Short answer. Article 9 of the Labor Code sets the price for land transferred to a tenant-farmer at two and a half times the average yield of three normal crop years before October 21, 1972. The tenant repays that amount plus six percent yearly interest over fifteen equal annual installments, with his cooperative covering any missed payment.
What the law says
the value of the land shall be equivalent to two and one-half (2-1/2) times the average harvest of three
Labor Code, Article 9 — How Land Value Is Computed. Read the full provision →
What the law says
shall be paid by the tenant in fifteen (15) years of fifteen (15) equal annual amortizations
Labor Code, Article 9 — How Land Value Is Computed. Read the full provision →
How the purchase price is set
The formula fixes the price of land transferred to a tenant-farmer at two and one-half times the average harvest of three normal crop years, measured before Presidential Decree No. 27 took effect on October 21, 1972. That harvest-based figure, not a market appraisal, is what determines the base cost of the land.
Basing the price on past harvests rather than current land value meant the amount owed did not rise and fall with real estate prices at the time payment was due.
Repayment terms for the tenant-farmer
Once the base price is set, the total cost, including interest at six percent per year, is payable over fifteen years, split into fifteen equal annual amortizations. This spreads the purchase price into a fixed yearly obligation rather than a single lump-sum payment.
The interest rate and payment schedule are both fixed by the provision itself, leaving no room for the parties to negotiate a different rate or term for this particular transfer.
What happens if a payment is missed
If the tenant-farmer defaults on an amortization, the farmers' cooperative he belongs to is required to pay the missed amount on his behalf. The cooperative does not simply absorb the loss, however, since it keeps a right of recourse to collect that amount back from the defaulting member.
This arrangement ties the individual tenant-farmer's repayment obligation to the collective standing of his cooperative, giving the cooperative a direct interest in members keeping up with their amortizations.
The government's backing
The provision also has the government guarantee these amortizations, backing them with shares of stock in government-owned and government-controlled corporations rather than cash. This guarantee was meant to make the financing arrangement more secure for whichever party ultimately held the receivables on the land transfer.
That guarantee sits alongside the cooperative's right of recourse as a second layer of security behind the tenant-farmer's payment obligation under this article.
Where this fits among the land-reform articles
This valuation and payment scheme carries out the broader statement of objectives elsewhere in the Labor Code, which frames agrarian reform as freeing tenant-farmers from land they worked but did not own. The price formula, interest rate and repayment period here are the concrete mechanics behind that stated goal, and the following article addresses the conditions attached to the farmer's resulting ownership.
Related provisions
- Labor Code, Article 9 — How Land Value Is Computed
- Labor Code, Article 7 — Objectives Of Agrarian Reform
- Labor Code, Article 10 — Conditions On Farmer Ownership