University of Southern Philippines Foundation
00), the government
COLLEGE OF LAW
AGRARIAN REFORM LAW
10:00 am to 12:00 noon
Sundays, Room 202
Instructor:
Atty. Philline Rosemae Reluya-Yu
Students:
Berdin, Alexis;
Gumboc, Chris Edward J.;
Japitan, Angel Agustine II O.;
Nidoy, Lillybeth;
Ruiz, Mark Armand S.;and,
Sarsona, Susana.
GROUP 3
LAND VALUATION &
JUST COMPENSATION:
PRESIDENTIAL DECREE No. 27,
EXECUTIVE ORDER No. 228 AND
REPUBLIC ACT No. 6657 as amended
Contents
1. Laws & Implementing Rules and
Regulations
2. Just Compensation, Authority to
Determine the
3. Acceptable Payment, Forms of
4. Land Valuation, Formulas of
1
APPLICABLE LAWS AND
IMPLEMENTING RULES AND
REGULATIONS. The compensation of
the landowner follows the law implemented by
Department of Agrarian Reform in acquiring:
For lands acquired by virtue of Presidential
Decree No. 27 and Executive Order No. 228, the
following are the applicable provisions:
“The total cost of the land,
including interest at the rate of
six (6) per centum per annum,
shall be paid by the tenant in
fifteen (15) years of fifteen (15)
equal annual amortizations;”
(Presidential Decree No. 27
(1972)
Section 2. x x x “The average
gross production per hectare
shall be multiplied by two and a
half (2.5), the product of which
shall be multiplied by Thirty Five
Pesos (P35.
support price for one cavan of 50
kilos of palay on October 21,
1972, or Thirty One Pesos
(P31.00), the government
support price for one cavan of 50
kilos of corn on October 21,
1972, and the amount arrived at
shall be the value of the rice and
corn land, as the case may be, for
the purpose of determining its
cost to the farmer and
compensation to the landowner.
(Section 2, EO No. 228).
For lands compulsorily acquired or
voluntarily offered for sale by virtue of Republic
Act No. 6657 as amended, the following
provision applies:
“Section 17. Determination
of Just Compensation. — In
determining just compensation,
the cost of acquisition of the
land, the current value of the like
properties, its nature, actual use
and income, the sworn valuation
by the owner, the tax
declarations, and the assessment
made by government assessors
shall be considered. The social
and economic benefits
contributed by the farmers and
the farmworkers and by the
Government to the property as
well as the non-payment of taxes
or loans secured from any
government financing institution
on the said land shall be
considered as additional factors
to determine its valuation.”
(Chapter VI Section 17 of RA
6657)
Likewise, the Department of Agrarian
Reform issued DAR Administrative Order No. 6,
s. 1992, which determines the valuation of land
under RA 6657. Said DAR Administrative Order
was subsequently consolidated in Section IV(D)
of DAR Administrative Order No. 2, s. 2009.
2
JUST COMPENSATION, CONCEPT
AND DETERMINATION. Under Section
IV(D)(1) of DAR Administrative Order No.
2, s. 2009, the land valuation shall be based on (1)
the criteria provided for in Section 7 of RA 9700;
(2) based on the order of the DAR Adjudication
Board (DARAB); or, (3) the regular court, if land
owner disputes the valuation from DARAB,
which has become final and executory.
 “Eminent domain refers to the inherent
power of the State to take private property for
public. This power has two basic limitation: (1)
the taking must be for public use; and, (2) just
compensation must be given to the owner of the
property taken. Notably, in agrarian reform cases,
the taking of private property for distribution to
landless farmers is considered to be one for public
use. Anent just compensation, the same is defined
as the full and fair equivalent of the property
expropriated. The term “just” qualifies the word
“compensation” because the return deserved by
the owner of the property must be real,
substanstial, full and ample. The RTC must
consider the guidelines set forth in Section 17 of
RA 6657 and as translated into formula in DAR
A.O. No. 5. However, it may deviate from these
factors or formula if the circumstances warrant.”1
“On jurisdiction and doctrine of
exhaustion of administrative remedies: Section
50 of RA No. 6657, in part, provides that the
DAR is vested with “primary jurisdiction” to
determine and adjudicate agrarian reform
matters” and “exclusive original jurisdiction over
all matters involving the implementation of
agrarian reform” except those falling under the
jurisdiction of the Department of Agriculture
(DA) and the Department of Natural Resources.
Section 57, on the otherhand, confers “special”
and “original and exclusive” jurisdiction, to the
Regional Trial Court, as Special Agrarian Court
over all petitions of landowners for the
determination of just compensation.”2
3 FORMS OF ACCEPTABLE
PAYMENT. The following are the
acceptable forms of payment:
Mode PD 27 EO 228 RA 6657
Cash YES YES YES
Stocks NO MAYBE YES
Tax Credits NO MAYBE YES
LBP Bonds NO YES YES
Rentals NO YES NO
In kind NO MAYBE NO
In Presidential Decree No. 27, Payment
shall be in cash which shall be payable for fifteen
(15) equal annual installments within fifteen (15)
years.
In EO 228, payment shall be upon
election of the landowner. If in cash, 10% thereof
shall be paid immediately and the remaining
balance payable through bonds which 10%
thereof shall mature in ten (10) years. Lease
rentals paid after October 28, 1972 is considered
payment if there are payments made by farmer-
1 2
Sps. Nilo and Erlinda Mercado vs. Landbank of the
Philippines, G.R. No. 196707
beneficiary to the land owner. If LBP Bonds, this
shall be market interest bearing bonds which is
able to purchase privatized government assets.
Payment by stocks, tax credits, or in kind, shall
be with consent of the landowner and with
approval of Presidential Agrarian Reform
Council (PARC).
In RA 6657, payment thereof shall
likewise be upon the election of the landowner. If
in cash, the area of the land acquired shall control:
(1) for land with area of 50 hectares and above,
25% shall be in cash; (2) for land with area
between 24 to 50 hectares, 30% shall be in cash;
(3) for 24 hectares and below, 35% in cash; and,
(4) the remaining balance in any of the instances
mentioned prior shall paid in government
financial instruments.
If paid in stocks, this should either be: (1)
stocks of Government Owned and Controlled
Corporations; (2) preferred shares of Land Bank
of the Philippines; or, (3) physical assets or other
qualified investments set by Presidential
Agrarian Reform Council (PARC).
Further, in same RA 6657, tax credits
may be used which can be used against any tax
liabilities. Likewise, LBP Bonds, which are
different from preferred shares, which are market
interest bearing bonds whose rates are aligned
with 91-day treasury bill rates. 10% of the face
value thereof shall mature every year from the
date of issuance until the tenth (10th) year.
Further, LBP Bonds should be transferable and
negotiable for any of the following:
1) Acquisition of land or other real
properties of the government, including
assets under the Asset Privatization
Program and other assets foreclosed by
government financial institutions in the
same province or region where the lands
for which the bonds were paid are
situated;
2) Acquisition of shares of stock of
government-owned or -controlled
corporations or shares of stocks owned
by the government in private
corporations;
3) Substitution for surety or bail bonds for
the provisional release of accused
persons, or performance bonds;
4) Security for loans with any government
financial institution, provided the
proceeds of the loans shall be invested in
Vivencio Mateo, et. al. vs. Department of Agrarian
Reform, Land Bank of the Philippines and Mariano T.
Rodriguez, et. al., G.R. no. 186339, February 15, 2017
 an economic enterprise, preferably in a
small-and medium-scale industry, in the
same province or region as the land for
which the bonds are paid;
5) Payment for various taxes and fees to
government; provided, that the use of
these bonds for these purposes will be
limited to a certain percentage of the
outstanding balance of the financial
instruments: provided, further, that the
PARC shall determine the percentage
mentioned above;
6) Payment for tuition fees of the immediate
family of the original bondholder in
government universities, colleges, trade
schools, and other institutions;
7) Payment for fees of the immediate family
of the original bondholder in government
hospitals; and
8) Such other uses as the PARC may from
time to time allow.
shall be multiplied by Thirty Five Pesos (P35.00.
If corn, by Thirty One Pesos (P31.00).
In RA 6657, and as provided in DAR
Administrative Orders No. 6 s. of 1996 and No. 2
s. of 2009, the valuation depends if the land is
voluntary offered for sale or compulsorily
acquired. If voluntarily offered for sale, the
declared value by the land owner shall be taken
as the price, provided that it is not higher than the
formula for compulsory acquisition as provided
in DAR Administrative Order No. 6 s. 1996 and
2 s. 2009. If land is compulsorily acquired, the
remaining four (4) formulas in RA 6657, as
described in the table above, shall apply. CNI, or
Capitalized Net Income, is the income received
by the land owner as a result of one (1) year of
production. CS, or Comparable Sales, is the
amount of sale if the neighboring parcels of land
are sold to third persons. MV per TD is the market
value as declared in the Tax Declaration.

4
FORMULAS OF LAND VALUATION.
Depending on the law acquiring the land,
valuation thereof shall depend on the
provisions of the law, thus:

LAW FORMULA
PD 27 LV = (Average Harvest of 3 Normal
Crop Years*2 ½) + 6% interest

EO 228 LV = (Average Gross Production3 *

2.5) * P35.00 or P31.00

RA 6657 LV4 = Declared Value or Value based

on Formula, whichever is lower.

LV = (CNI*0.6) + (CS*0.3) + (MV per

TD *0.1)

LV5 = (CNI*0.9) + (MV per TD *0.1)

LV6 = (CS*0.9) + (MV per TD *0.1)

LV7 = MV per TD * 2

In PD 27, valuation of the land is the

product of the average harvest of 3 normal crop
years and 2 ½ plus 6% interest per annum.

In EO 228, land valuation is the product

of the average gross production multiplied by 2.5
and the government’s support price for one cavan
of fifty (50) kilos of either rice or corn. If rice, it

3 6
Determined by Barangay Committee on Land Production Applies if the Capitalized Net Income data from
4 Formula for lands voluntarily offered for sale. Landowner is absent.
5 Applies if the comparable sales data from Landowner is 7 Applies if the Comparable Sales and Capitalized Net

absent Income from landowner is absent and only tax declaration is

present.