Agricultural Land in the Philippines: Ownership, Possession and Use
Agrarian reform laws are difficult to understand in the Philippines. Newcomers to agricultural business in the Philippines should understand the statutes and regulations that apply to its ownership and possession.
Understanding Farm Ownership
Ownership, or the transfer thereof, is subject of the Comprehensive Agrarian Reform Law or R.A. No. 6657, as amended by R.A. No. 9700. These laws authorize the Department of Agrarian Reform (DAR) to expropriate agricultural landholdings and redistribute the same to qualified beneficiaries, including regular farmworkers.
Knowing a few acronyms is important here. Farmlands that are selected for redistribution undergo a process described as Land Acquisition and Distribution (LAD). The LAD process begins with the DAR issuing a notice of coverage to the landowner. The process ends with the generation of a Certificate of Land Ownership Award (CLOA). The holder of the CLOA is called the Agrarian Reform Beneficiary (ARB).
Since ownership of agricultural land beyond five (5) hectares is subject to LAD, it is risky to purchase large agricultural landholdings. Yet even farmland that has already undergone the LAD process and titled under the name of an ARB cannot be sold within ten (10) years from the time the CLOA has been issued.
If you want to purchase farmland, the safest bet is to find ARBs who have a CLOA that was issued 10 years prior to the intended sale.
Tenancy and Farmlands
The good news is that you don’t need to buy a farmland to do farming. As I’ve written here before, entrepreneurs can explore the different types of Agribusiness Venture Agreements (AVAs) most suitable to their needs.
Moreover, it’s important to understand the rules on tenancy. Special limitations on ownership apply to agricultural property. We mentioned size limitations of five (5) hectares.
The term “tenant” has a technical meaning under the Section 5 (a) of the Agricultural Tenancy Act of the Philippines or R.A. No. 1199:
(a) A tenant shall mean a person who, himself and with the aid available from within his immediate farm household, cultivates the land belonging to, or possessed by, another, with the latter’s consent for purposes of production, sharing the produce with the landholder under the share tenancy system, or paying to the landholder a price certain or ascertainable in produce or in money or both, under the leasehold tenancy system.
Ideally, a tenant attains the status of ARB or CLOA holder if he is listed to be a beneficiary by the DAR. Yet there are some situations where the CLOA holder to the land and the tenant are different people.
Even if the ARB sells the CLOA, the buyer will have to respect the tenant, who enjoys security of tenure for his work on the land. In Romeo T. Caluzor v. DeocGracias Llanillo et al, G.R. No. 155580, July 1, 2015, the Supreme Court provided six (6) factors which have to be present for the existence of a tenancy:
For tenancy relationship to exist, therefore, the following elements must be shown to concur, to wit:
(1) the parties are the landowner and the tenant;
(2) the subject matter is agricultural land;
(3) there is consent between the parties to the relationship;
(4) the purpose is of the relationship is to bring about agricultural production;
(5) there is personal cultivation on the part of the tenant or agricultural lessee; and
(6) the harvest is shared between landowner and tenant or agricultural lessee.
The presence of all these elements must be proved by substantial evidence; this means that the absence of one will not make an alleged tenant a de jure tenant. Unless a person has established his status as a de jure tenant, he is not entitled to security of tenure or to be covered by the Land Reform Program of the Government under existing tenancy laws.
Thus, to be a tenant, it is not enough to personally occupy and cultivate the land if the landowner does not consent to a tenancy relationship. Neither does it suffice to be paid by the landowner to till the land on a contract basis.
Once a tenancy is established, it can only be terminated based on the grounds provided in Section 36 of the Agricultural Land Reform Code or R.A. 3844, which include non-payment of rentals to the landowner.
In exploring agribusiness, perhaps equally important as conducting legal due diligence is the ability to relate and manage people. Part of this task is clear communication of the rights that are due to landowners, workers and tenants. Whether you are trying to negotiate an agricultural lease or implement new farm techniques on tenanted land, you will need to communicate your legal rights and paint a picture of what is fair to the other party.
For Agrarian estates and DAR concerns, I can assist. Contact Atty. Kenneth at firstname.lastname@example.org
About Atty. Kenneth
Atty. Kenneth C. Varona is a lawyer with experience in civil and criminal litigation, contracts, immigration law, and intellectual property law. He worked in Metro Manila for three years before starting his own firm Varona Law in 2020. He also writes at Economerienda, a blog offering snackable insights on personal finance, business and life.