In February 2023, the Government Legislation Center website published agreements between ministries regarding the draft amendment to the Act on the Management of Agricultural Real Estate of the State Treasury and certain other acts (UD 376).
The project introduces a number of facilitations and clarifies certain concepts related to agricultural land transactions.
Larger area exempted from restrictions
The proposed change involves revising the area standard that determines the exclusion threshold from the law. Under the new provisions, the law will not apply to agricultural properties where the agricultural land area is less than 0.3 hectares. Restrictions on agricultural land transactions will also not apply to mixed properties with a larger area where the agricultural land area is less than 0.3 hectares. Such plots are typically located in residential areas and are acquired for construction purposes. They have little significance for improving the structural composition of family farms.
Expansion of the definition of close relatives under the law
After the amendment, close relatives will include: descendants, ascendants, siblings, children of siblings, siblings of parents, spouses of adoptive parents, adopted children, stepchildren, as well as parents of spouses, stepfathers, and stepmothers.
Transformation of entrepreneurs and civil partnerships into joint-stock companies
The current regulations provide an exception to the “land for farmers” principle in the case of acquiring agricultural real estate through division, transformation, or merger of commercial law companies. The Commercial Companies Code allows for the transformation not only of commercial law companies but also of entrepreneurs or civil partnerships into commercial law companies. Under the current legal framework, it is doubtful whether the transformation of such entities into commercial law companies, if the transformed assets include agricultural land, requires obtaining the consent of the Director of the Agricultural Property Agency (KOWR) for the effective transfer of ownership of the agricultural land to the newly formed company. The planned regulations aim to remove these doubts by explicitly stating that such transformations will not require the consent of the Director of KOWR.
Preemptive rights and acquisition of shares in dominant companies
The preemptive rights and acquisition by the Agricultural Property Agency (KOWR) will cover shares and stocks of dominant companies holding shares in companies that own or have perpetual usufruct of agricultural real estate with an area of at least 5 hectares, or agricultural real estate with a total area of at least 5 hectares. This is a significant change that will expand KOWR’s involvement in the trading of shares and stocks of companies. It will be crucial to verify before each transaction whether these companies are owners of agricultural real estate.
Invalidity sanction will only apply to legal acts
According to the planned amendment to Article 9 of the Act on Shaping the Agricultural System, “The acquisition of ownership of agricultural real estate, co-ownership of agricultural real estate, perpetual usufruct, co-perpetual usufruct of such real estate, as well as the acquisition of shares and stocks in a commercial company referred to in Article 3a(1), made based on a legal act contrary to the provisions of this Act, is invalid.”
Previously, the invalidity sanction applied to the acquisition of agricultural real estate, regardless of whether the acquisition was based on a legal act or a legal event (court rulings, administrative decisions).