Restrictions on purchasing land under CLOA

A CLOA is a legal document issued by the Department of Agrarian Reform (DAR) to farmer-beneficiaries as proof of ownership of agricultural land awarded to them under the government’s Comprehensive Agrarian Reform Program (CARP).

Republic Act (RA) 6657, or the Comprehensive Agrarian Reform Law of 1988 (CARP Law), was enacted to allow landless farmers and farmworkers to own, directly or jointly, the lands they till or to receive a just share of the fruits thereof. To this end, the State redistributed the ownership of all agricultural lands to landless farmers, subject to the landowners’ retention limits and with due regard to their right to just compensation.

However, farmer-beneficiaries under the CARP are subject to certain limitations in terms of sale, transfer or disposal of the land awarded to them. Sections 26 and 27 of the CARP Law, strictly provide a 10-year holding period, the requirement of a prior DAR clearance or approval, and fully-settled amortization payments, before an awarded land may be validly sold to another person, to wit:

Section 26. Payment by Beneficiaries. — Lands awarded pursuant to this Act shall be paid for by the beneficiaries to the LBP in thirty (30) annual amortizations at six percent (6%) interest per annum.

The LBP shall have a lien by way of mortgage on the land awarded to the beneficiary; and this mortgage may be foreclosed by the LBP for non-payment of an aggregate of three (3) annual amortizations. The LBP shall advise the DAR of such proceedings and the latter shall subsequently award the forfeited landholdings to other qualified beneficiaries. A beneficiary whose land, as provided herein, has been foreclosed shall thereafter be permanently disqualified from becoming a beneficiary under this Act.

Section 27. Transferability of Awarded Lands. — Lands acquired by beneficiaries under this Act may not be sold, transferred or conveyed except through hereditary succession, or to the government, or the LBP, or to other qualified beneficiaries for a period of ten (10) years: provided, however, that the children or the spouse of the transferor shall have a right to repurchase the land from the government or LBP within a period of two (2) years. Due notice of the availability of the land shall be given by the LBP to the Barangay Agrarian Reform Committee (BARC) of the barangay where the land is situated. The Provincial Agrarian Reform Coordinating Committee (PARCCOM) as herein provided, shall, in turn, be given due notice thereof by the BARC.

If the land has not yet been fully paid by the beneficiary, the rights to the land may be transferred or conveyed, with prior approval of the DAR, to any heir of the beneficiary or to any other beneficiary who, as a condition for such transfer or conveyance, shall cultivate the land himself. Failing compliance herewith, the land shall be transferred to the LBP which shall give due notice of the availability of the land in the manner specified in the immediately preceding paragraph.

In the event of such transfer to the LBP, the latter shall compensate the beneficiary in one lump sum for the amounts the latter has already paid, together with the value of improvements he has made on the land.

Thus, while the law permits the sale of land under CLOA, it is necessary that the conveyance must comply with the conditions set by the DAR and the provisions of the CARP Law.

Source: Manila Times

Mortgage Redemption Insurance and fire insurance in home loans

Under Republic Act 10607, which amends the Insurance Code of the Philippines, fire insurance refers to a contract of indemnity that provides coverage for loss or damage to property caused by fire. (Section 169, Insurance Code)

For purposes of indemnification, the valuation of the property insured, often equivalent to the amount of the outstanding loan, determines the insurer’s liability in the event of a covered peril. (Section 173, Ibid.) Accordingly, in the event of fire, the insurer is bound to indemnify the insured based on the said valuation.

Mortgage Redemption Insurance (MRI), on the other hand, is a form of life insurance designed to protect both the mortgagee (lender) and the mortgagor (borrower) in the event of the latter’s untimely death or total and permanent disability within the term of the mortgage loan.

The proceeds of the MRI policy are applied to extinguish the outstanding mortgage obligation, releasing the heirs of the borrower from any liability.

The primary objective of an MRI is to ensure that the mortgage loan will be fully paid in case of the borrower’s death or total and permanent disability.

It is a common practice for banks to require both MRI and fire insurance when granting a home loan. In the event of the borrower’s death, the existence of an MRI coverage prevents foreclosure proceedings, affording the borrower’s family or the latter’s heirs financial security during a period of loss.

The designated beneficiary of an MRI is generally the bank or lending institution, thereby ensuring that any insurance proceeds are directly applied to satisfy the unpaid loan obligation in accordance with the terms of the mortgage contract.

Alternatively, fire insurance serves to indemnify the policyholder in the event of loss or damage caused by fire. A standard fire insurance policy typically includes the cost of repairing or rebuilding damaged structures. However, in the context of a home loan, the application of fire insurance differs.

In the event the mortgaged property is damaged or destroyed, the insurance proceeds shall be applied primarily to the outstanding loan balance, thereby safeguarding the interest of the mortgagee and ensuring that no financial loss is sustained by the lender.

With respect to the premium, the amount and terms of payment shall be governed by the provisions stipulated in the loan agreement and insurance policy.

It is a prevailing practice among banks to bundle the mortgage loan together with the fire insurance and MRI premiums, the total amount being payable either on an annual or monthly basis, depending on the agreed terms.

Source: Manila Times

Philippines edges up in rule of law

The Philippines inched up three places to 97^th out of 143 countries and jurisdictions in the 2025 edition of the World Justice Project’s (WJP) Rule of Law Index. It was the country’s best ranking in five years. However, it remained one of the laggards in the region.

Source: Business World