On 26 April 2016 the Act of 14 April 2016 on suspension of sale of property from the Agricultural Property Stock of the State Treasury and amendment to certain acts (the “Act”) was signed by the President. The Act awaits to be published in the Official Journal of Laws and is stated to take effect on 30 April 2016.
The goal of the Act is to prevent foreign entities buying agricultural properties. When Poland joined the European Union a transition period was provided, restricting purchases of land in Poland by EU entities until 1 May 2016. During this time foreigners needed to obtain a decision of the Minister of the Interior and Administration to purchase certain real properties. After 1 May 2016 a decision of the Minister will no longer be required. However, the government decided to place restrictions on trade in agricultural property that are applicable to all entities operating on the Polish market, irrespective of whether or not they are considered foreigners and to suspend the sale of agricultural land owned by the State Treasury which is managed by the Agricultural Property Agency (“Agency”).
Below we highlight the key points of the Act.
1. Overview of the restrictions introduced in the Act
The following main restrictions shall apply to agricultural properties larger or equal to 0.3 hectares:
- Agricultural properties may be acquired only by individual farmers. Save for statutory exceptions (incl. close relatives, State Treasury, Catholic Church and religious associations), the acquirer has to obtain the consent of the Agency and to meet strict conditions;
- The new owner of the agricultural property will be obliged to manage the farm on the property for at least 10 years following acquisition;
- The Agency will also have a pre-emptive right over the shares of commercial companies that own agricultural properties and a right to re-purchase agricultural properties owned by a limited partnership when a partner of the partnership changes or a new partner joins the partnership;
- The Agency will have a right to purchase agricultural properties in each case when ownership of the agricultural property changes, irrespective of the legal basis of the change. Notably, this shall include mergers, divisions and transformations of companies.
2. What properties are covered by the Act?
The Act ‒ and its restrictions ‒ does not apply to agricultural properties smaller than 0.3 ha.
The Act expressly excludes from its scope properties which are designated in the local zoning plan for a purpose other than agricultural and agricultural property for which a final and binding decision on conditions of construction and land development designating the land for non-agricultural purposes was issued before the Act entered into force. This provision suggests that after the Act takes effect only a non-agricultural designation of the real estate in the local zoning plan will release a property from the restrictions imposed by the Act.
3. Who can acquire agricultural property?
The general rule is: individual farmers only. An individual farmer is a natural person who already holds legal title to some agricultural properties, has farming qualifications and has lived, for at least 5 years, in a municipality where at least one property of his farm is located and during this period has been personally managing the farm. Moreover, after acquisition of additional property, the total area of agricultural land owned by an individual farmer cannot exceed 300 ha.
In all other cases, the consent of the Agency for a transfer of ownership is required (exceptions apply, see below). Consent can be obtained by the current owner provided that: he can evidence that he cannot dispose of the property to any eligible person, and the prospective owner guarantees the land will be used for agricultural purposes and there will be no excessive concentration of agricultural land. A prospective owner can apply for Agency consent provided that: he is a natural person, aims to manage the family farm on the acquired real estate, has farming qualifications, guarantees that the land will be used for agricultural purposes and undertakes to live for at least 5 years in a municipality where at least one property of his farm is located.
If the Agency rejects the motion for consent, the owner may ask the Agency to purchase the land at the market price, which shall be defined by the Agency.
Moreover, the new owner of agricultural property is under a statutory obligation to manage ‒ for at least 10 years following acquisition ‒ the farm to which the new agricultural property was joined. During this time the agricultural property may not be sold or handed over for use to another person (including lease to another person). The new owner may, however, request the court to release him from these obligations.
There are certain exemptions from these rules. The requirements to be an individual farmer and to manage the farm shall not apply in particular in the case of acquisition: (i) by close relatives of the owner, (ii) by local government units, (iii) by the State Treasury or the Agency, and (iv) by the Catholic Church and other religious associations, (v) as a result of inheritance (although in such cases the Agency has a right to purchase the property). Moreover, the requirement to be an individual farmer shall not apply when an acquisition is made during a restructuring within the framework of recovery proceedings.
4. Pre-emptive right of the Agency
The Agency will have a right to purchase agricultural properties in the case of (i) sale of agricultural property, or (ii) transfer of shares of commercial companies which own agricultural property.
Exceptions to this rule include: 1) sale of agricultural property to: (i) close relatives of the owner, (ii) local government units, (iii) the State Treasury or Agency, or (iv) between legal entities of the Catholic Church or of the same religious association, and 2) transfer of shares on the stock exchange market or to close relatives.
The pre-emptive right to the agricultural property does not apply if consent of the Agency for acquisition of the agricultural property was obtained.
The Agency will also have a right to purchase agricultural properties owned by limited partnerships when a new partner joins the partnership or when the partners change. The right does not apply when a partner is replaced by a close relative or a new partner is a close relative of any of the current partners.
5. Right of the Agency to purchase the real property
When ownership of an agricultural property changes due to legal acts other than sale, the Agency will have the right to purchase the property at a market price. This will include: (i) an agreement other than a sale agreement, (ii) unilateral legal transactions, (iii) court judgments, decisions of a public authority including judgments and decisions made in accordance with the provision of enforcement proceedings, and (iv) any other legal act or legal event including in particular: inheritance, division, merger or transformation of a commercial company.
The purchase right does not apply in particular when the transfer of an agricultural property: 1) results in a family farm expanding to not more than 300 ha, 2) is made: (i) with consent of the Agency; (ii) by a close relative of the person acquiring real estate, (iii) due to inheritance by law or inheritance by an individual farmer, (iv) by a specific bequest in a will to an individual farmer; (v) between legal entities of the same church or religious association.