Requirements and Due Diligence
Selling large-scale agricultural land in the Philippines is a complex process governed by a web of agrarian reform laws, local government regulations, and environmental mandates. Beyond a simple transfer of title, the transaction must navigate the restrictions of the Comprehensive Agrarian Reform Program (CARP) and specific administrative requirements.
1. Verification of Title and Ownership
The foundation of any real estate transaction is ensuring the "cleanliness" of the title.
- Certified True Copy of the Title: Obtain a fresh copy from the Register of Deeds to check for existing liens, encumbrances, or a "Notice of Coverage" under CARP.
- Tax Declaration and Clearances: Ensure that Real Property Taxes (RPT) are paid up to date. Large holdings often accumulate significant tax liabilities that must be settled before the Bureau of Internal Revenue (BIR) issues a clearance.
- Verification of Technical Description: For large tracts, a relocation survey by a licensed Geodetic Engineer is essential to confirm that the actual boundaries match the title and that there are no encroachments.
2. DAR Clearances and CARP Compliance
The most critical hurdle for agricultural land is the Department of Agrarian Reform (DAR). Under Republic Act No. 6657, there are strict limits on land ownership and transfer.
Five-Hectare Retention Limit: An individual can generally only own up to five hectares of agricultural land. Selling a "large" tract often requires proof that the seller is within their retention limit and that the buyer will not exceed theirs upon purchase.
DAR Clearance: A DAR Clearance is mandatory for the registration of the sale. The DAR will verify:
That the land is not subject to a pending case or coverage under CARP.
That there are no displaced tenant-farmers.
Right of Retention and Tenant's Right of First Refusal: If there are agricultural lessees or tenants on the land, they have a legal right of first refusal to purchase the land under reasonable terms. If they cannot buy it, they must be properly compensated (disturbance compensation) before the sale can proceed.
3. Land Classification and Zoning
Not all "green" land is legally agricultural.
- Certificate of Non-Coverage or Conversion: If the buyer intends to use the land for residential, commercial, or industrial purposes, a Land Use Conversion order from the DAR is required. Selling agricultural land for non-agricultural use without this conversion is a violation of law.
- Zoning Certificate: Verification from the Housing and Land Use Regulatory Board (HLURB) or the local government’s planning office is necessary to confirm the land's current zoning classification.
4. Mandatory Clearances for Large Transactions
For large-scale transfers, additional government "No Objection" certifications are often required:
- DENR Clearance: If the land is near timberland, mineral land, or protected areas, a clearance from the Department of Environment and Natural Resources (DENR) is necessary to ensure the land is "alienable and disposable."
- NCIP Clearance: If the land falls within or overlaps with an Ancestral Domain, a certification from the National Commission on Indigenous Peoples (NCIP) is required to ensure the sale does not violate the rights of Indigenous Cultural Communities.
5. Tax Obligations and Documentation
The transfer of agricultural land triggers several fiscal requirements:
| Tax Type | Rate | Responsibility |
|---|---|---|
| Capital Gains Tax (CGT) | 6% of the gross selling price or fair market value | Usually the Seller |
| Documentary Stamp Tax (DST) | 1.5% of the transaction value | Usually the Buyer |
| Transfer Tax | 0.5% to 0.75% (depends on LGU) | Usually the Buyer |
| Registration Fees | Graduated scale | Usually the Buyer |
- Certificate Authorizing Registration (CAR): This is issued by the BIR once all taxes are paid. The Register of Deeds will not issue a new title (TCT) without the CAR.
6. Due Diligence Checklist for Sellers
To avoid future litigation or the "freezing" of the sale, the seller should prepare:
- Affidavit of Aggregate Landholdings: Both seller and buyer must swear to the total amount of agricultural land they own nationwide.
- Affidavit of Non-Tenancy: If there are no tenants, an affidavit (validated by the DAR) must be provided.
- Proof of Notice: If there are tenants, written proof that they were offered the land first and declined.
- Secretary’s Certificate: If the seller is a corporation, a board resolution authorizing the sale and designating an authorized signatory is mandatory.