24 September, 2019
When a farmer needs credit, and whose only asset is the land under patent which he tills, where does he go?
Previously, landowners were prohibited under CA (Commonwealth Act) No. 141 from selling or mortgaging their lands for the first five years from the grant of free patent.
These lands could not also be held liable for the satisfaction of any debt contracted prior to the expiration of the period. And, even if sold beyond the five-year period, the landowner, his widow, or legal heirs, were still granted by law the right to redeem or repurchase the same within five years from the date of sale.
The public policy objective of these free patent restrictions is sound, that is, to provide a home and decent living to small independent landowners, and to give them every chance to preserve for themselves and their families the land that the State had graciously given them as a reward for their labor in cultivating the same.
These restrictions, however, unduly limit our farmers’ access to credit, as their lands, which are almost always their only assets, cannot be used as collateral for loans. This effectively limits their opportunity to create capital and make investments to modernize and increase farm productivity. In fact, despite the lapse of the five-year prohibitory period, lands under patent remain unattractive to banking institutions, considering the landowner’s right of redemption for another five years, which conflicts with banks’ interest at quickly disposing of their hard assets to maintain their solvency and liquidity.
With the passage of RA No. 11231 or the Agricultural Free Patent Reform Act, signed into law by President Rodrigo R. Duterte on Feb. 22, lands acquired under a free patent are no longer subject to the restrictions previously imposed under CA No. 141. Thus, free patents shall now be considered as titles in fee simple, granting landowners full and unrestricted ownership rights. Further, free patents issued before the effectivity of RA No. 11231 also benefit from the law, as it applies retroactively, such that all restrictions previously imposed shall be removed and immediately lifted, but without prejudice to the right of redemption for transactions made in good faith prior to the law’s effectivity.
Indeed, for decades, these lands had been “dead capital,” miring our farmers into deeper poverty, and hindering the country’s economic growth in the process. But with this new law, lands covered by free patents become immediately tradeable and bankable, granting farmers ready access to credit which they can use for whatever purpose they deem best for their lands, consistent with the law’s declared policy to allow efficient and effective utilization of said lands in order to contribute to wealth creation, entrepreneurship, and economic development.
Truly, this law not only breathes life into dead capital, but also empowers our farmers, promotes agricultural entrepreneurship, alleviates poverty, and boosts development in the agricultural sector, all while spurring the country’s economic growth.
But while this law brings so much promise, we can only hope that our farmers will not simply barter away their lands for easy cash, forcing them back where they originally were — without lands and homes.
For further information, please contact:
Tanya D. Ibañez, Angara Abello Concepcion Regala & Cruz (ACCRALAW)
tdibanez@accralaw.com
