Question & AnswerQ&A (DAR ADMINISTRATIVE ORDER NO. 05)
Article XIII, Section 4 of the 1987 Philippine Constitution mandates the payment of just compensation for lands covered by agrarian reform, providing that landowners shall receive just compensation for lands redistributed under the program.
Just compensation means the fair market value or the price which a buyer will pay without coercion and a seller will accept without compulsion.
Republic Act No. 6657, also known as the Comprehensive Agrarian Reform Law (CARL), particularly Section 17, provides guidance on the determination of just compensation, considering factors such as acquisition cost, current value of like properties, use and income, and other relevant factors.
The basic formula is LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1), where CNI is Capitalized Net Income, CS is Comparable Sales, and MV is Market Value per Tax Declaration.
The land valuation process must involve agrarian reform beneficiaries and their organizations, the Barangay Agrarian Reform Committees, the landowner, the Department of Agrarian Reform (DAR), and the Land Bank of the Philippines (LBP).
The capitalization rate used is 12%.
CNI = (Annual Gross Production (AGP) x Selling Price (SP) - Cost of Operations (CO)) divided by 0.12.
An assumed net income rate (NIR) of 20% is used, except for coconut landholdings which remain at a 70% assumed NIR.
The MV (and Unit Market Value) is grossed up from its effective date to the date of receipt of the Claim Folder by LBP, using the Regional Consumer Price Index adjustment factor.
The value of idle land using the formula MV x 2 shall not exceed the lowest value of land within the same estate, barangay, or municipality approved by LBP within one year from receipt of the Claim Folder.
It is the value of the land plus the cumulative development cost (CDC) of the crops from land preparation up to the time of field investigation.
They assist in the initial determination of the value of the land as provided under Section 47 of Republic Act No. 6657.
The social and economic benefits contributed by the farmers and farmworkers and the government, non-payment of taxes or government loans on the land, acquisition cost, comparable sales, and market value per tax declaration must also be considered.
Sales Transactions (ST), Acquisition Cost (AC), and Market Value based on Mortgage (MVM) are considered and combined as applicable.
DAR and LBP may adopt applicable industry data or conduct an industry study to determine income and cost parameters for valuation.