How Right-of-Way Affects Land Valuation in the Philippines

Introduction

In the Philippine real estate landscape, the concept of right-of-way (ROW) plays a pivotal role in determining the usability, accessibility, and ultimately the market value of land. ROW refers to a legal easement that grants a property owner the right to pass through another's land to access a public road, utilities, or other essential services. This easement is particularly crucial in a densely populated archipelago where land parcels are often irregularly shaped or isolated due to natural features, urban development, or historical subdivisions. Under Philippine law, ROW can either enhance or diminish land value depending on whether the property benefits from or is burdened by the easement. This article explores the legal foundations of ROW, its implications for land valuation, key factors influencing value adjustments, government acquisition processes, and relevant jurisprudence, providing a comprehensive overview for landowners, investors, and legal practitioners.

Legal Framework Governing Right-of-Way

The primary legal basis for ROW in the Philippines is found in the Civil Code of the Philippines (Republic Act No. 386), specifically Articles 649 to 657, which outline the rules for easements of right-of-way. An easement is defined as a real right imposed on one immovable property (the servient estate) for the benefit of another (the dominant estate) belonging to a different owner. Article 649 stipulates that the owner of an estate enclosed by others without adequate outlet to a public highway is entitled to demand a compulsory easement of ROW through neighboring estates, provided proper indemnity is paid.

To establish a legal easement of ROW, four essential requisites must be met:

Isolation of the Property: The dominant estate must lack adequate access to a public highway or its existing access must be impractical, rendering the property nearly unusable.
Least Prejudicial Route: The ROW must follow the path that causes the least damage or prejudice to the servient estate. Courts evaluate factors such as the route's length, impact on existing structures, and overall burden.
Payment of Indemnity: Compensation is mandatory. For a permanent easement, indemnity includes the value of the land occupied plus any damages to the servient estate, such as loss of utility or restrictions on use. If temporary, it covers damages only.
No Self-Induced Isolation: The isolation must not result from the dominant owner's own acts, such as subdividing the land in a way that creates the enclosure.

Easements can be voluntary (agreed upon by parties) or legal (imposed by law). ROW is typically discontinuous and non-apparent, meaning it is used intermittently and may not be visibly marked. Once established, the easement is registered with the Registry of Deeds and runs with the land, affecting subsequent owners.

In addition to the Civil Code, Republic Act No. 10752 (The Right-of-Way Act), enacted in 2016, facilitates the acquisition of ROW for national government infrastructure projects. This law streamlines expropriation processes, ensuring just compensation based on fair market value (FMV), replacement costs for improvements, and consequential damages. A recent amendment, signed into law by President Ferdinand Marcos Jr. on September 23, 2025, introduces a valuation system using a schedule of market values (SMV) to expedite acquisitions and reduce delays in public projects.

Other relevant statutes include Republic Act No. 8974 (2000), which initially governed ROW acquisitions for infrastructure, emphasizing zonal valuations by the Bureau of Internal Revenue (BIR). These laws underscore that ROW is not merely a private arrangement but a tool for public welfare, balancing individual property rights with societal needs.

Impact of Right-of-Way on Land Valuation

ROW significantly influences land valuation by altering a property's economic potential, usability, and market appeal. Valuation in the Philippines typically relies on methods such as the sales comparison approach (comparing similar properties), cost approach (replacement value minus depreciation), and income approach (potential revenue generation). The presence or absence of ROW affects these assessments in distinct ways for dominant and servient estates.

Effects on the Servient Estate (Burdened Property)

Value Depreciation: An ROW easement encumbers the servient estate, restricting the owner's full enjoyment of the land. The portion occupied by the passageway cannot be developed, leading to a direct loss in usable area. Courts and appraisers often deduct the FMV of the occupied land from the overall property value. Additional depreciation arises from severance damages (reduced value of remaining land due to division) and consequential damages (e.g., noise, privacy loss, or aesthetic impacts from increased traffic).
Quantification of Impact: Compensation for ROW is calculated as: FMV × Area Taken + Replacement Cost of Improvements + Severance & Consequential Damages - Benefits Derived. For instance, if a 50-square-meter strip is taken from a 1,000-square-meter lot valued at PHP 10,000 per square meter, the base compensation is PHP 500,000, plus any damages. This can reduce the servient estate's market value by 5-20%, depending on location and easement width.
Market Perception: Properties with existing ROW easements are often less attractive to buyers, as they imply shared use and potential disputes. In urban areas like Metro Manila, this can lead to a 10-15% valuation discount, while in rural settings, the impact may be higher due to limited alternative access.

Effects on the Dominant Estate (Benefiting Property)

Value Appreciation: For landlocked properties, securing an ROW transforms an isolated parcel into an accessible one, dramatically increasing its utility and market value. Without access, a property's value can plummet by 30-50%, as it becomes unsuitable for residential, commercial, or agricultural use. Establishing ROW can restore or even exceed pre-isolation values by enabling development.
Economic Benefits: Enhanced access facilitates better infrastructure connections, such as utilities and transportation, boosting income potential (e.g., for farming or subdivision). In real estate appraisals, this is factored as a positive adjustment in the sales comparison method.

Government Acquisitions and Just Compensation

For public projects like roads, railways, or flood control, the government exercises eminent domain under RA 10752. Just compensation must be "adequate and just," typically the higher of BIR zonal value or local government unit (LGU) assessments. The 2025 law introduces SMV schedules prepared by licensed appraisers, incorporating market data, location, and physical attributes to ensure fair valuation. Affected owners receive 100% of the offered amount upon expropriation, with disputes resolved through courts.

Factors in government valuation include:

Zonal Valuation: BIR-determined values based on location and use.
Improvements and Crops: Replacement cost without depreciation.
Consequential Damages: Loss to remaining property, offset by any benefits (e.g., increased value from new infrastructure).

Key Factors Influencing Valuation Adjustments

Several elements modulate how ROW affects land value:

Location and Land Use: Urban properties with ROW burdens may see steeper depreciations due to high development potential, while rural lands might prioritize agricultural impacts.
Easement Characteristics: Width, permanence, and visibility matter. A wide, permanent ROW (e.g., for vehicles) causes more depreciation than a narrow footpath.
Market Conditions: In booming areas, ROW can indirectly appreciate values through improved connectivity.
Legal Disputes: Ongoing ROW conflicts can deter buyers, leading to temporary value drops until resolution.
Registration and Documentation: Properly registered easements provide clarity, minimizing valuation uncertainties.

Jurisprudence and Case Studies

Philippine courts have shaped ROW valuation through landmark decisions:

Spouses Williams v. Zerda (2025): The Supreme Court upheld a compulsory ROW for a landlocked property, emphasizing that prior knowledge of isolation does not bar the easement. Compensation was based on FMV of the occupied strip plus damages, illustrating how courts balance necessity with fairness.
Unisource Commercial v. Chung (2009): Clarified that easements are real rights affecting property value permanently, requiring indemnity for both land value and servient estate prejudice.
Road Right-of-Way Disputes: Cases like those discussed in legal commentaries highlight that unregistered ROW can lead to valuation disputes, reducing marketability until judicially confirmed.

In practice, a Metro Manila subdivision case saw a servient lot's value drop by 12% due to a 3-meter ROW, while the dominant lot's value rose by 25% post-establishment.

Dispute Resolution and Remedies

ROW disputes are resolved through:

Amicable Settlement: Negotiation for voluntary easements.
Barangay Conciliation: Mandatory for local disputes.
Court Action: Filing for compulsory easement or quieting of title.
Mediation: Under the Alternative Dispute Resolution Act.

Landowners should consult legal experts to assess valuation impacts and secure fair indemnity.

Conclusion

Right-of-way is a double-edged sword in Philippine land valuation: a boon for inaccessible properties and a burden for those granting passage. Rooted in the Civil Code and bolstered by laws like RA 10752, ROW ensures equitable access while mandating just compensation. Understanding its effects—through depreciation for servient estates, appreciation for dominant ones, and structured government acquisitions—is essential for informed real estate decisions. As infrastructure development accelerates, stakeholders must navigate these dynamics to protect property rights and maximize value in an evolving legal landscape.