Changes in agruculatural properties turnover

On 9 May 2019, the Senate (the upper house of the Polish parliament) approved without amendments the revised Act on the Shaping of the Agricultural System. The amended act will come into force upon its signature by the President. 

The most important changes

The amended act introduces free trade in agricultural properties of the area of less than 1 hectare in urban areas, but the State Treasury will still have the pre-emptive right to purchase those properties (also in the case of further resale).

The existing restrictions on transfer of shares in limited and joint stock companies which are owners or perpetual usufructuaries of agricultural properties have also been relaxed. Also, the pre-emptive right of the State Treasury to purchase agricultural properties from partnerships undergoing changes in their partnership structure which are owners or perpetual usufructuaries of agricultural properties, will be limited too.

Properties of up to 1 hectare

The passed legislation introduces a new category of agricultural property, namely properties of the area from 0.3 to 1 hectare which are subject to the revised provisions of act. For the record, the properties of the area of less than 0.3 hectare are not subject to any restrictions imposed by the Act on the Shaping of the Agricultural System, as they fall outside its scope.

On the other hand, properties of the area of at least 1 hectare will be subject to – as is currently the case – to all restrictions by the act.

Upon the entry into force of the amended act, an agricultural property of the area from 0.3 to 1 hectare, situated within or outside the city, will therefore not lose its agricultural characteristics because the provisions of the Act on the Shaping of the Agricultural System will still apply to it. The changes introduce two exemptions.

Firstly, restrictions as to persons who can acquire agricultural properties have been lifted. At present, agricultural properties exceeding the area of 0.3 hectare may be acquired exclusively by individual farmers (other entities require special approval of the Director of the National Support Centre for Agriculture). Once the amendments have been introduced, the properties of the area of less than 1 hectare can be acquired by any natural or legal person, regardless of the situation of the property – within or outside the city.

Further, in the case of properties situated within the administrative borders of cities (of the areas of up to 1 hectare), the buyer will be relieved from the obligation to run an agricultural farm on the acquired property (i.e. conducting an agricultural activity) and his right to sell such property will not be limited either. At present, the buyer has an obligation to run an agricultural farm for 10 years from acquisition and must not sell the property during this time. The above relaxation will not however apply to properties situated outside the cities.

It should be noted, though, that acquisition of such properties will depend on the State Treasury’s not exercising its pre-emptive right. Therefore, the acquisition transaction will have to be two-stage.

At the same time, if the property owner wants to sell the property, the State Treasury will also have the pre-emptive right, what should be remembered as unconditional sale of such property will be invalid.

Changes affecting the companies

The State Treasury’s pre-emptive right was relaxed with respect to the shares of limited and joint stock companies, as well as the pre-emptive right to purchase agricultural properties in the case of change of ownership structure in partnerships. Once the amendments have been in force, the State Treasury will have these rights only with relation to companies/partnerships which are owners or perpetual usufructuaries of agricultural properties of total area of at least 5 hectares.

Yet another restrictions have been imposed on joint stock companies that want to be listed on a stock exchange. If such company is an owner or perpetual usufructuary of agricultural properties of total area exceeding 5 hectares, it has to notify the National Support Centre for Agriculture on adopting a resolution on applying for admitting of the shares under prospectus into trading on regulated market. Because the National Centre will have the right to purchase from that company all agricultural properties against payment of a price corresponding to their market value.

Other changes

Some other changes include shortening of the obligatory period to run an agricultural farm by the buyer of agricultural property from 10 to 5 years.

The procedure for applying for approval to sell the property before the lapse of this 5-year period has also been simplified. No one will have to apply to court, as the matter will be decided upon by the Director of the National Support Centre for Agriculture by way of administrative decision.

Author:

Grzegorz Witczak
Director of Commercial Law and Property Department, Advocate
TGC Corporate Lawyers

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