It is well known that the legislation on agricultural land and forestry is very strict and diverse, especially in comparison with the legislation on other private law matters. However, complying with these regulations must be even more difficult if the person who wants to acquire the ownership of a land is a citizen of another country and therefore is not familiar with the relevant Hungarian legislation. With the following, we offer a brief summary of the mandatory aspects of land acquisition in Hungary.
I. Participants of agriculture
Act CXXII of 2013 on the Transfer of Agricultural and Forestry Land (“Land Transfer Act”) covers the sale and purchase of the lands, considered as agricultural lands, which definition covers all lands that are being registered as arable lands, vineyards, orchards, gardens, meadows, grasslands, reeds, forests and wooded areas.
The Land Transfer Act sets forth that only natural persons who are
a) Hungarian citizens; or
b) EU citizens, or a citizen of a country party to the Agreement on the European Economic Area, or a citizen of a country treated as such by an international treaty (“EU citizen”)
may acquire the ownership of agricultural lands. Furthermore, the Land Transfer Act explicitly sets forth, that
1. foreign citizens (a person who is not a Hungarian citizen, nor an EU citizen);
2. foreign countries and their domains; and
3. legal entities – with few exceptions –
are prohibited from acquiring ownership of an agricultural land in Hungary.
It is crucial that natural persons who are not considered as “farmers” under the Land Transfer Act, may acquire ownership of agricultural lands only if the area of the land they possess, including the area of the land they wish to acquire, does not exceed 1 hectare. This means that in case a non-farmer already owns one hectare of agricultural land, he is even prohibited from acquiring ownership via adverse possession, since his ability to acquire ownership is maximized by law. This limitation does not apply only in few cases, one of which is when a non-farmer acquires the ownership of land from a close relative.
Under the term “farmer” the Land Transfer Act mainly considers a Hungarian or EU citizen registered in Hungary, who has a vocational qualification or a professional qualification in agriculture or forestry.
As mentioned above, legal entities – excluding few cases – are not entitled to own agricultural land, however, they are entitled to use them if they are considered as an “agricultural producer organization”.
II. Maximum land acquisition and maximum landholdings
The Land Transfer Act differentiates the maximum area of agricultural lands that can be owned or possessed by one participant of the agriculture.
The ownership of agricultural land is maximized in 300 hectares, and can be acquired by farmers or non-farmers who acquire the ownership from their close relative.
The farmers and the agricultural producer organizations are entitled to possess up to 1200 hectares of agricultural land. However, if the agricultural producer organization is considered as a producer of seeds of arable and horticultural crops, or an operator of a livestock holding, the area that can be possessed goes up to 1800 hectares.
III. Right of preemption and its exercise
The Land Transfer Act limits the freedom of contract in many aspects. One of the most crucial regulation is that the seller of the land does not have the ultimate right to choose the buyer as he wish, since there is a wide range of persons who have the right of preemption by law. Therefore, if a seller is to sell his land, the holders of the right of preemption can easily step into the contract and can acquire the ownership of the land with their unilateral statement.
Regarding the execution of the right of preemption, the seller is obliged to send the sales contract to the agricultural administration within 8 days after signing the contract. The agricultural administration then reviews the contract and if it does not find any reason for which it should be rejected, the administration ensures that the contract shall be advertised and thus made known to the potential holders of right of preemption.
IV. The mandatory approval of the transfer
In order to transfer the ownership of the agricultural land, the contract must be approved by the agricultural administration. The Land Transfer Act defines many reasons, which lead to the rejection of the contract. The most common causes of rejection are in connection with the violation of the above regulations, the violation of rights of preemption, or the failure to undertake the obligations by the buyer, explained under Section V.
V. The obligations after the acquirement of ownership
Pursuant to Act CXXIX on the Protection of Agricultural Lands, the land user must use the land for the production of the type of its registered cultivation or – without pursuing production – to prevent the establishment and spread of weeds, while respecting the soil protection standards (“Obligation of Use”).
The right to acquire ownership is subject to the undertaking of the obligation that the buyer will use the land himself and, in doing so, he will fulfil his Obligation of Use. Furthermore, the buyer shall accept the obligation that he is not to use the land for any other purpose than it is registered in the title deed for a period of 5 years from the date of acquisition of ownership.
The only exceptions from the obligations above is that the owner of the land can assign the “right of land use” by lease agreement to Hungarian or EU citizens, or to legal entities prescribed by law. Under the “right of land use”, the user can utilize, manage and use the agricultural land. According to the Land Transfer Act, the “right of land use” can be acquired by farmers or agricultural producer organizations.
Based on the above it is safe to say that the acquirement of agricultural lands and the lawful usage following the acquirement is a highly complex matter, and it is easy for anyone who is not specialized to get lost in the concerning legal provisions. Therefore, it is highly recommended that in case anyone is about to start a related procedure, seek professional advice before doing so.
By Patrik Kiss, Junior Associate, act Ban & Karika Attorneys at Law