
The owner should therefore document the date when the government entered the property, demolished or altered the structure, restricted access, or began using the affected area for the public project.
Road-Widening Projects and Right-of-Way Reservations
Special rules may apply when the property originated from a government patent or other grant subject to a statutory right-of-way reservation. The IRR of Republic Act No. 10752 recognizes rules under Commonwealth Act No. 141 concerning right-of-way acquisition involving patent lands.
For certain lands covered by the Public Land Act, a reserved right-of-way may be taken without payment for the land itself, although damages to improvements may remain compensable. The applicable width and legal effect depend on the date and manner of the original grant, the governing statute, and the facts of the acquisition.
The IRR of Republic Act No. 10752 states that, for the circumstances identified under Commonwealth Act No. 141, the reserved strip may be used without compensation for the land, while the owner must be paid the replacement cost of affected improvements.
In [Buot, et al. v. National Transmission Corporation (2021)](#J6.18), the Court recognized that a statutory right-of-way may limit the owner’s right to payment for the land within the reserved strip. Nevertheless, compensation may become due for the remaining property when enforcement of the easement results in practical destruction, material impairment of value, or deprivation of normal use.
In [Republic of the Philippines v. Torres, et al. (2026)](#J1.21), the Court held that, for the lands and circumstances involved in that case, the 20-meter right-of-way was measured from the centerline of the existing national highway. Any taking beyond the applicable easement required payment of just compensation for the excess, while affected improvements also had to be compensated.
Government Possession Before Final Judgment
In an expropriation case, the government may obtain possession before final determination of compensation if it satisfies the applicable statutory and procedural requirements, including the required deposit with the court.
The IRR of Republic Act No. 10752 provides procedures for right-of-way acquisition, valuation, deposit, and immediate possession. The amount and method of deposit depend on the governing provisions and the type of property involved.
Immediate possession does not mean that the government may avoid paying the final amount adjudged by the court. If the deposit is less than the final compensation, the government remains liable for the balance and applicable legal interest.
Legal Interest on Unpaid Compensation
When there is a delay in paying just compensation, legal interest may be imposed because the unpaid award represents a forbearance of money.
In [Republic of the Philippines v. Torres, et al. (2026)](#J1.21), the Court stated that 6% legal interest on the difference between the final amount awarded and the initial payment accrues from the time of taking until finality of the decision. After finality, the total amount of just compensation earns 6% interest until full payment.
The precise computation depends on the dates of taking, initial payment, finality of judgment, and satisfaction of the award. These dates should be pleaded and supported by the record.
Illustrative Example
Suppose a commercial building fronts a national road. The government acquires a 3-meter strip that contains part of the entrance canopy, customer parking, and a portion of the façade.
The owner may claim:
- the fair market value of the land acquired;
- the value or replacement cost of the affected canopy and façade;
- the cost of restoring the remaining structure to a safe and usable condition; and
- the reduction in value of the remaining commercial property caused by reduced access, visibility, parking, or usable floor area.
If the road project increases traffic exposure and produces a measurable benefit to the remaining property, the government may present evidence of that benefit. The benefit cannot be assumed, and it cannot be used to eliminate payment for the property actually taken.
What Should a Commercial Property Owner Do?
The owner should first determine whether the government’s proposed acquisition is covered by a statutory right-of-way reservation or requires an ordinary expropriation proceeding. This distinction may affect whether compensation is payable for the land, the improvements, or both.
The owner should then preserve evidence of the property’s condition and use before the taking. A before-and-after appraisal, supported by plans, photographs, leases, business records, and engineering reports, is usually more persuasive than a general claim that the property became less profitable.
The owner should also require the government to identify precisely the area to be acquired, the improvements affected, the date of intended taking, and the basis for the proposed valuation. Any agreement or quitclaim should be reviewed carefully before signing, particularly if it may waive claims for consequential damages or unpaid improvements.
Conclusion
The government may expropriate a portion of a commercial building for a road-widening project, but it must establish public use, observe due process, and pay just compensation. The owner is entitled to the value of the land and improvements taken, and may also recover severance damages when the remaining property suffers a proven reduction in value or usefulness.
The strongest claim is supported by reliable valuation evidence showing the property’s condition and value before and after the taking. Owners should document the physical, legal, and business effects of the acquisition and obtain professional legal, engineering, and appraisal advice before accepting payment or executing a quitclaim.
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