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New Regulation On Selling Agricultural Properties in Poland

Pawel Koehler

Koehler Rak & Partners Law Chambers

The legal basis for this comment is:

1) The act of 23.04.1964 – The Civil Code, and 

2) The act of 11.04.2003 on shaping the agricultural system.

The act on shaping the agricultural system was introduced mainly to strengthen the protection and development of family farms, which are the basis of the agricultural system of the Republic of Poland. It is also supposed to ensure proper management of agricultural land throughout the country.

First, attention should be paid to the statutory definitions in Article 2. In accordance with those definitions an agricultural property includes agricultural properties within the meaning of the Civil Code, except for properties located in areas intended for purposes other than agriculture, in accordance with land development plans for these properties.

Usable agricultural land is another term directly related to the agricultural property, which, in accordance with the act's glossary, means all kinds of arable land, orchards, permanent meadows, built-up agricultural land, permanent pastures, land under ponds and land under ditches.

The acquisition of agricultural property, on the other hand, is a "transfer of ownership of agricultural property or acquisition of ownership of agricultural property as a result of a legal act or a ruling of a court or public administration authority or any other legal event".

So we are dealing here both with the sale of agricultural land, but also, for example, with a deed of gift or statutory or testamentary inheritance.

Another issue we should pay attention to is Article 1a of this act, according to which the act does not apply to:

"1) agricultural land:

a) which is a part of the Agricultural Property Stock of the State Treasury referred to in the act of 19 October 1991 on the management of agricultural property of the State Treasury,

b) with an area of less than 0.3 ha,

c) which constitutes internal roads,

3) the purchase of shares or parts thereof in the co-ownership of the property referred to in clause 1, letters b and c".

When it comes to the acquisition of agricultural property, in accordance with Article 2a it can only be done by an individual farmer, unless the act provides otherwise.

Article 7, paragraph 1 indicates who an individual farmer is. According to the act, it is a natural person who is the owner, holder of the right of perpetual usufruct, independent owner or leaseholder of agricultural properties (up to 300 ha), who has agricultural qualifications and has lived for at least 5 years in a given commune, where at least one of the agricultural properties which is a part of a farm is located, and who personally runs this farm at that time.

The legislator also indicated in paragraphs 2 and 3 in which cases a natural person is considered to be personally running a farm and to have agricultural qualifications, as well as how to calculate years worked and what can be included as years worked.

"2. A natural person is considered:

1) to be personally running a farm if that person:

a) works on that farm,

b) makes all decisions concerning agricultural activities on that form;

2) to have agricultural qualifications if that person has obtained:

a) basic vocational education in agriculture, basic industry-specific education, secondary education, secondary industry-specific education, or higher education, or

b) qualification or vocational title or vocational title of a master in a profession useful in agricultural activities, and has worked for at 3 years in the agriculture,or

c) higher education other than agricultural education and has worked for at 3 years in the agriculture, or higher education other than agricultural education and has completed postgraduate studies in a field related to agriculture, or secondary education or industry-specific secondary education other than agricultural education and has worked for at least 3 years in the agriculture, or

d) primary, lower-secondary, basic vocational or basic industry-specific education other than in the agriculture and has worked for at least 5 years in the agriculture.

The years worked referred to in paragraph 2 are considered to be a period during which a natural person:

1) was covered by social insurance for farmers, or

2) was engaged in agricultural activity on a farm with an area of not less than 1 ha, which was this person's property, an object of perpetual usufruct, an object of independent ownership or lease, or

3) was employed on a farm under an employment contract or a cooperative contract of employment, carrying out work related to agricultural activities, or

4) carried out work connected with agricultural activity as a member of an agricultural production cooperative, or

5) has completed the traineeship referred to in Art. 53, paragraph. 1 of the act of 20 April 2004 on employment promotion and labour market institutions (Dz. U. – the Journal of Laws – of 2017, items 1065, 1292, 1321, 1428 and 1543), which included tasks related to the agricultural activity.”

If we are dealing with a family farm, the existing area of the farm added to the area to be purchased may not exceed 300 ha of usable agricultural land (Article 2a, paragraph 2). However, this is not the case here.

Article 2a, paragraph 3 provides for an exception to this prescription that the acquisition must be made by an individual farmer. In accordance with this article: "paragraphs 1 and 2 do not apply to the acquisition of agricultural land:

1) by:

a) person close to the seller [i.e. descendants, ascendants, siblings, siblings' children, spouse, adopting parents and adoptees],

b) local governmental body,

c) State Treasury or a National Centre acting on its behalf, a commercial company whose exclusive shareholder is the State Treasury, which is a transmission system operator or which holds a concession for the transmission of liquid fuels, within the meaning of the Act of 10 April 1997 – Energy law,

d) legal persons acting in accordance with the regulations concerning the relationship of the State with the Catholic Church in the Republic of Poland, the relationship of the State with other churches and religious associations, and guarantees of freedom of conscience and religion,

e) national parks when purchasing agricultural property for purposes related to environment protection,

f) by a person who sold the agricultural property for purposes related to the implementation of an Investment or Accompanying Investment within the meaning of the Act of 10 May 2018 on the Central Communication Port – within 3 years from the date of conclusion of the contract – or a person from whom it was expropriated for the same purposes,

g) Special Purpose Vehicle referred to in the act of 10 May 2018 on the Central Communication Port;

2) as a result of inheritance or specific bequest;

3) based on Article 151 or Article 231 of the Civil Code;

4) in the course of a restructuring procedure as part of a recovery procedure."

The above list is closed.

The foregoing is related to another provision, namely Article 2b of this act. The purchaser is required to run a farm for at least 10 years from the acquisition of the property, and if the purchaser is a natural person, he/she must also run the farm in person. In addition, paragraph 2 contains a clause according to which during that time the property may not be sold or given to other entities.

Regardless of the way in which the property is acquired, compliance with the principle in Article 2b, keeping the property and running the farm for at least 10 years are required.

Furthermore, if one wishes to sell agricultural property, one should bear in mind Article 3 of the act on shaping the agricultural system, which indicates the group of entities that have the right of first refusal. This list is closed. In accordance with this regulation the leaseholder has the right of first refusal if:

"1) the lease agreement had been concluded in writing, has a definite date and had been performed for at least 3 years, counting from that date, and

2) the agricultural property to be purchased is a part of the leaseholder's family farm.”

If there are no persons from the above catalogue who have the right of first refusal, it is transferred, under the act itself, to a National Centre acting on behalf of the State Treasury.

Paragraph 5 of that provision also specifies situations in which the first refusal is excluded, that is to say if:

"1) the agricultural property is purchased by:

a) local governmental body,

b) State Treasury,

ba) company referred to in Article 2a, paragraph 3, clause 1, letter ca,

c) person close to the seller;

2) the agricultural property is acquired with the approval referred to in Article 2a, paragraph 4 or with the approval referred to in Article 29a, paragraph 3, clause 1, letter b of the act of 19 October 1991 on the management of agricultural property of the State Treasury;

3) the sale takes place between legal persons referred to in Article 2a, paragraph 3, clause 1, letter d, of the same church or religious association."

Another important provision for this entire analysis is Article 9 of the act on shaping the agricultural system: in accordance with paragraph 1 of that article if the agricultural property (also its share or part) is acquired in a manner inconsistent with the provisions of this act, they will be automatically void. In particular, the following will be considered void:

- performing a legal act without notifying the entities who have the right of first refusal or the National Centre (as the entity that has the right of second refusal);

- sale or transfer of the possession of agricultural property without the court approval referred to in Article 2b, paragraph 3;

- purchase of agricultural property on the basis of false declarations or counterfeit or misleading documents.

To summarise, we should also mention Article 172, §3 of the Civil Code, which is related to the act on shaping the agricultural system. In accordance with that article: "an agricultural property can be acquired within the meaning of the provisions of the act referred to in Article 166, §3 [i.e. the act on shaping the agricultural system] by adverse possession only by an individual farmer within the meaning of the provisions of that act if the area, determined in accordance with Article 5, paragraphs 2 and 3 of that act, of the agricultural property to be acquired together with the agricultural property he owns does not exceed 300 ha of usable agricultural land".

 

By : Pawel Koehler, Partner

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