Guidelines on Lease of AGRARIAN Land under AVA

Legal basis and cited authorities

Section 1 grounds the guidelines on Section 8 of Republic Act No. 6657, which preserves the respect of existing agreements until new agreements are entered, and limits foreign entities from enjoying better rights than domestic counterparts.
Section 1 also relies on Section 3 of Republic Act No. 7905, which amends Section 44 of Republic Act No. 6657 and directs PARCOM to recommend continuous processing of lease back arrangements, joint venture agreements, and similar schemes that optimize operating size while promoting security of tenure and security of income.
Section 1 further anchors the rental and lease framework on Executive Order No. 229, which governs continuity of leases and management tracts on distributed and registered land, including limits on duration, renegotiation upon expiration, and DAR determination of rental when parties fail to agree.
Section 4.1 incorporates the approval/review structure under DAR Administrative Order No. 09, Series of 2006, titled “Revised Rules and Regulations Governing Agribusiness Venture Arrangements (AVAs) in Agrarian Reform Areas.”

Coverage of CARP lands under AVA

Section 2 applies to all lands covered by the Comprehensive Agrarian Reform Program (CARP) under agribusiness venture arrangement.
Section 2 also applies to retained areas of small landowners and lands of agrarian reform beneficiaries (ARBs) that are fully paid where the ten-year prohibitory period under Section 27 of Republic Act No. 6657 has already lapsed, and where ARBs opted to include those landholdings under a lease agreement.
The Order’s coverage requires lease rental determination for covered lands under an AVA structure (Section 2).

Definitions and key concepts

Section 3.1 defines Average Household Size as the ratio of household population to the number of households, estimated by the National Statistics Office (NSO/NSO equivalent stated as “IMSO”).
Section 3.2 defines Comparable Lands as lands of the same estate or municipality/province/region with similar crop features, terrain, soil properties/conditions (including type, texture, pH, moisture content), distance, and accessibility.
Section 3.3 defines Economic Family-Size Farm Unit as an area of farm land that permits efficient use of labor and capital resources, producing sufficient income for a modest standard of living for food, clothing, shelter, and education, with reasonable reserves for fluctuations and possible allowance for yearly amortization.
Section 3.4 defines Land Amortization Value (LAV) as the regular annual amortization per hectare paid by ARBs under CARP, based on LBP land valuation and land amortization schedule, subject to the land value as determined by final arbitration of DARAB, SAC, or the Court of Appeals when contested or under appeal.
Section 3.4 provides that when lands are fully paid or donated by the landowner to the ARBs, LAV means the equivalent value/amount of annual amortization of comparable lands within the municipality/province/region.
Section 3.4 provides that for lands under the voluntary land transfer (VLT) scheme, LAV refers to the fixed amount of land value specified in the signed VLT agreement between ARBs and the landowner.
Section 3.5 defines Lease Rental as income accruing to the owner as payment for agricultural use of the leased land under the lease agreement.
Section 3.6 defines Lease Agreement as an AVA scheme where ARBs give the former landowner or any other investor general control over land use and management for a certain amount and a definite period.
Section 3.7 defines Lessee-Investor as any person, natural or juridical, who with the lessor’s consent operates the leased land for agricultural production consistent with the lease agreement.
Section 3.8 defines Lessor-ARB as an individual ARB or a duly registered ARB cooperative/association that leases awarded lands to an investor for agricultural production.
Section 3.9 defines Poverty Threshold as the minimum income/expenditure for a family/individual to meet basic food and non-food requirements, established by the National Statistics Coordination Board (NSCB).

Core lease rental computation rules

Section 4.1 requires that terms and conditions of the lease agreement (including the determination and computation of lease rental) be mutually agreed upon by contracting parties, subject to approval by the Presidential Agrarian Reform Council (PARC)/PARC Executive Committee (ExCom) upon PARCCOM recommendation and NAEC review and evaluation pursuant to DAR A.O. No. 09, Series of 2006.
Section 4.1 requires that any amendment, change, extension, or renegotiation of terms and conditions (including extension of period and renegotiated lease rental rates) follow the same review and approval process by PARC or PARC ExCom.
Section 4.1 provides that the absence of PARC/PARC ExCom approval renders any lease agreement null and void.
Section 4.2 requires the DAR, through NAEC, to conduct inventory, review, and monitoring of all lease agreements with a period of at least 25 years and those subject of renegotiation, to determine development and use of land, parties’ compliance, period-related conditions, and viability of full take over by ARBs consistent with agrarian reform intent.
Section 4.3 requires that in negotiating or renegotiating annual lease rental per hectare, parties factor in annual LAV, annual Real Property Tax (RPT) on the land per hectare, and annual poverty threshold, and may consider other remuneration and historical net income based on validated financial statements.
Section 4.3 establishes the lease rental benchmark formula: LR = PT + LAV + RPT (with the defined components below).
Section 4.3 defines the computation of PT as: PT = annual per capita poverty threshold of the province where the subject landholding is located × national average household size of five (5).
Section 4.3 sets 3 as the maximum hectarage of lands that may be awarded to ARBs under Republic Act No. 6657, and requires inclusion of this factor within the benchmark formula framework.

Approval, documentation, and renegotiation

Section 4.4 requires the computed and agreed lease rental to be incorporated into the lease agreement or amendment thereto.
Section 4.4 requires submission to NAEC (through AVA-Task Force (TF)) of all pertinent data and documents used as bases in determining lease rental, together with the lease agreement for review and evaluation under DAR A.O. No. 09, Series of 2006.
Section 4.5 requires renegotiation of lease rental amount or other provisions every five (5) years, or earlier if grounds under Section 4.14 of DAR A.O. No. 09, Series of 2006 arise (including extraordinary increase in inflation rate, drastic change in price fluctuations in inputs and outputs, declaration of areas as calamity or disaster area due to force majeure, or other meritorious grounds).
Section 4.5 prohibits renegotiated lease rental from being lower than the lease rental preceding renegotiation.
Section 4.6 provides that conflicts arising from negotiation, implementation, or compliance with lease rental payments are governed by Sections 14 to 16 of DAR A.O. No. 09, Series of 2006.
Section 4.6 requires that during arbitration, the lessee-investor continues paying the lessor-ARB the lease rental and any productivity and quality premium, if any, based on the lease rental rate of the preceding year, until the conflict is resolved.
Section 7 requires that operating procedures on filing, review, approval, revocation/cancellation, reporting, and monitoring of lease agreements shall subscribe to DAR A.O. No. 09, Series of 2006.

Rights and obligations of parties

Section 5.1.1 entitles the lessor-ARB to receive rentals and other agreed benefits from the lessee-investor.
Section 5.1.2 requires the lessor-ARB to pay land amortization due (if applicable) and realty taxes, with amounts segregated by the lessee-investor from the lease rental for that purpose.
Section 5.1.3 requires the lessor-ARB to keep the lessee-investor in full and peaceful possession and enjoyment during the lease term and prohibits the lessor-ARB from physically appropriating or partitioning the leased land among ARB cooperative/association members.
Section 5.1.4 grants the lessor-ARB ownership of permanent improvements introduced by the lessee-investor upon termination of the lease agreement unless the lease agreement provides otherwise.
Section 5.1.5 grants the lessor-ARB the option to buy non-permanent improvements beneficial to the land at an amount agreed by both parties.
Section 5.1.6 requires permission/allowance for annotation of the lease agreement in the provincial Registry of Deeds (ROD) and a memorandum entered on the Certificate of Land Ownership Award (CLOA).
Section 5.2.1 requires the lessee-investor to manage and operate the land during the lease period, premised on paying lease rental and other benefits at agreed rates and complying with all lease stipulations.
Section 5.2.2 requires the lessee-investor to provide required capital to develop/plant/cultivate/harvest/process crops, extend technical and management services, and assume the risk of loss of agricultural operations.
Section 5.2.3 requires the lessee-investor to pay property taxes on buildings and other improvements on the land.
Section 5.2.4 requires segregation and remittance: real estate/property taxes to the Local Government Units, land amortizations to the Land Bank of the Philippines for compensable lands, or to the landowner for VLT lands, with original receipts provided to the lessor-ARB/s.
Section 5.2.5 grants the lessee-investor the right to construct buildings and introduce improvements necessary for agricultural operations with lessor-ARB consultation, while prohibiting any improvement that decreases the aggregate agricultural area to the extent of lowering land rental and other ARB privileges.
Section 5.2.6 requires the lessee-investor to manage and care for the property properly and efficiently using sound agricultural, financial, business, and environmental practices.
Section 5.2.7 requires the lessee-investor to bear all expenses for production, cultivation, harvesting, marketing, and business operations including business taxes and regulatory fees.
Section 5.2.8 imposes a duty to pay lease rental in good faith; if the lessee-investor fails to pay annual lease rent within the agreed period, the lessee-investor must pay interest of twelve percent (12%) of the annual lease rental or the prevailing legal rate on interest charges, whichever is higher.
Section 5.2.9 requires lessee-investor consent from the lessor-ARB/s before conducting experimental projects not directly related to production and processing but deemed necessary for sound production.
Section 5.2.10 grants the lessee-investor the option to remove/transfer/move non-permanent improvements with written consent prior to or upon termination/expiration if the lessor-ARB/s will not opt to purchase, with improvements charged to the lessee’s account and without causing damage to the premises.
Section 5.2.11 requires the lessee-investor, in collaboration with DAR, to implement a transfer of technology and management program focused on production technologies, entrepreneurship, marketing, resource mobilization, and project monitoring and evaluation pursuant to DAR A.O. No. 09, Series of 2006, within one year from the effectivity of the lease agreement, to ensure successful management by ARBs at lease expiration.
Section 5.2.12 requires maintaining ecological balance through sustainable use of natural resources, preserving soil fertility through investments such as soil and water conservation and fertility maintenance, and ensuring worker safety by conforming to internationally accepted standards in hazardous chemical use pursuant to DAR A.O. No. 09, Series of 2006.

Prohibitions and disputes during pendency

Section 6.1 prohibits lessor-ARB/s from dispossessing the lessee-investor of the leased land during the pendency of a petition for nullification of the lease agreement concerning the lease subject of that petition.
Section 6.1 provides that any lessor-ARB/s who unlawfully dispossesses the lessee-investor without due process of law is liable for damages.
Section 6.2.1 prohibits the lessee-investor from cultivating/growing/producing other crops or using the land for purposes other than those agreed in the lease agreement.
Section 6.2.2 prohibits the lessee-investor from planting, growing, raising, or permitting the planting, growing, or raising of plants and their fruits, produce, and products defined by Republic Act No. 9165, the Comprehensive Dangerous Drugs Act of 2002.
Section 6.2.3 prohibits the lessee-investor from causing substantial and unreasonable damage to the land and deterioration/depletion of soil fertility and other improvements through its operations.
Section 6.2.4 prohibits the lessee-investor from sub-leasing or assigning lease rights to another person or entity.

Transitory coverage and repeal rules

Section 8 governs transitory application by requiring that the Order governs all lease applications filed and renegotiated lease applications for revised terms and conditions upon effectivity, including pending applications under process in DAR Provincial Offices (DARPOs) at the time of effectivity.
Section 8 provides that existing lease agreements approved under DAR A.O. No. 02, Series of 1999 may be renegotiated upon petition of the parties under the process referenced in Section 2(d) and (e), Section 12 (last paragraph), and Section 15 (second to last sentence) of A.O. No. 02, Series of 1999.
Section 9 revokes, cancels, amends, or modifies all administrative orders, circulars, memoranda, rules, and regulations or portions inconsistent with the Order.

Sanctions and administrative enforcement framework

Section 4.7 requires that lease agreements provide sanctions for violations or non-compliance by either party of lease terms and conditions.
Section 4.7 requires the DAR to periodically monitor implementation of these lease agreements pursuant to Section 4, Item 4.21 of DAR A.O. No. 09, Series of 2006.