As promised last week, we are launching a series dedicated to agricultural land, where we will focus on issues related to agricultural land investments, both those related to trading and investment implementation. In this regard, today's article will also address the basic principles of acquiring agricultural real estate, explaining when the Act of 11 April 2003 on Shaping the Agricultural System (hereinafter also "UKUR") does not apply. In all other cases, we will be dealing with the limitations arising from this Act, which we will discuss in the coming weeks.

First, it's worth recalling that Polish law does not provide a single, legal definition of agricultural real estate that would apply to all factual situations. However, the starting point is, in principle, Article 46(1) of the Civil Code, which defines agricultural real estate (agricultural land) as real estate that is or may be used for agricultural production, including plant and animal production, including horticulture, fruit growing, and fish farming . It's important to remember that conducting such activity must be factually and legally possible.

The above definition is clarified specifically in the case of agricultural land transactions, as directly stated by the UKUR, which, referring to the Civil Code definition, stipulates that agricultural real estate does not include real estate located in areas designated for non-agricultural purposes in spatial development plans . Therefore, the Act refers to the function specified in the local plan, and if it does not indicate agricultural designation, then the restrictions arising from the Act on Shaping the Agricultural System do not apply.

In turn, the transitional provisions state that UKUR does not apply to real estate for which final decisions on development and land development conditions were issued before 30 April 2016 – obviously establishing the possibility of developing the real estate for purposes other than agricultural.

Moreover, the provisions of the Act on Shaping the Agricultural System do not apply to agricultural real estate located within the administrative boundaries of cities if a resolution has been adopted in relation to these real estates to determine the location of a residential investment or accompanying investments (i.e. the so-called lex developer), as well as if it is sold for these purposes.

The UKUR rules and restrictions will also not apply to agricultural land smaller than 0.3 hectares, land serving as internal roads, or land designated in the land register as land under ponds, provided that they constitute at least 70% of the property's area. The Agricultural System Act does not apply to these cases.

Here we come to the fundamental principle of purchasing agricultural property, which is to allow individual farmers to purchase it without restrictions (in this case, the limit is 300 hectares). In other cases, restrictions arise, which arise precisely from the UKUR.

From the subjective perspective, the Act on Shaping the Agricultural System allows for the acquisition of agricultural real estate without restrictions by, among others:

a person close to the seller;
a local government unit, the State Treasury or the National Support Centre for Agriculture acting on its behalf;
a commercial law company in which the State Treasury is a shareholder and which is a transmission system operator or holds a license to transmit liquid fuels;
national parks, in the case of acquisition of agricultural property for nature conservation purposes;
a member of an agricultural production cooperative who has a land contribution in that cooperative, in the event of the land contribution being transferred to him by another member of that cooperative.

Furthermore, the above-mentioned restrictions do not apply to situations in which, among others:

acquisition occurs as a result of inheritance and vindicatory bequest;
as a result of the abolition of joint ownership, division of joint property after the termination of the marriage and division of inheritance;
as a result of the division, transformation or merger of commercial law companies,
in the course of restructuring proceedings as part of remedial proceedings or in the course of enforcement and bankruptcy proceedings.

The acquisition of agricultural real estate by entities other than those listed above (provided that the full list can be found in Article 2a, Sections 3 and 3a of the UKUR) may occur with the consent of the Director General of the National Support Centre for Agriculture, expressed in a decision. We will write about the details of this procedure next week.

It's important to remember that when purchasing agricultural property, the buyer is subject to a number of obligations. First and foremost, they are obligated to operate the farm that includes the agricultural property for at least five years from the date of acquisition. For individuals, this obligation involves personally managing the farm, i.e., working on it and making all decisions regarding agricultural activities on the farm.

Furthermore, for the first five years from the date of acquisition, agricultural property cannot be sold or transferred to other entities. We'll write about the possibilities for exempting this prohibition next week.

It should be noted that the National Support Centre for Agriculture has powers in this regard that allow it to monitor compliance with the aforementioned obligations. These include, among other things, the right to conduct inspections, including the right to enter agricultural property and the right to request written or oral explanations, as well as the right to present and provide access to documents. Additionally, the National Support Centre for Agriculture has the authority to petition a court to acquire ownership of agricultural property if the purchaser has not commenced or ceased agricultural operations, has transferred possession of the acquired property without the consent of the National Support Centre for Agriculture, or is not conducting agricultural activities.

In summary, the Act on Shaping the Agricultural System establishes a general prohibition on the sale of agricultural real estate, while also regulating in detail who may acquire such land and under what circumstances. Therefore, before entering into a transaction, it is necessary to thoroughly investigate whether the property is of an agricultural nature, and if so, whether it is possible to acquire it based on the exceptions presented above.

Next week, we will discuss the rules related to the powers granted to the National Support Centre for Agriculture in regulating the trade in agricultural land, i.e. in what situations the consent of the National Support Centre for Agriculture must be obtained and when the statutory right of pre-emption applies.

This alert is for informational purposes only and does not constitute legal advice.

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