Amendments to Agrarian Land Reform Code

Policy and core structure

The State policy is to establish cooperative-cultivatorship, owner-cultivatorship, and the economic family-size farm as the basis of Philippine agriculture, and to divert landlord capital in agriculture to industrial development (Section 2, amended Section 2).
The State policy requires achieving a dignified existence for small farmers free from pernicious institutional restraints and practices (Section 2, amended Section 2).
The State policy mandates a viable social and economic structure and an agriculture conducive to greater productivity and higher farm income through a cooperative system of production, processing, marketing, distribution, credit, and services (Section 2, amended Section 2).
The State policy requires applying all labor laws equally and without discrimination to both industrial and agricultural wage earners (Section 2, amended Section 2).
The State policy provides for a more vigorous and systematic land resettlement program and public land distribution (Section 2, amended Section 2).
The State policy directs making small farmers more independent, self-reliant, and responsible citizens and a source of genuine strength in the democratic society (Section 2, amended Section 2).
The State policy mandates first priority to measures for adequate and timely financing of the Agrarian Reform Program pursuant to House Joint Resolution No. Two, otherwise known as the Magna Carta of Social Justice and Economic Freedom, and existing laws, executive and administrative orders, and rules and regulations (Section 2, amended Section 2).
The State policy requires involving local governments in implementing the Agrarian Reform Program and evolving a system of land use and classification (Section 2, amended Section 2).
The Code’s established components are an agricultural leasehold system to replace share tenancy systems, crediting rental as amortization, a declaration of rights for agricultural labor, mechanisms for land acquisition and equitable distribution, and institutions for financing and assistance for lessees and cooperatives, among others (Section 3, amended Section 3).

Automatic conversion and share tenancy rules

Agricultural share tenancy throughout the country is declared contrary to public policy and automatically converted to agricultural leasehold upon the effectivity of this section (Section 4, amended Section 4).
The credit assistance traditionally extended by landowners and local lenders to tenants for production loans and loans for purchase of work animals, tillage equipment, seeds, fertilizers, poultry, livestock, feed, other similar items, and advances for subsistence may be continued by said landowner and local lender (Section 4, amended Section 4).
Total charges on these loans—including interest and service, inspection and issuance fees—must not exceed 14% per calendar year (Section 4, amended Section 4).
The principal on these loans must not be subject to upward adjustment even in case of extraordinary inflation and/or devaluation (Section 4, amended Section 4).
For loans or advances other than money, interest must be computed on the basis of the current price of the goods at the time when the loans or advances were made (Section 4, amended Section 4).
Any work animal and tillage equipment in the possession of a share tenant but owned by a landowner must automatically be sold to said tenant on installment for a period not exceeding 5 years at a price agreed upon by the parties (Section 4, amended Section 4).
The tenant must pay in advance 10% of the price agreed upon (Section 4, amended Section 4).
Existing share tenancy contracts may continue in force and effect in any region or locality, to be governed by Republic Act No. 1199, as amended, until the end of the agricultural year when the President organizes the Department of Agrarian Reform by executive order in accordance with the amendatory act, unless such contracts provide for a shorter period or the tenant sooner exercises his option to elect the leasehold system (Section 4, amended Section 4).
Lands devoted to crops covered by marketing allotments must be made the subject of a separate proclamation by the President upon recommendation of the department head to protect international commitments and ensure efficient management through workable arrangements such as organization of cooperatives, marketing agreements, or similar mechanisms (Section 4, amended Section 4).
If agricultural share tenants do not want to become agricultural lessees, they must notify the landowners in writing with the assistance of the Bureau of Agrarian Legal Assistance (Section 4, amended Section 4).
Upon such notice, tenants have 1 agricultural year from the date of notice to accept the leasehold relationship; otherwise the landowner may proceed to ejectment (Section 4, amended Section 4).

Lessee pre-emption and redemption

When an agricultural lessor decides to sell the landholding, the agricultural lessee has a preferential right to buy under reasonable terms and conditions (Section 2, amended Section 11).
The entire landholding offered for sale must be pre-empted by the Department of Agrarian Reform upon petition of the lessee or any of them (Section 2, amended Section 11).
Where there are two or more agricultural lessees, each is entitled to the preferential right only to the extent of the area actually cultivated by him (Section 2, amended Section 11).
The pre-emption right may be exercised within 180 days from notice in writing served by the owner on all lessees affected and the Department of Agrarian Reform (Section 2, amended Section 11).
If the lessee agrees to the terms and conditions, the lessee must give written notice of intent to exercise pre-emption within the balance of the 180-day period, but in any case not less than 30 days (Section 2, amended Section 11).
The lessee must tender payment or present a certificate from the Land Bank that it shall make payment pursuant to Section 80 of the Code (Section 2, amended Section 11).
If the lessor refuses to accept tender or presentment, the lessee may consign with the court (Section 2, amended Section 11).
Disputes as to the reasonableness of terms and conditions may be brought to the proper Court of Agrarian Relations, which must decide within 60 days from filing (Section 2, amended Section 11).
After finality of the Court of Agrarian Relations decision, the Land Bank must pay the lessor the price fixed by the court within 120 days (Section 2, amended Section 11).
If the Land Bank fails to pay within 120 days, the principal earns an interest equivalent to the prime bank rate existing at the time (Section 2, amended Section 11).
Upon filing the corresponding petition or request with the Department or in court by the agricultural lessee or lessees, the 180-day running period ceases (Section 2, amended Section 11).
Any petition or request for pre-emption must be resolved within 60 days from filing; otherwise the 180-day period starts to run again (Section 2, amended Section 11).
If the landholding is sold to a third person without the knowledge of the agricultural lessee, the agricultural lessee has a right of redemption at a reasonable price and consideration (Section 2, amended Section 12).
Where there are two or more agricultural lessees, each is entitled to redemption only to the extent of the area actually cultivated by him (Section 2, amended Section 12).
The right of redemption may be exercised within 180 days from notice in writing served by the vendee on all lessees affected and the Department of Agrarian Reform upon registration of the sale, and it has priority over any other right of legal redemption (Section 2, amended Section 12).
The redemption price is the reasonable price of the land at the time of sale (Section 2, amended Section 12).
Upon filing the corresponding petition or request with the Department or in court, the 180-day period ceases to run (Section 2, amended Section 12).
Any petition or request for redemption must be resolved within 60 days from filing; otherwise the 180-day period starts to run again (Section 2, amended Section 12).
The Department must initiate the redemption, while the Land Bank finances it, as in the case of pre-emption (Section 2, amended Section 12).

Leasehold economics: irrigation and rental limits

The cost of construction of a permanent irrigation system, including distributory canals, may be borne exclusively by the agricultural lessor who is entitled to an increase in rental proportionate to the resultant increase in production (Section 4, amended Section 32).
If the agricultural lessor refuses to bear construction expenses, agricultural lessees may shoulder the expenses; the lessor then is not entitled to an increase in rental and must, upon termination, pay the lessee or his heir the reasonable value of the improvement at termination (Section 4, amended Section 32).
If the irrigation system constructed does not work, it is not considered an improvement within the meaning of Section 32 (Section 4, amended Section 32).
Lessees must manage and control irrigation systems within their respective jurisdiction (Section 4, amended Section 32).
Irrigation systems constructed and operated by the government may be given to lessees—either as individuals or groups—at their option, with the right to maintain, manage, operate, and collect and receive rentals therefrom (Section 4, amended Section 32).
Where the irrigation system has obligations to meet until paid, lessees must allocate not more than 25% of their collection for rentals to the government; otherwise, the irrigation system must be maintained, managed, and operated solely by the lessees under rules on water rights and water use promulgated by the National Irrigation Administration or authorized agencies (Section 4, amended Section 32).
If the irrigation system is installed and/or constructed at the expense of the landowner or agricultural lessor, the Department must initiate acquisition while the Land Bank finances acquisition at current fair market value, so ownership vests in the lessees as individuals or groups (Section 4, amended Section 32).
Consideration for the lease of riceland and lands devoted to other crops must not be more than the equivalent of 25% of the average normal harvest, or if no harvests exist, the estimated normal harvest during the three agricultural years immediately preceding the leasehold establishment after deducting seeds and cost of harvesting, threshing, loading, hauling, and processing as applicable (Section 5, amended Section 34).
If the land has been cultivated for less than three years, the initial consideration must be based on the average normal harvest during the preceding years when cultivated, or the harvest of the first year in case of newly cultivated lands if normal; the final consideration must be based on the average normal harvest during the three preceding agricultural years (Section 5, amended Section 34).
If parties have no agreement on rental, the Court of Agrarian Relations must summarily determine a provisional rental using existing laws, rules and regulations and production records in department field units, taking into account land development and lessee participation; the provisional rental continues until a fixed rental is finally determined (Section 5, amended Section 34).
The Court must determine fixed rental within 30 days after the petition is submitted for decision (Section 5, amended Section 34).
If capital improvements are introduced not by the lessee to increase productivity, rental must be increased proportionately to the consequent increase in production; if there is disagreement, the Court determines the reasonable increase in rental (Section 5, amended Section 34).

Rental credited to purchase amortization

Rental paid under the preceding section after approval of this amendatory act must be credited as amortization payment on the purchase price of the landholding tilled by the lessee in the instances of (1) government expropriation for the lessee and (2) redemption (Section 6, added Section 34-A).
The purchase price is determined by the parties or concerned government agencies on the same basis prescribed under Section 56 of the Code (Section 6, added Section 34-A).
Whatever balance remains after crediting as amortization must be financed by the Land Bank in the same ratio and mode of payment under Section 80 of the Code (Section 6, added Section 34-A).
The Land Registration Commission may concurrently with the Bureau of Lands approve-survey plans for original registration and issue transfer certificate of title in favor of new amortizing-owner-beneficiaries; the Land Registration Commissioner must issue rules and regulations to implement this provision (Section 6, added Section 34-A).
The Department and/or the Bank must facilitate immediate issuance of the corresponding transfer certificate of title to the new amortizing owner with the encumbrance duly annotated (Section 6, added Section 34-A).
An amortizing owner may use this transfer certificate of title to obtain a loan from any public or private lending institution and is entitled to borrow not less than 60% of the fair market value of the property (Section 6, added Section 34-A).
Loan proceeds must be applied 50% as partial payment of any unpaid balance on the landholding and 50% for capital improvement and operating capital for farm operations (Section 6, added Section 34-A).
All loan payments obtained under this section must be guaranteed by the Land Bank, which must set aside a sinking fund in the amount determined by its Board of Trustees (Section 6, added Section 34-A).
If there is default in payment of three consecutive installments on the loan, the lender must immediately notify the Land Bank and the Department, after which these agencies must take appropriate steps: (1) answer for default when due to fortuitous event, or (2) in other cases, take over ownership and administration of the property (Section 6, added Section 34-A).
In cases of takeover due to default, the government must endeavor to substitute the defaulting amortizing owner with a new one who does not own any land and is subrogated to rights and assumes obligations (Section 6, added Section 34-A).
The rules on the two preceding paragraphs apply also when the lessee defaults in payment of at least three consecutive rental amortizations, with proper notice by the former landowner in proper cases (Section 6, added Section 34-A).
When default is due to fortuitous events, the Land Bank must be answerable for the default and farmers must be released from obligations to pay the installment(s) due together with interest thereon (Section 6, added Section 34-A).

Urban conversion: disturbance compensation

When a landholding is declared by the department head to be suited for residential, commercial, industrial, or other urban purposes, the agricultural lessee must be entitled to disturbance compensation equivalent to five times the average of gross harvests on his landholding during the last five preceding calendar years (Section 7, amended Section 36(1)).

Rights and labor: concerted activities

The Code must recognize a right to engage in concerted activities as defined under Republic Act No. 875 (Section 8, amended Section 39(2)).

Department of Agrarian Reform: organization and field structure

A Department of Agrarian Reform is created under the direct control and supervision of the President to implement the state policies on agrarian reforms under this Code and other pertinent laws (Section 9, new Section 49).
The Department is headed by a Secretary appointed by the President with the consent of the Commission on Appointments, assisted by one Undersecretary also appointed with the same consent requirement (Section 9, new Section 49).
The Secretary and Undersecretary must be natural-born citizens of the Philippines, with proven executive ability and adequate background and experience in land reform for at least 5 years and at least 35 years of age (Section 9, new Section 50).
The Undersecretary must be a career administrator and not more than 57 years of age, unless the President determines special qualifications and necessity (Section 9, new Section 50).
No person who owns any farmholding may be appointed Secretary or Undersecretary unless such farmholding is under the leasehold system or the system of agricultural land ownership transfer direct to the tiller (Section 9, new Section 50).
The Secretary receives annual compensation equivalent to any other executive department Secretary; the Undersecretary receives annual compensation equivalent to any other executive department Undersecretary (Section 9, new Section 50).
The Secretary’s powers and functions include powers and duties required of any executive department secretary under existing laws in addition to those in the Code (Section 10, added Section 50-A).
The Undersecretary’s powers and functions include those required of any executive department undersecretary under existing laws in addition to those in the Code (Section 10, added Section 50-B).
In case of vacancy or inability of the Secretary due to illness, absence, or any other cause, the Undersecretary must temporarily perform the functions of the said office (Section 10, added Section 50-C).
The office of the Secretary comprises the Secretary, Undersecretary, chiefs of staff services or units directly under the department proper, and their personnel, with department personnel appointed by the Secretary under civil service law and rules (Section 10, added Section 50-D).
The Department must create staff services: a Planning Service, Financial and Management Service, Administrative Service, and other staff services the Secretary may deem necessary, each headed by a chief with defined functions (Section 10, added Section 50-E).
The Department must establish bureaus headed by Directors with Assistant Directors for program and policy implementation: (1) Bureau of Farm Management, (2) Bureau of Land Acquisition, Distribution and Development, (3) Bureau of Resettlement, and (4) Bureau of Agrarian Legal Assistance (Section 10, added Section 50-F).
The Director and Assistant Director of each bureau must have natural-born citizenship, proven executive ability, adequate land reform experience for at least 3 years, and at least 25 years of age, and must be career administrators not exceeding 57 years, unless President determines special qualifications; they must not own any farmholding unless it is under the leasehold or direct transfer to tiller systems (Section 10, added Section 50-G).
The Department may have regional and field offices; it must establish ten regions with specified provinces and cities and regional centers, and follow an integrated field service approach (Section 10, added Section 50-I).
Each regional and other field office must establish a consultative and coordinating body including a tiller-lessee representing agricultural lessees and a representative from local governments where the office operates (Section 10, added Section 50-I).
Regional offices must be headed by a Regional Director (and Assistant Regional Director when necessary) appointed by the Secretary under civil service rules with the same qualifications as bureau leadership (Section 10, added Section 50-I).
The Regional Director must implement Department policies and plans within the region, with Department supervision and control for functions transcending regional boundaries (Section 10, added Section 50-I).
Regional offices must have units on agricultural extension, credit, and legal assistance and cooperative development, or personnel representing these functional areas through combinations of related functions (Section 10, added Section 50-I).
Regional offices must implement Department laws, policies, plans, programs, rules and regulations, provide service to the people, coordinate with other departments/agencies, coordinate with LGUs, and perform related functions under other existing laws (Section 10, added Section 50-I).

Abolition, transfer, and functional allocation

The Land Reform Project Administration and its governing body, the National Land Reform Council under the Office of the President, are abolished; their functions, appropriations, records, equipment, property, and personnel are transferred to the Department, including necessary personnel from the Council and governing body (Section 11).
The Land Authority under the Office of the President, a member-agency of the Land Reform Project Administration, is abolished; its functions and related assets and personnel are transferred to the Department (Section 12).
The Secretary must, in consultation with the Undersecretary and Bureau Directors, allocate by Department Order the functions of abolished agencies/offices/units not otherwise assigned by the amendatory act or the Department’s organization plan (Section 13).
The Land Bank of the Philippines is attached to the Department as its land financing arm and must devote all resources to agrarian reforms; the Agricultural Credit Administration coordinates and cooperates with the Department as its credit arm and must devote its resources to agrarian reforms (Section 14).
The Land Bank and Agricultural Credit Administration must provide staff advice and assistance to the Secretary, and their regional/field units must coordinate with Department regional/field units (Section 14).
The President must, within 60 days from approval of the amendatory act, organize the Department by Executive Order upon recommendation of the Special Technical Committee created under Special Order No. 11, Series of 1971, of the Land Reform Project Administration, and the Commission on Reorganization created pursuant to Republic Act No. 5435 as amended, to achieve economy and maximum efficiency and effectiveness and strictly observe the merit system in retention and promotion of the best qualified personnel (Section 15).
The administrative machineries of entities attached/required to coordinate and cooperate with the Department must also be reorganized to align activities with the Code’s requirements and objectives (Section 15).
No more than 10% of Department personnel and the bureaus, offices, agencies and/or entities under, coordinating or servicing it may be stationed in the central office, and no more than 5% of total personnel in regional, team, resettlement agency or equivalent field offices may be stationed in such offices (Section 15).

Expropriation, just compensation, and appraisal

The Department must be responsible to initiate and prosecute expropriation proceedings to acquire private agricultural lands for subdivision into economic family-size farm units and resale to bona fide tenants, occupants, and qualified farmers, applying only to private agricultural lands subject to the stated terms and priority (Section 16, amended Section 51).
Expropriation applies to all idle or abandoned private agricultural lands except those held or purchased within one year from approval of the Code by private individuals or corporations for resale/subdivision into economic family-size farm units not more than 6 hectares each, with subdivision and resale substantially carried out within one year from approval of the Code (Section 16, amended Section 51).
Expropriation applies to private agricultural lands suitable for subdivision into economic family-size farm units not more than 6 hectares, owned by private individuals or corporations worked by lessees, where no substantial portion in relation to area sought is planted to permanent crops under labor administration in excess of 24 hectares (except all private agricultural lands under labor administration) (Section 16, amended Section 51).
Private agricultural lands continuously occupied and cultivated for not less than 10 years by tillers or their ascendants who are not farm laborers or lessees may be subject to expropriation (Section 16, amended Section 51).
Any court action filed for ejectment of the tiller does not interrupt the running of the 10-year period unless filed within 3 years from date of occupancy (Section 16, amended Section 51).
If final court decision in ejectment is favorable to the tiller, the 10-year period is continuous and uninterrupted (Section 16, amended Section 51).
In expropriation of private agricultural lands declared necessary, the Department must consider the order of priority: idle or abandoned lands; those whose area exceeds 1,024 hectares; those whose area exceeds 500 hectares but not more than 1,024 hectares; those whose area exceeds 144 hectares but not more than 500 hectares; those whose area exceeds 75 hectares but not more than 144 hectares; and those whose area exceeds 24 hectares but not more than 75 hectares (Section 16, amended Section 51).
The Department must also acquire private agricultural lands regardless of area through negotiated purchase subject to court approval as to price for distribution and sale at cost to actual occupants who are tillers of the land in lots of not more than 6 hectares (Section 16, amended Section 51).
In negotiated purchase petitions, priority is given to the group with a greater number of tillers who first filed the petition, then the group with fewer tillers, then individual tillers, and the group or individual who has continuously tilled longest has first priority (Section 16, amended Section 51).
The Department must help bona fide farmers without lands or owner-cultivators of uneconomic farms to acquire and own economic family-size farm units of not more than 6 hectares each (Section 16, amended Section 51).
The Department must administer and dispose of agricultural lands of the public domain under custody and administration of the National Resettlement and Rehabilitation Administration and the Economic Development Corps of the AFP prior to this amendatory act and other public agricultural lands reserved by the President or by law for resettlement and sale, in accordance with chapter terms and conditions, without contravening public policy on permanency of forest reserves or laws preserving forests, parks, and watersheds (Section 16, amended Section 51).
The Department’s authority does not exclude other modes of disposition of public agricultural lands under the public land act, nor contravene the authority of the Department of Agriculture and Natural Resources over public agricultural lands not covered by the Agrarian Reform Program (Section 16, amended Section 51).
The Secretary of Agriculture and Natural Resources must release to the Department within 10 years from approval of this amendatory act all lands of the public domain reserved for agricultural resettlement and sale except public agricultural lands reserved as settlements for national cultural minorities administered by the Commission on National Integration (Section 16, amended Section 51).
The Department must develop plans and initiate actions for systematic opening of alienable and disposable lands for speedy distribution and development by persons who do not own any land in sizes not more than 6 hectares (Section 16, amended Section 51).
The Department must recommend to the President, after prior consultation with the Secretary of Agriculture and Natural Resources, what portion of alienable or disposable public lands should be reserved for resettlement or disposition under this chapter (Section 16, amended Section 51).
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