Control of trading in agricultural real estate | In Principle

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Control of trading in agricultural real estate

The new Agricultural System Act of 5 August 2015 enters into force on 1 January 2016, superseding the act of 11 April 2003. Barring further amendments, from the New Year the Agricultural Property Agency will be vested with expanded pre-emptive rights and new rights to decide on whether agricultural establishments can be partitioned.

Under current law, if no one else has pre-emptive rights to agricultural land or they fail to exercise a pre-emptive right, the Agricultural Property Agency, acting for the State Treasury, is vested with a pre-emptive right pursuant to the Agricultural System Act of 11 April 2003 in the case of sale of agricultural real estate with an area of 5 hectares or more. And in the case of transfer of ownership of agricultural real estate with an area of less than 5 hectares through an agreement other than a contract of sale, the agency, acting for the State Treasury, may submit a declaration acquiring the property for payment of a monetary equivalent. From 1 January 2016, these provisions will apply instead to agricultural properties no smaller than 1 hectare.

There will also be a new instrument in the form of a decision by the local branch of the Agricultural Property Agency on the permissibility of division of an agricultural establishment—as defined in the Civil Code to mean agricultural land together with woodlands, buildings or parts of buildings, equipment and inventory, which constitute or could constitute an organised economic whole, along with rights connected with operation of the agricultural establishment—on an area with no less than 1 hectare of agricultural land.

Under Art. 8(1) of the new act, if the transfer of ownership of agricultural real estate would result in division of an agricultural establishment, the transfer will be permitted under any of the following circumstances:

  • The area of agricultural land that remains the property of the seller is less than the area of agricultural land necessary to conduct agricultural activity (the basic area standard for agricultural land in agricultural establishments), but the sold property or part thereof together with the agricultural land of the acquirer will create or enlarge an agricultural establishment.
  • The area of the acquired agricultural land together with the agricultural land owned by the acquirer will be greater than the area of agricultural land continuing to be owned by the seller.
  • The sold agricultural land or a part of it includes agricultural land not adjacent to other agricultural land included in the same agricultural establishment of the seller, but is adjacent to agricultural land included in an agricultural establishment owned by the acquirer.
  • In an exchange agreement, the difference in the areas of the exchanged agricultural properties, calculated in “conversion” hectares referred to in agricultural tax regulations, does not exceed 10%.
  • The transfer is intended to establish a rational boundary between agricultural establishments.
  • The seller retains ownership of land under a residential building together with other adjacent structures and land necessary for proper use of the residential building, whose total area does not exceed 0.5 hectare, and the sold agricultural real estate or part of it together with the acquirer’s agricultural real estate will create or enlarge an agricultural establishment.

The Agricultural Property Agency will oversee trading in agricultural land and decide not only on sale of agricultural properties, but also transfers of ownership other than by a contract of sale. This will create a level of state intervention in real estate transactions not seen in Poland at any time since 1990. It would be worthwhile to consider changing these regulations and finding other, less intrusive instruments for shaping the country’s agricultural system.

Iwona Kasperek, Tomasz Zasacki, Real Estate & Construction Practice, Wardyński & Partners