Easier trade in agricultural land
The Polish President has signed an amendment to the Shaping of the Agricultural System Act of 11 April 2003 (the “Act”). The amending legislation should significantly soften the current restrictions on trading in agricultural land, which entered into force on 30 April 2016. This should result in the unblocking of transactions which involve agricultural land as one of the significant assets. Nevertheless, the final version of the amendment lacks more liberal regulations concerning trade in agricultural land within cities.
The table below summarises the most important changes for the private sector made by the amendment:
| Currently | After amendment |
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Purchase of agricultural real estate without restrictions only up to 0.3 ha. In other cases – purchase is available only for such entities as are defined in the Act or with the consent of the Director of the National Agriculture Support Centre (“KOWR”). |
KOWR’s Director need not consent to a purchase of agricultural land with an area less than 1 ha, nor to acquisitions which arise following a division, transformation or merger of commercial companies. In such a case, the KOWR Director still has a pre-emptive right (in the case of sale) or a real estate purchase right (if the acquisition occurs due to the transformation of commercial companies). |
| A purchaser of agricultural real estate is obliged to run a farm which includes the purchased agricultural real estate for at least 10 years. In that period, the purchaser cannot sell the real estate without the court’s consent. |
A purchaser of agricultural real estate is obliged to run a farm which includes the purchased agricultural real estate for at least 5 years. In that period, the purchaser cannot sell the real estate without the KOWR Director’s consent. The prohibition on selling the real estate does not apply, among others, to agricultural real estate located within administrative city limits and which has an area less than 1 ha. The period of 5 years also applies to purchases completed before the amendment entered into force.
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KOWR has a pre-emption right to buy shares and stocks in a commercial company which owns agricultural real estate. The deadline for KOWR issuing a notification that it wishes to exercise the pre-emption right in accordance with the Civil Code is 1 month from the date on which KOWR received the notice from the company. |
KOWR has a pre-emption right to buy shares and stocks in a commercial company which owns or uses agricultural real estate with an area of at least 5 ha, or multiple agricultural real estates with a total area of at least 5 ha. The deadline for KOWR issueing a notification that it wishes to exercise the pre-emption right is 2 months from the date on which KOWR received the notice from the company. |
| If, in relation to a partnership which owns agricultural real estate, a change of partner occurs or a new partner joins, KOWR may issue a notification that it wishes to purchase the real estate for an amount equivalent to its market value. | In the event of a change of a partner or a new partner joining a partnership which owns or uses an agricultural real estate with an area of at least 5 ha, or multiple agricultural real estates with a total area of at least 5 ha, KOWR may issue a notification that it wishes to purchase the real estate for an amount equivalent to its market value. |
| None | If a joint stock company which owns or is a perpetual lessee of an agricultural real estate with an area of at least 5 ha, or multiple agricultural real estates with a total area of at least 5 ha, adopts a resolution that it wishes to apply to be permitted for trade its shares on a regulated market, KOWR may issue a notification that it wishes to purchase the company’s real estates for an amount equivalent to its market value. |
Additional amendments
The amendment contains other changes, such as new rules for announcing the sale of agricultural real estate in connection with seeking the KOWR Director’s consent to sell the real estate. Minor changes are also made to the conditions to be fulfilled by a person who holds the status of an individual farmer, within the meaning of the Act, and the method for proving such that such status applies.
Facilitations for the transaction
M&A transactions based on share deal structures will be partially unblocked and facilitated by the Act having increased the territorial areas of real estates in respect of which the KOWR Director can exercise the pre-emption right to buy the shares/ stocks of the land-owning companies. Likewise, such deals will be facilitated by changes made to the requirement to obtain consent for the sale of such real estate.
Moreover, another positive development if the abolition of the requirement to obtain the KOWR Director’s consent to sell real estate as part of commercial companies’ reorganisations. This will unblock and facilitate the sale of real estates based on mergers, divisions and other transformations of commercial companies.
It should be noted, however, that the final version of the amendment lacks provisions which would enable agricultural land locate within cities to be exempted from the provisions of the Act. The previous versions of the amendment contained suggestions that agricultural lands within cities would fall outside the scope of the Act’s provisions, so that such land could be purchased by any entity (not merely by a farmer) and for any purpose. In the version adopted by the Sejm, an exclusion applies to the obligation to obtain the KOWR Director’s consent to sell agricultural lands having an area up to 1 ha regardless of whether or not they are located within cities or in rural areas.
The amendments to the Act should enter into force within 14 days after their announcement.
