New rules on transacting agricultural lands seen to boost investments

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news national pix 1 june 8 2016The Department of Agrarian Reform issued two new rules to boost investments in agriculture.

Administrative Orders (AO) Nos. 04 and 06, Series of 2016 which govern particular transactions affecting agricultural lands have been issued by the Department of Agrarian Reform (DAR) and are slated to become effective by this month. The former will take effect on June 16, 2016 while the latter will take effect the day after.

AO No. 04, Series of 2016 provides rules on agribusiness venture agreements (AVAs), while AO No. 06, Series of 2016 regulates transfer of ownership of agricultural lands. Both rules aim to create an environment sustainable for agribusiness in the country by securing tenure rights of agrarian reform beneficiaries (ARBs) and strengthening business relations between FBs and investors.


“Both remained faithful to the provisions of the Comprehensive Agrarian Reform Law, but the requirements and procedure were streamlined to simplify the process,” explained DAR Assistant Secretary Justin Vincent La Chica, the Chairperson of the DAR Guidelines Drafting Committee.

Landscaping for Agribusiness

La Chica narrated that in the last decade, issues surrounding agribusiness venture agreements (AVAs) cropped up which impelled the DAR to undertake several series of consultations, one of which was conducted by an independent team formed by the DAR and the United Nations Food and Agricultural Organization (UN FAO).

The result of the consultations together with many international principles that were recently issued, and grounded by the Constitution and the pertinent laws, became the basis of the new rules.

Although the DAR, under the new rules, imposed, for the protection of the interest and welfare of the ARBs, minimal mandatory provisions, the Agency made sure that the AO will not unduly impede on what the beneficiaries and the investors can agree together and will rather mainly look at whether consent was freely given by the beneficiaries in an atmosphere of comity.

AO No. 04, Series of 2016 emphasized on the role of the government to provide support services to the farmer-owners to allow them to negotiate with investors, as far as practicable, on an equal footing.

“While the requirements and the process were made simpler, the Presidential Agrarian Reform Council still has the discretion on approving these agreements under the new rules.  This is provided for by the law and we have no authority nor any intention to circumvent that,” La Chica asserted.

The said Rules also gave premium to mediation and conciliation as the primary form of dispute resolution.

AVAs are contracts entered into by an agrarian reform beneficiary (ARB) or group of ARBs, on the one hand, and an investor, on the other, which involves the possession of the land; management of the operations of the farming of the land; control/distribution of the produce of the land, for a period of more than two cropping seasons; commitment of the owners to produce certain crops, at a determinable quantity, for a period of more than two cropping seasons; and/or such other arrangements similar to these.

Simple transactions of purchase of inputs or sale of crops or products, insofar as these are not linked to any of the abovementioned enumeration, are not considered as AVAs.news national pix 2 june 8 2016
Transfers of Agricultural Land

Opportunities for red tape in the transfer of ownership of agricultural lands have also been lessened or eliminated altogether by the issuance of AO No. 06, Series of 2016.

“The transfer of ownership of agricultural lands, including those not distributed through an agrarian reform program, must be cleared by the DAR before it is registered.  The DAR is tasked to verify that the said transfer is not restricted by the Comprehensive Agrarian Reform Law,” clarified La Chica.

Except in cases of intestate succession and testate succession of legitimes to compulsory heirs, and the foreclosure of agricultural land by banks, agrarian laws proscribes the transfer of ownership of agricultural lands if it will result to the transferee gaining an aggregate agricultural landownership of more than five hectares.

“Our interpretation of the law is, except for an Agrarian Reform Cooperative, all types of juridical entities are considered as one person hence only allowed to own up to five hectares of land.  Any attempt to circumvent the five-hectare ceiling rule, such as with the use of fly-by-night juridical entities, will be dealt with to the full extent of the law,” warned La Chica.

Moreover, the law bars the ARBs to transfer the awarded land during a holding period of ten (10) years and while the amortization to the government has not yet been fully paid. Only transfers through hereditary succession, or to the government or another qualified beneficiary are allowed during the said period.

“If the restrictions do not apply, the DAR will have to clear the transfer,” said La Chica.

“Let me hasten to add that the only thing that expired on June 30, 2014, or the supposed expiration of the CARPER, was the authority of the DAR to initiate the land acquisition and distribution process over those lands not yet covered by a Notice of Coverage or a case, or has yet been voluntarily offered to sell.  The other provisions of the law, including the restrictions on transfers, are still in force and effect,” stressed La Chica.

 

The text of AO No. 04, Series of 2016 (the Rules on AVAs) and AO No. 06, Series of 2016 (the Rules on Transfer of Ownership of Agricultural Lands) can be found in the DAR’s online legal library which can be accessed through http://www.lis.dar.gov.ph.