Buying Land in Poland
- Property purchase in Poland
- Buying Apartment
- Buying a House
- Buying Land
- Property Due Diligence
- Polish Property Registers
- Mortgage in Poland
- Property Purchase and Tax
- Buying Property by Foreigner
- Property lease
- Property Development in Poland
Agricultural land in Poland
Polish law places various restrictions on those who want to buy agricultural land. Farmlands account for more than a half of the country’s area. You should note that there are cases where land located within city borders, with significant investment potential, has the status of agricultural land despite the fact that it is not used for agricultural purposes. For this reason, an investor should take a close look at the legal status of a land lot before buying to make sure that they will be allowed to buy the property that they are interested in.
Agricultural land from the perspective of Polish law
Agricultural land is land that is or can be used for agricultural production purposes in respect of crop and livestock production, including horticultural production, fruit farming and fish farming. This means that a land lot does not have to be used for agricultural purposes to qualify as agricultural land. The fact that such use is possible is sufficient. For the purposes of laws restricting the transferability of agricultural land, land situated within areas which, in accordance with zoning plans, are intended for use other than agricultural, is not considered as agricultural land. In practice, the key documents necessary to verify the agricultural status of a land lot before the transaction are extracts from the land register and the certificate of permitted use of land lot in accordance with the zoning plan.
Trade restrictions with agricultural land in Poland
Polish law places a number of restrictions on transactions involving agricultural land lots covering an area of more than 0.3 ha. Individual farmers enjoy special legal status under Polish law. In principle, only a person qualified as an individual farmer is allowed to buy agricultural land. An individual farmer is a natural person who is the owner, perpetual usufructuary, autonomous possessor or the leaseholder of agricultural land with the total area of arable land not exceeding 300 ha, holding farming qualifications and residing in the municipality where one of the land lots making up the farm for at least 5 years and running the farm in person during that period.
KOWR consent for the acquisition of agricultural land
The acquisition of agricultural land by a person who is not an individual farmer is allowed only with the consent issued by the General Director of KOWR (Krajowy Ośrodek Wsparcia Rolnictwa – National Support Center for Agriculture) subject to a number of statutory conditions.
The consent may be applied for by:
- the seller of the agricultural land in the case where selling the land to an individual farmer is not an option (e.g. because none were interested in buying the land) or
- a natural person (the buyer) with agricultural qualifications who intends to set up or expand a family-run farm or
- a higher-education institution which buys the agricultural land for the purposes of own research, academic or development activities or
- an investor running a public-purpose investment project.
That said, there are exceptions where an entity who is not an individual farmer is allowed to buy agricultural land without the consent of the General Director of KOWR.
These exceptions include cases where:
- agricultural land is bought by a person close to the transferor (descendants, ascendants, siblings, siblings’ children, parent’s siblings, a spouse, adoptive parents, adoptees and stepchildren),
- agricultural land is bought as a result of the termination of co-ownership, division of marital property upon divorce or the division of the deceased’s assets,
- agricultural land is bought in the course of enforcement or bankruptcy proceedings,
- agricultural land is bought as a result of the division, conversion or the merger of commercial companies and partnerships,
- agricultural land is bought in the course of restructuring as part of remedial proceedings,
- agricultural land is located in a mining activities area or mining impact area,
- agricultural land is bought for the purposes of an off-shore wind farm,
- agricultural land has an area of less than 1 ha.
The statutory right of preemption to agricultural land
Another limitation placed on the transferability of agricultural land is the statutory right of preemption. This right is enjoyed by a leaseholder of agricultural land and KOWR. When agricultural land is about to be sold, each of them can exercise the right of preemption and buy the land for the price agreed between the parties to the sale agreement. Importantly, the leaseholder of agricultural land has priority over KOWR in respect of the exercise of the preemption right. Only if the leaseholder gives up the right of preemption or there is no leaseholder of the agricultural land in question who would be entitled to exercise the right, the option to buy the land goes to KOWR.
The leaseholder has the right of preemption in respect of agricultural land only if the lease agreement was executed in writing and the agreement date was certified, the agreement has been performed for at least 3 years following that date and the agricultural land about to be sold is a part of the leaseholder’s family-ran farm. KOWR has the preemption right with respect to the sale of any agricultural land which is not exempt from the statutory right of preemption under applicable regulations. For instance, the right of preemption does not apply in the case of the sale of agricultural land to the entities named below:
- an entity which is not an individual farmer, but obtained KOWR’s consent for the purchase of the land,
- local government entities,
- the State Treasury,
- certain types of state-owned companies,
- the seller’s closest family members,
- an agricultural production cooperative or its member,
- another legal person of the same church or religious organization (only in the case of a transaction within the church or religious organization).
In practice, the right of preemption is usually exercised in connection with transactions relating to agricultural land lot with an area of at least 0.3 ha, but less than 1 ha, where the buyer is not an individual farmer or a person close to the seller.
To execute a transaction of buying agricultural land encumbered with the right of preemption, you need to sign two separate agreements:
- a conditional sale agreement whereby the seller undertakes to transfer the title to the land provided that no entity with the right of preemption exercises this right. The entity with the right of preemption can exercise this right within a month from being notified of the execution of the conditional sale agreement. The priority in terms of the exercise of the right of preemption with respect to agricultural land is given to the leaseholder of the land who meets the statutory requirements. If there are no leaseholders with the right of preemption or the leaseholder with that right gives it up, the right of preemption can be exercised by operation of the statute by KOWR acting to the benefit of the State Treasury;
- a transfer agreement whereby the title to the agricultural land is transferred to the buyer. This agreement is executed when the right of preemption is not exercised within the statutory deadline by any of the entities entitled to do so. When the transfer agreement is executed, the title to the agricultural land is transferred to the buyer. Once it is signed, the buyer can also be recorded in the relevant register as the owner or the perpetual usufructuary of the land in question.
The statutory right to compulsory purchase
The right of preemption to agricultural land applies in the case of a sale. In the case of other legal transactions which result in the transfer of the title to agricultural land, KOWR has the right to the compulsory purchase of land from the transferee.
The compulsory purchase applies especially in the case of the acquisition of agricultural land by way of:
- a gift agreement or a lifetime agreement,
- a court decision on the termination of co-ownership or the distribution of the deceased’s estate,
- a court decision transferring the title to the land to the winner of an auction held under enforcement proceedings,
- adverse possession,
- an inheritance or a legacy by vindication (zapis windykacyjny),
- the division, conversion or the merger of commercial companies and partnerships.
The land is acquired at the price paid by the transferee (e.g. the price for which it was acquired following an auction held by a debt enforcement officer). If the price is unclear from the substance of the legal transaction or the court decision on the basis of which the agricultural land was acquired, KOWR will purchase the land at the market price determined by it on the basis of an evaluation issued by a property appraiser. The owner of agricultural land can challenge the evaluation and apply to the court for determination of the market price of the agricultural land within one month from receiving KOWR’s statement on the compulsory purchase of the land.
KOWR can exercise the right to purchase within 1 month from receiving notice from the transferee about the acquisition of agricultural land.
That said, the law creates numerous exceptions where the KOWR’s right to the compulsory purchase of agricultural land does not apply. These exceptions include cases where agricultural land is acquired:
- for the purpose of expanding a family-ran farm with an area of up to 300 ha, and the acquired agricultural land is located in a municipality where the transferee resides or in a neighboring municipality;
- with KOWR’s consent,
- by a person close to the transferor,
- as a result of intestate succession or succession by an individual farmer,
- by an individual farmer as a result of a legacy by vindication,
- by certain types of state-owned companies,
- by an agricultural production cooperative or its member.
The acquisition of the perpetual usufruct right to agricultural land and a share in the co-ownership of agricultural land
The restrictions on the transferability of agricultural land, including the need to obtain the consent of the General Director of KOWR, the statutory right of preemption and KOWR’s statutory right to compulsory purchase, apply accordingly to the acquisition of:
- the perpetual usufruct right to agricultural land or a share in the perpetual usufruct right to agricultural land;
- a share in the co-ownership of agricultural land.
Other restrictions on the transferability of agricultural land
Polish law places restrictions on share transactions relating to companies which are owners or perpetual usufructuaries of agricultural land with the total area of at least 5 ha. The key restrictions include:
- the right of preemption with respect to company shares,
- the right to compulsory purchase of agricultural land in the case of share transactions other than a sale of a company,
- the right to purchase agricultural land in the case where a partner in a partnership is replaced or a new partner joins a partnership,
- the right to purchase agricultural land in the case where a resolution on applying for admission to the regulated market is adopted.
Moreover, it is worth noting that the person acquiring agricultural land is required to run a farm comprising that acquired land for at least 5 years following the acquisition. However, there is a number of exceptions to this rule, where the obligation to run a farm for the prescribed period of time does not apply. One of the exceptions is the acquisition of agricultural land with an area of less than 1 ha located within the administrative boundaries of a city.
The acquisition of agricultural land in violation of statutory regulations
The acquisition of agricultural land, a share in the co-ownership of agricultural land or a share in the perpetual usufruct right in violation of statutory regulations (e.g. without the required consent of the KOWR Director or in breach of the preemption right) is invalid.
A legal action to determine that a legal transaction in invalid (e.g. an agreement to sell agricultural land) can be brought by KOWR, as well as any person with legitimate interest in such determination (which in practice means each of the parties to the defective agreement).
Given the risk that a transaction of acquiring agricultural land in violation of regulations will be found invalid, the parties to the transaction should exercise a high degree of diligence when determining the legal status of the land and should ensure that the process of acquisition is handled in compliance with the prescribed procedures.