I. Introduction
In Philippine law, “commercial use of agricultural land” isn’t just an everyday phrase – it sits at the intersection of:
- Land classification (public domain vs private),
- Land use / zoning (agricultural vs commercial vs industrial, etc.), and
- Agrarian reform (protection of lands for farmers).
Using agricultural land for commercial purposes (malls, warehouses, subdivisions, resorts, etc.) usually requires formal “conversion” or reclassification, and doing it wrong can lead to:
- Cancellation of titles or CLOAs,
- Administrative fines and criminal liability,
- Invalidation of contracts, and
- Tax and regulatory problems.
This article explains, in Philippine context:
- What counts as agricultural land
- What is generally understood as commercial use
- How the law treats conversion from agricultural to commercial
- When “commercial” activity is still treated as agricultural
- The consequences of unauthorized commercial use
II. Legal Framework
Key legal sources that shape this topic include:
1987 Constitution
- Policies on agrarian reform, protection of agricultural lands, and land use.
Commonwealth Act No. 141 (Public Land Act)
- Classification of lands of the public domain.
Comprehensive Agrarian Reform Law (CARL) – RA 6657, as amended by RA 9700 (CARPER)
- Definition of agricultural land, agrarian reform coverage, and land use conversion provisions.
Local Government Code (LGC) – RA 7160, Section 20
- Authority of LGUs to reclassify agricultural lands to non-agricultural uses.
Local zoning ordinances and Comprehensive Land Use Plans (CLUPs)
- Adopted by cities/municipalities, approved by higher authorities.
DAR Administrative Orders on land use conversion
- Detailed rules on converting agricultural lands to residential, commercial, industrial, etc.
Various special laws
- E.g., on environmental compliance, housing, economic zones, tourism, etc.
III. What Is “Agricultural Land” in Law?
Under RA 6657, agricultural land is generally:
Land devoted to or suitable for agriculture, and not classified as mineral, forest, or national park.
Key ideas:
- It is a use- or suitability-based concept, not merely a tax declaration label.
- It covers land for crop production, livestock, poultry, fishponds, and similar food/fiber production activities.
- Land already classified as industrial, commercial, or residential before June 15, 1988 (the effectivity of CARL) is normally outside agrarian reform coverage, even if physically planted.
Thus, in agrarian reform law, “agricultural” means devoted to farming-type activities or suitable for them — not yet legally converted for urban uses.
IV. What Is “Commercial Use”?
A. General understanding
In Philippine land use and zoning practice, “commercial use” usually refers to the use of land primarily for profit-oriented trade and services, such as:
- Retail (shops, groceries, malls, markets)
- Offices and banks
- Hotels, resorts, restaurants, entertainment facilities
- Warehouses, logistics hubs, showrooms
- Other business establishments serving customers or clients
These are distinct from:
- Residential use – housing, dormitories, apartments
- Industrial use – manufacturing, heavy processing, large-scale warehousing with industrial character
- Institutional use – schools, churches, hospitals, government offices
In zoning maps, these appear as C-1, C-2, C-3 or “Commercial”, “General Commercial”, etc.
B. Commercial vs. Agricultural
For land that is legally “agricultural,” commercial use typically means non-agricultural, urban-type business use of the land itself, such as:
- Converting rice fields into commercial complexes, gasoline stations, big-box retail, hotels;
- Using farmland for purely commercial parking, motorpools, or non-agri warehouses;
- Putting up a strip mall or recreation center in the middle of farmland, without any agricultural function.
By default, this kind of shift is considered land use conversion and cannot be done freely on agrarian land.
V. Conversion of Agricultural Land to Commercial Use
A. Conversion vs. Reclassification
These two concepts are often confused but are legally different:
Land Reclassification (by LGUs, LGC Sec. 20)
- An LGU (city or municipality) changes the zoning category of land from agricultural to commercial, industrial, etc., in its CLUP and zoning ordinance.
- Limits: LGUs may only reclassify up to a certain percentage of agricultural lands (e.g., 10% for many LGUs, higher for highly urbanized cities), subject to requirements and approvals.
- Reclassification affects planning and taxation, but does not automatically allow physical conversion if the land is under agrarian reform or still formally classified as agricultural for DAR purposes.
Land Use Conversion (by DAR)
DAR authorizes the actual change in use of land from agricultural to non-agricultural (e.g., commercial) purposes.
Under Sec. 65 of RA 6657, conversion may be allowed, especially when:
- The land has become more suitable for urban uses (commercial, residential, industrial), or
- It is no longer economically feasible for agriculture.
DAR conversion is required where:
- The land is still agricultural under agrarian reform laws, and
- You want to physically put up commercial structures or uses on it.
Important: LGU reclassification ≠DAR conversion. Often, you need BOTH:
- Reclassification in the zoning ordinance; and
- DAR conversion order to legally convert agrarian land.
B. DAR’s definition of conversion
DAR issuances typically define “land use conversion” as:
The act of authorizing a change in the use of agricultural lands to non-agricultural uses such as residential, commercial, industrial, or other purposes.
So, any move to change the actual use of agricultural land into commercial activity is formally a conversion and must follow DAR rules — especially when the land is under CARP coverage or already awarded to agrarian reform beneficiaries (ARBs).
C. Conditions for conversion to commercial use
While details depend on specific DAR rules in force at the time, typical considerations include:
- Whether the land is irrigated or irrigable (which are generally non-negotiable for conversion, or very strictly controlled);
- Whether the land is prime agricultural land or part of a major production area;
- Compatibility with the CLUP and zoning ordinance;
- Level of urbanization and availability of services in the area;
- Existence of alternative agricultural areas;
- Impact on farmer-beneficiaries and food security.
DAR can deny applications for commercial conversion if the land is:
- Irrigated or already programmed for irrigation;
- Part of protected agricultural areas;
- Strategically important for food production.
VI. Commercial Use Within Agriculture: Agri-Commercial and Agro-Industrial Uses
Not all “commercial” activities on agricultural land automatically make the use non-agricultural. Some uses are ancillary or supportive and are treated as agricultural/allowable, for example:
Agri-commercial uses:
- Trading posts, rice mills, drying pavements, packing houses, cold storage facilities for farm produce;
- Input supply stores (seeds, fertilizer) serving farmers on-site;
Agro-industrial uses:
- Processing facilities that are directly tied to produce from the farm or immediate vicinity (e.g., sugar mill adjacent to cane fields, on a land designated as agro-industrial in zoning);
Farm tourism / agritourism:
- Resorts or accommodations integrated within a real, ongoing farm enterprise, where the main character and zoning may still be agricultural or agro-tourism, depending on local rules.
In CLUPs and zoning ordinances, these may be specifically allowed in agricultural or agro-industrial zones, subject to conditions. They blur the line between “purely commercial” and “agricultural,” and treatment can vary by LGU and by DAR interpretation.
The key test is usually:
Is the primary use still agricultural/production-based, with commercial activity only incidental or supportive? Or has the land effectively become non-agricultural urban commercial in nature?
If it’s the latter, formal conversion is generally required.
VII. Agrarian Reform Implications of Commercial Use
A. CARP-covered lands and ARB rights
Agrarian reform lands (awarded through:
- Emancipation Patents (EPs), or
- Certificates of Land Ownership Award (CLOAs))
are subject to strict limitations:
- ARBs are generally prohibited from selling, transferring, or donating awarded lands within a certain period, and even after, transfers are heavily regulated.
- Unauthorized conversion to non-agricultural uses is prohibited.
B. Illegal conversion
Under RA 6657 as amended (and related DAR rules), illegal conversion includes:
- Changing the use of CARP-covered agricultural land (e.g., from rice fields to commercial establishments) without DAR conversion clearance;
- Allowing or tolerating commercial development that effectively prevents continued agricultural use, even if you haven’t formally changed the tax declaration.
Consequences can include:
- Cancellation of EP/CLOA and reversion of land to the State or redistribution;
- Administrative fines;
- Criminal liability for landowners, ARBs, and even developers who knowingly take part;
- Invalidation of transactions (e.g., sale or lease for commercial use) as contrary to agrarian reform laws.
C. Developers and buyers
Developers, corporations, and individuals who buy or lease agricultural land for commercial projects must ensure:
- The land is not CARP-covered, or if it is, that proper exemption/exclusion/conversion has been granted;
- They have secured DAR clearances and complied with zoning and other permits.
Failure to do so can lead to:
- Projects being stopped or demolished;
- Difficulty in securing titles and building permits;
- Liability for participation in illegal conversion.
VIII. Role of LGUs, CLUPs, and Zoning in Commercial Use
A. LGU authority under the Local Government Code
Section 20 of RA 7160 allows cities and municipalities to:
- Reclassify agricultural lands into non-agricultural (residential, commercial, industrial) based on economic and urbanization needs;
- Subject to percentage caps and approval requirements, and consistent with higher-level plans.
A land that has been reclassified as commercial in the CLUP and zoning ordinance:
- Becomes subject to commercial real property tax rates;
- Is more readily issuable locational clearances and building permits for commercial structures.
However, if the land is under agrarian reform, this zoning change still must be reconciled with DAR rules through conversion.
B. Commercial zoning vs agricultural zoning
- Land in a commercial zone can generally be used for business establishments as specified in the zoning ordinance.
- Land in an agricultural zone is intended for farming and related uses, with only limited commercial activities allowed (e.g., small sari-sari stores, agri-support facilities).
Thus, “commercial use” of agricultural land in violation of zoning may lead to:
- Notice of violation from the LGU,
- Closure orders,
- Demolition of non-conforming structures,
- Denial of permits and business licenses.
IX. Tax, Regulatory, and Environmental Implications
A. Real property tax classification
Once land is formally converted or reclassified and used for commercial purposes:
- Its assessment level typically changes to “commercial,” resulting in higher real property tax.
- Local treasurers rely on tax declarations and zoning classifications; DAR conversion and LGU certifications often trigger changes.
Using land commercially without updating its classification can lead to back taxes, surcharges, or disputes.
B. Environmental and planning approvals
Commercial development on former agricultural land may require:
- Environmental Compliance Certificates (ECC) or Certificates of Non-Coverage;
- Subdivision or development permits (especially for commercial estates or mixed-use projects);
- Clearances from traffic, sanitation, and utility agencies.
All of these agencies will usually ask:
- Is this land properly classified and converted for commercial use?
If not, permits can be denied or revoked.
X. Unauthorized Commercial Use: Liabilities and Risks
Using agricultural land for commercial purposes without proper authority can expose parties to:
Administrative liability
- From DAR (illegal conversion), LGUs (zoning violations), and other regulators.
Criminal liability
- Under agrarian laws (for illegal conversion), and possibly under special laws if there are related irregularities.
Civil liability
- Contracts (leases, sales) may be void or unenforceable if contrary to law;
- Parties may be liable for damages (e.g., to ARBs, to government).
Project risk
- Stop-work orders, demolition, denial of occupancy permits, difficulty in registering titles and mortgages.
In short: commercializing agricultural land is not just a business decision, it is a legal process.
XI. Gray Areas: Mixed-Use, Agri-Tourism, and “Commercial Farms”
A. Mixed-use and agri-tourism
Some projects combine farming with tourism or commercial features:
- Farm resorts
- Pick-and-pay fruit farms
- Cafés and homestays within plantations
Treatment depends on:
- Local zoning (e.g., agro-tourism, agri-industrial, or special-use zones);
- Whether the core and dominant use remains agricultural;
- Whether DAR sees the development as consistent with continued agricultural production or as de facto conversion.
Projects that overbuild the “resort” side while letting the agricultural side become token or ornamental risk being treated as commercial conversion requiring DAR approval.
B. Commercial farms vs commercial land use
“Commercial farm” in agrarian reform sometimes refers to large plantations engaged in commercial-scale agriculture (e.g., bananas, pineapple, sugar).
These are still agricultural use (they produce crops), even if owned by corporations and export-oriented.
“Commercial land use” in the zoning sense, by contrast, means non-agricultural, urban-type businesses, even if located physically in the countryside (e.g., mall, hotel, golf course, logistics park).
Distinguishing the two is crucial when analyzing:
- Whether CARP coverage remains;
- Whether DAR conversion is required.
XII. Practical Takeaways
For landowners and developers:
Don’t assume you can put up a commercial structure on any land just because it’s titled in your name.
Check:
- Zoning classification (CLUP, zoning ordinance, zoning certificate);
- DAR status (CARP-covered or not; need for exemption/exclusion/conversion);
- Existing occupants or ARBs.
Secure:
- DAR conversion order if needed;
- LGU permits;
- Environmental clearances.
For agrarian reform beneficiaries (ARBs):
- Be wary of contracts that require you to “allow” commercial projects without DAR approval.
- Unauthorized conversion can cost you your land and expose you to penalties.
For LGUs and planners:
- Align zoning/reclassification with national policies on food security and agrarian reform.
- Coordinate with DAR when drafting CLUPs and approving developments on agricultural land.
XIII. Conclusion
In Philippine law, “commercial use” of agricultural land is not just about what you build on the property – it is a legally regulated shift from farming-focused use to business-oriented urban use.
- Agricultural land is protected under the Constitution and agrarian laws, especially where farmers and ARBs are involved.
- Commercial use—malls, offices, hotels, non-agri warehouses—on such land usually requires formal land use conversion and compliance with zoning and national policies.
- Some agri-commercial and agro-industrial activities may be allowed without full conversion, but only when they remain truly supportive of genuine agricultural production.
Using agricultural land for commercial purposes without going through the proper processes is not a mere technicality – it can lead to serious legal, financial, and project risks. Understanding the legal meaning of “commercial use” in the agricultural context is therefore essential for farmers, landowners, developers, and local governments alike.