In today's article, we continue the topic of pre-emption rights and the limitations associated with them, and more specifically, the pre-emption rights for agricultural real estate.
In accordance with the currently applicable legal provisions, the legislator has introduced a wide range of restrictions related to the sale of agricultural real estate.
It should be assumed that the above limitation with respect to agricultural real estate is introduced by the very definition of agricultural real estate in Article 46 (1) of the Civil Code, according to which agricultural real estate is considered to be not only land that is actually used for conducting agricultural production activities in the field of horticulture, fruit growing and fish production, but also real estate that can potentially be used for conducting the above activities.
The mentioned restriction on the disposal of agricultural real estate applies primarily to the group of entities entitled to acquire such real estate, or the statutory right of pre-emption, which is the subject of this alert, limiting the freedom of the owner to freely dispose of his land constituting agricultural real estate.
Pursuant to Article 166 of the Civil Code, in a situation where a co-owner of an agricultural property on which a farm is run plans to enter into a sales agreement for his or her share or part of such share, the sale of such share (or part) is limited by the right of pre-emption of the remaining co-owners, provided that such co-owners run an agricultural farm on the common land.
An analysis of the current literature on this regulation reveals that scholars are divided on the interpretation of the legislature's requirement that the remaining co-owners operate a farm on common land. According to one position, the statutory right of pre-emption applies only to co-owners who actually jointly operate a single farm on the agricultural property in which they hold a share. However, this position has been criticized due to the fact that the regulation in question was intended to protect joint ownership and provide the remaining co-owners with the opportunity to increase their shares in the agricultural property. Consequently, some scholars hold that the right of pre-emption should apply to co-owners, regardless of whether they operate a separate farm jointly or individually. Therefore, the condition required for the exercise of the right of pre-emption, according to the second position, should be only the circumstance that the co-owners run a farm on the agricultural property whose share is to be sold by a given co-owner, regardless of the fact of running separate agricultural farms.
Further, in accordance with the wording of Article 166 § 1 of the Civil Code in fine , the right of pre-emption is not granted to co-owners in a situation where the transfer of a share is made simultaneously with the transfer to a single entity of an agricultural farm run by the seller of the share in the agricultural real estate.
It should therefore be assumed that this exclusion would indicate that the correct position is to assume that the right of pre-emption is granted to co-owners regardless of whether they jointly run one or several separate agricultural farms, and only if it takes place on one agricultural property to which they are entitled to shares.
Additionally, co-owners do not have the right of pre-emption in a situation where the transfer of the share would be made to one of the co-owners or to a person who would statutory inherit the agricultural farm run on the property to which the seller is entitled to the share.
Subsequently, in accordance with §3 Art. 166 of the Civil Code, the above provision does not apply to cases where the share in co-ownership or part of this share concerns agricultural real estate within the meaning of the Act of 11 April 2003 on shaping the agricultural system (Journal of Laws of 2024, item 423, hereinafter referred to as: "UKUR"). It should therefore be concluded from the above that this regulation will apply only to land below 0.3 ha.
In addition to the statutory right of pre-emption arising from the Civil Code, the legislator has also provided such an entitlement, pursuant to Article 3 of the UKUR, for the benefit of the lessee of agricultural real estate, with the proviso that the above right is only granted when:
a) the lease agreement was concluded in writing and has a certified date and was performed for at least 3 years from that date,
b) the purchased agricultural property is part of the lessee's family farm.
This means that for the lessee to have a right of first refusal, it is essential that the lease agreement be concluded in the appropriate form, but above all, that the agreement be performed for at least three years from that date, i.e., that the lessor makes the leased property available to the lessee for at least the statutory period, and that the lessee pays rent in return during that period. Furthermore, this right will not arise if the lessee were not to acquire such property as part of a family farm within the meaning of Art. 5, Section 1 of the UKUR (i.e., operated by an individual farmer and with a total area of agricultural land not exceeding 300 hectares).
Pursuant to the above regulation, in the absence of a right of first refusal, including when the lessee does not meet one of the above-mentioned grounds, including when the real estate being sold would not become part of the lessee's family farm, the right of first refusal is vested, by operation of law, in the National Centre for Agricultural Support (hereinafter referred to as the "National Centre"), which operates on behalf of the State Treasury.
It is important to note that the above entitlement, both with respect to the lessee (even if the lessee meets the statutory requirements) and with respect to the National Centre acting on behalf of the State Treasury, does not apply in the situations specified in Article 3, Section 5 of the UKUR, which contains an exhaustive list of cases excluding the aforementioned statutory right of pre-emption. Consequently, based on the wording of the cited legal basis, such an exclusion will apply, among other situations, when the purchaser of the agricultural property being sold is a local government unit, the State Treasury, or a person related to the seller of such property.
Under both provisions discussed, concluding a contract without the beneficiary's statutory right of first refusal, i.e., concluding a contract transferring ownership without the prior binding sales agreement (conditional sales agreement), leads to the most far-reaching legal consequence: the invalidity of such a legal act. Consequently, the omission of a beneficiary of the statutory right of first refusal will in each case imply an uncorrected legal defect in the concluded contract.
At this point, we would like to invite you to read our next article discussing the right of pre-emption and the right to acquire a forest or land intended for afforestation, which will be published next week as part of our Tuesday Mornings for Construction.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of May 21, 2024
author:
