28
Thu, Mar
55 New Articles

Agricultural Land in Poland Only for Individual Farmers?

Poland
Tools
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

Since Poland became a member of the European Union in 2004, agricultural land prices have been constantly rising. However, agricultural land in Poland is still among the cheapest in Europe, costing on average only one third of what it brings in many Western European countries.

One reason for this is that EU nationals must obtain a permit issued by the Minister of the Interior and Administration in order to purchase agricultural land until the 12th anniversary of Poland’s accession. This requirement will cease to apply after May 1, 2016.

Many Polish farmers would prefer that the limitation be maintained, hoping that prices would stay at the current level, enabling them to expand their farms at a relatively low cost. It is feared that when the protection period ends there will be large-scale acquisition of agricultural land without the local population being consulted beforehand or community consent being obtained, threatening the interests of family farms. 

To address these anxieties, a legislative proposal is being promoted by the Polish Ministry of Agriculture and Rural Development. The proposed law provides that only individual farmers will be eligible to acquire agricultural land of an area over 3,000 square meters. Under the draft, an individual farmer is a person with agricultural skills who runs a farm not larger than 300 hectares and who has been a resident of a farming municipality for at least five years. Exceptions apply for the transferor’s relatives, local government units, and the State Treasury or the Agricultural Properties Agency (APA), as well as for churches and religious associations. Acquisition by other entities would be possible only under certain and strict conditions subject to a permit issued at the discretion of the APA. The acquirer of agricultural land would be obliged to run the farm for at least ten years from the date of acquisition, and the land could not be transferred to other entities during that period. The proposed amendments would apply not only to acquisition on a contractual basis but to all kinds of transfers, including acquisitions through mergers. In the case of acquisition as a result of any transfer other than sale agreement, the APA may submit a statement on acquisition. Moreover, the APA would have also a pre-emptive right to acquire shares in non-listed companies which own agricultural land. 

The proposed amendment is controversial, as the entire idea of the proposal may infringe rules and principles of EU law. For example, it may be held to breach the principle of free movement of capital among Member States. Case law of the Court of Justice of the European Union (CJEU) also explicitly precludes national rules requiring an acquirer of agricultural land to farm it in person and to be a resident of the municipality to which the land is a part.

An explanatory memorandum to the draft law indicates that similar regulations have been adopted by Hungary and Bulgaria. It is worth noting, however, that the European Commission (EC) has asked those two Member States to comment on the new legislation. Thus, it is possible that ultimately the EC may contest the proposed law by bringing an action against Poland before the CJEU.

The amendment is a revolutionary change to current regulations. It leaves a very narrow space for the free transfer of agricultural land. Planned greenfield investments and the warehouse business could also be affected. There will be need for close cooperation with local authorities to change the status of agricultural land to other uses. One result could well be the mass abandonment of agricultural land use in favor of other activities.

The proposed draft has been approved by the Parliament and is awaiting the signature of the President. It is planned for the new law to enter into force on April 30, 2016.

By Jedrzej Kniaznikiewicz, Associate, and Grzegorz Skowronski, Head of Real Estate & Construction Practice, Wolf Theiss Poland

This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Our Latest Issue