Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH (17") CONGRESS

First Regular Sepa

HOUSE BILL NO.

Introduced by REP. JOSE CHRISTOPHER Y. BELMONTE

EXPLANATORY NOTE

Public land titling data from the Department of Environment and Natural Resources
(DENR) showed that around 2.5 millions agricultural patents were issued by the department
and registered with the Register of Deeds in the last 30 years, most of these are through Free
Patent. Agricultural free patent holders are successful farmers/cultivators of small size farms.
The fact that these individuals were able to keep their agricultural landholding and had paid
real property tax on their land since 1960! is an indication, at least, of their skills as farmer-
entrepreneur. They are farmer-entrepreneurs and not tenant-farmer beneficiaries of
Comprehensive Agrarian Reform Program.

Free patents and the less numerous homestead patents issued under the Public Land
Act as amended, however, is subject to oncrous restrictions against encumbrances or
alienation for five (5) years and repurchased by the patentee and/or his widow and
descendants within a period of five (5) years from the time of sale. Due to its restrictive
features, agricultural patents are not as attractive in the rural land market, either as collateral
or for acquisition.

The effect of the restriction is bad for the rural economy. It becomes a barrier to the
earning potential of the land as it prevents patent holders from transferring or trading the land
formally. More importantly, the restriction limits the ability of agricultural patentees to make
use of the land as collateral for loan, which would, in effect, relax credit constraints. Banks
and other financial institutions avoid agricultural patents as collateral because of the five (5)
year right of repurchase that forces banks to hold agricultural patents for four (4) more years
instead of just one (1) year for regular titles, in case of a foreclosure sale. In short, in the
event of foreclosure, banks could not immediately liquidate an acquired agricultural patent
thereby affecting the banks liquidity and its standing with the Bangko Sentral. As a result,
agricultural patentees are forced to obtain unsecured loans with higher interests rates, instead
of the lower interest business loans that are secured by mortgages.

‘Through the years, the State policy towards preservation of ownership through

1 Continuous occupation and cultivation of the land and payment of real property taxes for atleast
thirty (30) years from 1990 is a condition for the issuance of Free Patent.


transfer restriction and right of repurchase has slowly been relaxed.” At present, only
agricultural free patents and homestead patents are the last restricted patents in the land
market. It has been recognized that such restrictions on the right to alienate or encumber the
lands have worked against the people who are supposed to benefit from the law by depriving
them of the full enjoyment and utilization of the property. These farmer entrepreneurs are not
asking the government for financial support, what they needed from government only is full
owners use of their lands since they are in the best position to evaluate the land in accordance
to their needs.

While it is not automatic for landholders to use their land as collateral for credit,
especially from formal credit suppliers, the repeal of these provisions is enough to widen the
options for the agricultural patent landholders to get lower cost of credit, who for the moment
are mostly dependent on the informal suppliers. This bill proposes to repeal Sections 118 and
119 of the Public Land Act in order to remove restrictions on agricultural patents and to make
these agricultural land titles immediately tradable and bankable, provide patentees with much
needed access to credit and create capital and investments, create jobs, increase productising
and reduce poverty in the rural areas.

In view of the foregoing reasons, the approval of this bill is earnestly sought.

AMipdonl,

2 Restrictions on Public Lands Disposed under Republic Act No. 47733 was removed under
Presidential Decree Nos. 967 (1976) and 1304 (1978): restrictions on patents issued under Republic Act
No.730 was removed by Presidential Decree No. 2004 (1985); and Section 5 of Republic Act No.
10023 (2010) removes restrictions under Sections 118-123 of CA No. 141. Likewise, the Supreme
Court latest 730 was removed by Presidential Decree No. 2004 (1985): and Section 5 of Repul
No. 10023 (2010) removes restrictions under Sections 118-123 of CA No. 141. Likewise, the Supreme
Court latest



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

SIXTEENTH (17") CONGRESS.
First Regular Session

3618

HOUSE BILL NO.

Introduced by REP. JOSE CHRISTOPHER Y. BELMONTE

1

2 AN ACT

3REMOVING THE RESTRICTIONS UNDER SECTIONS 118 AND 119 OF
4COMMONWEALTH ACT NO. 141, AS AMENDED

5

6 Be it enacted by the Senate and the House of Representatives of the Republic of the
Philippines in Congress assembled:

8 SECTION. 1. Coverage ~ Sections 118 and 119 of Commonwealth Act No. 141 or
9The Public Land Act, as amended, are hereby repealed.

10 Sec. 2. Retroactive Effect ~ This Act shall have retroactive effects on all free patents
A1and homestead patents issued before the effectivity of this Act.

12

2B See. 3. Repealing Clause. - All laws, decrees, orders, rules and regulations or other
1dissuances or parts thereof inconsistent with the provisions of this Act are hereby repealed
1Sor modified accordingly.

16

7 See. 4. Separability Clause. - If any portion or provision of this Act is declared uncon-
18stitutional, the remainder of this Act or any provisions not affected thereby shall remain in
19force and effect.

20

2 See. 5. Effectivity Clause. - This Act shall take effect after fifteen (15) days following
22the completion of its publication either in the Official Gazette or in a newspaper of general
23circulation in the Philippines.

24

25 Approved,

26