Apartment Building with Leasable Spaces Guide

Quick overview of key steps

This guide focuses on apartment buildings with ground-floor commercial or mixed-use units. Requirements and fees vary by city/municipality and project size, but most projects go through these steps:

Feasibility & site due diligence.
Secure land/title, survey, and zoning/locational clearances.
Prepare architectural & structural plans with licensed professionals.
Pre-approvals from barangay and LGU planning/zoning.
Apply for Building Permit (including electrical, sanitary, mechanical permits).
Environmental compliance if required (DENR ECC or IEE checklist).
Fire safety clearances and inspections (FSEC/FSIC).
Construction with periodic inspections.
Certificate of Completion, Occupancy Permit, FSIC before accepting tenants.
Business registration and tax compliance for leasing activities.
Ongoing renewals (fire safety, business permits, property tax, tax filings).

1) Feasibility & due diligence

What to do (first week–month)

Confirm land title (OCT/TCT/CCT) and lot boundaries; get a certified copy from the Registry of Deeds.
Check zoning / land use to confirm that residential apartments plus commercial units are allowed or if you need a zoning variance/conditional use.

Why it matters

If zoning does not allow business spaces or higher-density residential use, you may need locational clearance or a variance, which can delay your project. Always talk to your City Planning Office early.

2) Engage licensed professionals

What you need

Architect and civil/structural engineer to prepare full plans, specifications, structural calculations, and cost estimate.
MEP engineers (mechanical, electrical, plumbing/sanitary) for multi-storey or more complex buildings.
Geotechnical report/soil test for certain heights or if required by LGU.

Their stamps and signatures are mandatory for Building Permit applications. LGU checklists and the National Building Code (PD 1096) confirm these requirements.

Cost note

Professional fees for architect/engineer packages typically range from around 3%–8% of construction cost, depending on scope and whether design-and-build is included. Always get a written proposal or contract.

3) Barangay clearance & locational/use clearances

Common documents

Barangay clearance to build or to process permits.
Location plan or vicinity map.
Proof of land ownership (title / deed) and tax declaration.

Estimated barangay fees

Barangay clearance fees are usually modest; many sources cite ranges around ₱500–₱1,500 for basic business clearances, but your barangay ordinance controls the exact amount.

4) Building Permit application (major LGU step)

What's included

Submit a unified Building Permit application at the Office of the Building Official (OBO) at City/Municipal Hall. This typically includes:

Architectural, structural, electrical, sanitary/plumbing, and mechanical plans (signed and sealed).
Proof of ownership (title/deed), tax declaration, barangay clearance, and locational clearance.
Bill of materials / cost estimate.
Professional IDs/PRC licenses of architects and engineers.
Initial Fire Safety Evaluation requirements/receipts from BFP.

How fees are calculated

LGUs compute permit fees based on estimated construction cost or total floor area using their revenue ordinances. A typical assessment combines:

Building permit fee.
Electrical permit.
Sanitary/plumbing permit.
Mechanical permit (if applicable).
Processing and inspection fees.

For single houses, references cite combined fees around ₱6,000–₱12,000. For multi-storey apartments, total permit and allied fees can reach tens to hundreds of thousands of pesos, depending on building size and LGU schedule.

5) Environmental compliance (DENR-EMB), if required

Some apartment or mixed-use projects must secure an Environmental Compliance Certificate (ECC) or submit an Initial Environmental Examination (IEE) / checklist under PD 1586 and DENR rules, especially if:

The project is large enough to reach coverage thresholds.
The site is in an environmentally critical area (ECA).

Many smaller residential apartments do not require a full ECC, but when in doubt, confirm with the DENR-EMB regional office.

Estimated ECC/IEE fees (official)

Sample DENR schedules show official application fees such as ₱5,000 for IEE checklist and higher amounts for full EIS/PEIS (e.g., ₱15,000). Consultancy fees for preparing studies can be significantly higher.

6) Fire safety clearances (BFP)

The Bureau of Fire Protection (BFP) handles both the Fire Safety Evaluation Clearance (FSEC) during permitting and the Fire Safety Inspection Certificate (FSIC) before occupancy.

Submit fire protection plans along with building permit documents.
Pay Fire Code-related fees and any construction fire tax based on project value.
Request FSIC inspection after completion; FSIC is usually required before Occupancy Permit and Business Permit.

BFP fees and fire taxes are set in the Fire Code IRR and local schedules; check your local BFP office for the latest computation.

7) Construction and periodic inspections

As the building is constructed, expect inspections by the Building Official and BFP at various stages (foundation, structural framing, electrical, plumbing, and final).

Maintain as-built documentation and comply with all inspection notices. Non-compliance can delay or block issuance of the Occupancy Permit.

8) Certificate of Completion & Occupancy Permit

What you must obtain before leasing units

Certificate of Completion signed by your architect and engineers.
Occupancy Permit / Certificate of Occupancy from the OBO after final inspection.
FSIC from BFP for the completed building.

You typically cannot legally allow occupancy of apartment or commercial units until the Occupancy Permit is issued.

9) Business & tax registrations for leasing

Immediate tasks once you plan to lease out units

Register as a lessor with the BIR (if not already): issue official receipts for rental income and file the required tax returns.
Determine if you are VAT or non-VAT based on annual gross receipts; non-VAT lessors may be subject to percentage tax, while VAT-registered lessors charge and remit VAT.
Pay income tax on rental income through the appropriate income tax return (1701/1702, etc.).

Documentary Stamp Tax (DST) on leases

Lease contracts are generally subject to DST. A common example formula: ₱3.00 for the first ₱2,000 of annual rent and ₱1.00 for each additional ₱1,000 or fraction thereof (check current BIR rules). DST returns must be filed within the prescribed days after contract execution.

Other local taxes & permits

Business Permit from the city/municipality for your leasing/management entity; annual fee is based on gross receipts per LGU ordinance.
Real Property Tax (RPT) — paid annually to the City Treasurer based on assessed property value.
If you hire staff (property manager, caretakers), register with SSS, PhilHealth, Pag-IBIG and handle withholding taxes for employees.

10) Lease contracts & compliance

Recommended actions

Prepare clear Contracts of Lease (term, rent, deposit, security, maintenance, utilities, allowed uses for commercial units).
Consider notarization and, for very long leases, annotation on title (consult a lawyer).
Collect and remit any required withholding taxes related to leases, and maintain complete accounting and document trails for BIR purposes.

Typical cost summary (illustrative)

Use these as rough planning guides only. Exact numbers depend on your LGU, building size, and design.

Barangay clearance: around ₱500–₱1,500 for basic clearances (varies by barangay).
Building permit and allied permits: small houses often see ₱6,000–₱12,000; multi-storey apartments can reach tens to hundreds of thousands depending on project value.
Electrical permit: roughly ₱1,000–₱3,000 for small projects, more for larger buildings.
ECC/IEE official fees (if required): example ₱5,000 for IEE checklist; full EIS/PEIS fees higher.
BFP inspection, FSIC, and Fire Code fees: vary by floor area and risk classification; check local BFP schedule.
BIR Documentary Stamp Tax on leases: small per-lease DST but must be filed and paid on time to avoid penalties.

Treat LGU permit and allied fees as roughly proportional to total construction cost. The Building Official will provide exact computations when you file.

Fast action checklist (for your A/E or project manager)

Verify property title and zoning with City Planning / CPDO.
Engage architect and engineers; produce full plans and cost estimate.
Secure barangay clearance and any required locational/use clearances.
File Building Permit with OBO (include all allied permits).
Confirm if a DENR ECC/IEE is required and apply if applicable.
Apply for FSEC with BFP early in the process.
Start construction and log all required inspections.
Before leasing: obtain Certificate of Completion, Occupancy Permit, FSIC.
Register as lessor with BIR, file DST on leases, and secure local business permits.
Finalize lease contracts and set up proper accounting and tax compliance.

BusinessMindedPinoy.com