On 5 October, two important amendments came into force: the Act on the Management of Agricultural Property of the State Treasury and the Act on the Structuring of the Agricultural System (“ASAS”). The new regulations will streamline the trade of private agricultural real estate and facilitate the operation of companies in the renewable energy market. This is a response to changing economic, social and environmental conditions in Poland. We look at what has changed.
Exclusion of the application of the Act on the Structuring of the Agricultural System
Previously, the ASAS applied to agricultural properties of more than 0.3 ha, regardless of the area of agricultural land within the property.
The amendment has introduced a positive change in that the ASAS will not apply to agricultural real estate with an agricultural land area of less than 0.3 ha (such area to be determined on the basis of data from the land register).
In other words, the ASAS, including the right of first refusal in favour of the National Support Centre for Agriculture (Krajowy Ośrodek Wsparcia Rolnictwa, ‘KOWR’), will not apply to an agricultural property larger than 0.3 ha, as long as the area of agricultural land within such property is less than 0.3 ha.
Pre-emptive right for the National Support Centre for Agriculture
The rules regarding the pre-emptive right enjoyed by KOWR in the case of the sale of shares in a capital company have changed.
The new legislation has introduced the principle that KOWR has a pre-emptive right to purchase shares not only in a capital company that is the owner or perpetual usufructuary of a single agricultural property with an area of at least 5 hectares or of several agricultural properties with a total area of at least 5 hectares, but also in the parent company (within the meaning of the Commercial Companies Code) that holds shares in such a capital company.
This change significantly expands the scope of KOWR’s potential involvement in share trading and means that a company’s legal due diligence when intending to sell its shares will need to go much deeper. This is in order to eliminate potential pre-emption rights and thus the risk of invalidity of the share purchase agreement.
Renewable energy sources
The amendment to the Act on the Management of Agricultural Property of the State Treasury has introduced facilitations for entities operating in the RES market, including by expanding the list of properties that KOWR may sell or lease to such entities.
The amendments have abolished the previous rule that agricultural real estate is allocated primarily for the expansion or establishment of family farms. The exemption applies to agricultural properties that consist of at least 70% of non-arable land or agricultural land of classes VI and VIz, leased for the purpose of producing energy from renewable sources and located outside nature conservation areas.
This is a positive change aimed at supporting RES and photovoltaic installations. Previously, KOWR was not able to lease this type of land to renewable energy operators without a tender process.
Other procedural changes
The amendment has also added an additional requirement to the list of conditions for obtaining the approval of the National Support Centre for Agriculture for the purchase of agricultural real estate by a person who is not an individual farmer – the sale price of the agricultural real estate may not be lower than 95% of the price published in the announcement of the intention to sell on the portal erolnik.gov.
In addition, the reform introduced restrictions on the period of validity of the approval of the Director General of KOWR for the acquisition of agricultural property. Previously, the decision, once issued, was binding indefinitely; under the new regulations, it will have an expiry date, i.e. one year from the date on which the decision becomes final.
The provisions on the prohibition of sale and transfer of possession of agricultural real estate to third parties have also been amended.
The act extends the list of properties that are exceptions and can be sold or transferred within 5 years of acquisition. One of these is land for which a local zoning plan has been adopted after its acquisition and in accordance with which the land has been designated for non-agricultural purposes.
The reform will also regulate the level of fluctuation of rents for agricultural property.
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