RULES AND PROCEDURES GOVERNING AGRICULTURAL LEASEHOLD AND THE DETERMINATION OF LEASE RENTAL FOR TENANTED LANDS

I
Prefatory Statement

In order to protect and improve the tenurial and economic status of
tenant-tillers in agricultural lands within the retained areas and areas
not yet acquired pursuant to R.A. 6657, the DAR shall determine and fix
immediately the lease rentals thereof in accordance with Section 34 of
R.A. 3844, as amended.

The DAR shall likewise immediately and periodically review and adjust
the rentals for all crops for all regions to progressively improve he
condition of the farmer-lessees.

II
Policy

Pursuant to Section 12 of R.A. 6657, the following are the policies on agricultural lease hold and lease rental determination:

A.      By operation of law, all share-crop tenants of agricultural
lands covered by this Order are automatically converted into
agricultural lessees as of June 15, 1988;

B.      The lease rental to be paid by all agricultural lessees
shall not be more than the equivalent of twenty-five percent (25%) of
the average normal harvest during the three (3) agricultural years
immediately preceding June 15, 1988, after deducting the amount used for
seeds and the cost of harvesting, threshing, loading, hauling and
processing, or whichever is applicable.

C.      If the land has been cultivated for a period of less than
three (3) agricultural years prior to June 15, 1988, the initial rental
shall be based on the average normal harvest during the preceding
agricultural years when the land was actually cultivated, or on the
harvest of the first agricultural year in the case of newly cultivated
lands, if that harvest is normal.

          Alter the lapse of the first three (3) normal or usual
harvests, the final rental shall be based on the average normal harvest
during these three (3) preceding agricultural years.

          If there has been no normal harvest, the estimated normal
harvest during the three (3) agricultural years immediately preceding
shall be considered as the normal or usual harvest.

D.      The Municipal Agrarian Reform Officer (MARO) shall
determine and fix the rental pursuant to Section 12 of R.A. 6657, based
on production records available in the locality.

E.      If capital improvements are introduced on the farm by the
lessor with the consent of the lessee and subsequently result in
increase productivity, the rental shall be increased proportionately.

          Capital improvement is understood to mean any permanent
and tangible improvement on the land that will result in increased
productivity.

F.      All leasehold agreements shall be in writing using the
prescribed leasehold contract form duly notarized and registered with
the Municipal Treasurer’s Office.

G.      Existing leasehold contracts shall be respected provided
that the agreed lease rentals do not exceed the maximum provided by law.

III
Coverage

These Rules shall apply to all tenanted agricultural lands including but not limited to the following:

A.      Retained areas under R.A. 6657 and P.D. 27;

B.      Tenanted agricultural lands not yet acquired for distribution under CARP pursuant to R.A. 6657;

C.      All tenanted areas under Section 10 of R.A. 6657 which may be covered by this Order.

IV
Effectivity of Leasehold

A.      Leasehold arrangements covered by this Order shall take
effect on the first agricultural year immediately following the
leasehold relationship, as follows:

1.    Tenanted rice and corn lands and lands planted to other perennial crops as of November 10, 1971;

2.    Tenanted sugarlands, as of July 4, 1974, upon the
termination of the Philippine International Commitment as embodied in
the Laurel-Langley Agreement;

3.    Tenanted coconut and other lands planted to permanent crops, as of June 15, 1988, when R.A. 6657 took effect;

4.    Other tenanted agricultural lands, upon the establishment of a leasehold relationship through contract or court order.

B.      The agricultural leasehold relationship involving lands
within the retained area shall be valid from the establishment of
leasehold up to the time DAR shall acquire the retained land or up to
the date the contract is terminated in accordance with law.

V
Procedures

A.      Identification Phase — The MARO shall identify all
landholdings still under share tenancy as of the effectivity of R.A..
6657, the landowner thereof and the share tenants.

B.      Determination and Fixing of Rental — The MARO and
the Barangay Agrarian Reform Committee (BARC) concerned shall jointly
conduct a mediation conference between the landowner and the
tenant-tiller(s) for the purpose of fixing the lease rental. For this
purpose, the following steps shall be followed:

1.       Both parties shall be required to submit production data
or any document as proof of the average normal harvest, including the
deductible item(s) enumerated under the succeeding paragraphs, during
the three (3) agricultural years immediately preceding the date the
leasehold relationship was established, or June 15, 1988.

2.       On the basis of the documents and/or evidence presented,
the MARO and BARC shall proceed with the computation of the lease
rental applying the formula prescribed under Section 34 of R.A. 3844, as
amended, as follows:

a)    Get the normal or usual harvest for three (3)
agricultural years immediately preceding the data when the leasehold
relationship was established;

b)    From each normal and usual harvest, deduct the amount
used for seeds and the cost of harvesting, threshing, loading, hauling
and processing, or whichever is applicable:

c)    Determine the total normal net harvest for the three (3) to get the average normal net harvest;

d)    Divide the total normal net harvest by three (3) to get the average normal net harvest;

e)    Multiply the average normal harvest by 25%.

The resulting product shall be the fixed lease rental per
agricultural year for that particular land unless the landowner and
tenant has agreed to a lower lease rental.

C.      Documentation Phase —

1.  The agreement between the parties as to the fixing of rental
should be reduced in writing in the prescribed agricultural leasehold
contract (Annex “A”) which shall be drawn up in five copies in the
language or dialect known to the agricultural lessee and signed or
thumbmarked by the parties or their duly authorized representatives
before two witnesses.

2.  Before the contracting parties affix their signatures on the
contract, the MARO or BARC shall explain to the parties the terms and
conditions in the aforesaid contract including the rights and
obligations of both parties.

3.  The contracting parties shall acknowledge the execution of
the contract before the Municipal Trial Court Judge where the land is
situated or before a DAR lawyer commissioned as a Notary Public. The
MARO shall register the contract with the Municipal Treasurer.

D.      In case of disagreement or non-approval of the parties
involved in the determination of lease rental, the MARO shall determine
the rental in the manner prescribed under Paragraph V B-2 of this Order.
The MARO shall comply with the following requirements:

1.  The MARO shall prepare a corresponding leasehold documentation folder which shall contain the following:

a)    Documents and/or evidence presented and/or gathered by
the tenant-tiller, landowner, MARO and other parties involved relative
to tenure relationship as well as production data, deductible item(s)
provided for by law, and other relevant information;

b)    Minutes of conferences/meetings held for the purpose of
establishing tenure relationship, determining and fixing rental, and
resolving conflicts, if any;

c)    Worksheet forms used in the computation of lease rentals; (ANNEX “A-1”)

d)    Investigation Report, if any.

2.  On the basis of the documentation folder, the MARO shall
prepare the order of lease rental in five (5) copies using the
prescribed form, Annex “B” and shall affix his initial below the space
provided for the signature of the Provincial Agrarian Reform Officer
(PARO).

3.  The order of lease rental together with the documentation
folder shall be forwarded to the PARO for consideration and approval. 
The MARO shall retain a duplicate set of the documentation folder.

4.  The PARO, in considering the recommendation of the MARO,
shall be guided by the provisions of Section 12 of R.A.. 6657, Section
34 of R.A. 3844 and other pertinent provisions of existing laws.

5.  The PARO shall furnish a copy of the order of lease rental to
all parties concerned, including the MARO and the DAR Regional
Director.  The original copy shall be retained by the PARO for file.

VI
Resolution of Protest

Any party who disagrees with the Order fixing the rental may bring
the matter to the DAR Adjudication Board (DARAB) within fifteen (15)
days from receipt thereof otherwise the Order becomes final and
executory.

VII
Periodic Review

The Secretary may direct a periodic review and adjustment of the
rental structure for all leaseholds regardless of crops, including rice
and corn, in all regions.

VIII
Effectivity

This Administrative Order shall take effect ten (10) of days after
its publication in two (2) national newspapers of general circulation
pursuant to Section 49 of R.A.. 6657. All orders, circulars, rules and
regulations inconsistent herewith are hereby revoked, amended, or
modified as the case may be.

Adopted: 2 March 1989

(SGD.) PHILIP ELLA JUICO
Secretary

Effective: 16 March 1989