Law Summary
Statutory Guidelines on Determination of Just Compensation
- Section 17 of RA 6657 outlines factors for determining just compensation:
- Cost of acquisition
- Current values of comparable properties
- Nature, actual use, and income from the land
- Owner’s sworn valuation
- Tax declarations and government assessments
- Social and economic benefits contributed by farmers and government
- Non-payment of taxes and government loans
Stakeholder Involvement in Land Valuation Process
- Land valuation must include inputs from:
- Agrarian reform beneficiaries and their organizations
- Barangay Agrarian Reform Committees (BARCs)
- Landowners
- Department of Agrarian Reform (DAR)
- Land Bank of the Philippines (LBP)
- Legal mandates institutionalize partnership between government and farmer organizations (EO No. 129-A, Sections 3, 47 and 18 of RA 6657).
Basic Land Valuation Formula and Variations
- The primary formula: LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1), where LV=Land Value.
- Variations when some factors (Capitalized Net Income (CNI), Comparable Sales (CS), Market Value (MV)) are missing:
- If CS missing: LV = (CNI x 0.9) + (MV x 0.1)
- If CNI missing: LV = (CS x 0.9) + (MV x 0.1)
- Both missing: LV = MV x 2, with ceiling limits based on comparable land values.
- Special rules apply for permanent crops (productive, non-productive, or introduced by farmer-beneficiaries) involving cumulative development costs or salvage value.
- The landowner’s offer in voluntary offers to sell (VOS) limits compensation, grossed up by inflation adjustments.
Grossing-up Valuation Inputs According to Inflation
- Valuation inputs (e.g., landowner’s offer, sales transaction values) are grossed up using Regional Consumer Price Index (RCPI) adjustment factors.
- RCPI adjustment factor equals ratio of RCPI at the date of claim folder (CF) receipt to RCPI at the date/effectivity of the valuation input.
Capitalized Net Income (CNI) Method Explained
- CNI equals the difference between gross sales and cost of operations capitalized at 12%.
- Gross sales calculated as Annual Gross Production (AGP) times average selling price (SP).
- If cost of operations is not verifiable, a net income rate (NIR) of 20% is assumed, except for productive coconut land where 70% is assumed.
- Industry data from government/private sources validate production, cost, and price.
- Owner must submit data for verification; if unavailable or unverifiable, industry studies are used.
- Special adjustments for crops planted by farmer-beneficiaries and for intercropping systems with distinct formulas.
- Lease contracts may serve as basis for CNI, with formulas depending on lease type (fixed, percentage, variable, prepaid).
Comparable Sales (CS) and Its Computation
- CS includes sales transactions (ST), acquisition cost (AC), and market value based on mortgage (MVM).
- At least three comparable STs preferred, from barangay to province level, with area requirements.
- Different formulae used depending on availability of STs, AC, and MVM.
- Selection criteria include similarity in topography, land use, crop type, stage of productivity, and transaction date window (1985-1988).
- Grossing up applies to sales date values.
Acquisition Cost (AC) and Market Value Based on Mortgage (MVM)
- AC is relevant if purchased or exchanged between January 1, 1985 and June 15, 1988, with conditions related to property similarity.
- MVM applies if property was mortgaged as of June 15, 1988 and conditions remain similar.
- Excluded if multiple titles exist with contiguous lands not all mortgaged.
- Failure to submit appraisal within deadlines disqualifies MVM.
- Both AC and MVM are grossed up using inflation factors.
Market Value per Tax Declaration (MV) Computation
- Based on most recent tax declaration and schedule of unit market value.
- Adjustments if discrepancies exist between tax declaration and field investigation.
- Use nearby municipality’s UMV if necessary.
- Trees’ value included only if productive; trees introduced by farmer-beneficiaries or third parties excluded.
- Density thresholds apply for land classification.
Valuation of Improvements and Exclusions
- Non-crop improvements valued by LBP.
- No compensation for improvements introduced by third parties other than the landowner.
Administrative Provisions and Implementation
- Glossary of terms and crop classifications annexed.
- LBP authorized to issue clarificatory guidelines.
- Applies prospectively to all pending claims.
- Repeals prior inconsistent administrative orders.
- Takes effect 10 days after publication in national newspapers.
This summary covers key provisions, valuation methodologies, procedural requirements, stakeholder roles, and valuation adjustments in the valuation of lands subject to agrarian reform under RA 6657 as promulgated in DAR Administrative Order No. 05, s. 1998.