Changes regarding lease of agricultural land in Poland
On May 1, 2016, a 12-year- moratorium in Poland on selling the agricultural land to foreigners ended. With the expiry of this period and upcoming opening of the market for buying and selling of agricultural land, a new land law was issued by the Polish government. The aim of this new land law is to protect the agricultural land against the speculative purchase by investors, regardless nationality, in order also to protect family farms that according to the Polish Constitution are the core of the agriculture system in Poland.
This new Act on land law was adopted last year, in April 2016, more info can be found here.
Changes in land legislation have been accompanied with announced, also last year, institutional changes. The Agricultural Market Agency (ARR) and the Agricultural Property Agency (ANR) – previously dealing with land contracts, leasing and buying of agricultural state land – have merged from September 1, 2017, into the National Agency for Agricultural Support (in Polish: Krajowy Ośrodek Wsparcia Rolnictwa - KOWR). One of the responsibilities of the new Agency is management of state agricultural land and the improvement of the agricultural structure in Poland.
Lease of agricultural land: new regegulation from National Center for Agricultural Support
Beginning of October 2017, the National Center for Agricultural Support has published a regulation on execution of lease contracts of state agricultural land. Below the most important aspects, as well as the link to the (polish) regulation are described:
In general matters, the length of the lease period depends on the nature and destination of the agricultural land property. When deciding on the lease period the Agency should take into account: i) if a lessee participates in financial programmes or programmes co-financed from the EU, and ii) dates of collection the crops or specific cycle of production.
The regulation set extension periods for lease contracts as following:
- up to 15 years - if the lessee is a family farmer within the meaning of the Polish agricultural land legislation, or a person not more than 40 years old if he or she does not fulfill the requirement for a 5-year personal farm;
- up to 8 years - if the lessee is not a family farmer within the meaning of the Polish agricultural land legislation.
The definition of a family farmer has not been changed. A family farmer, within the meaning of the Polish agricultural land legislation of 2016, is an individual farmer who has qualifications, manages the farm himself, and his farm (both owned and leased) cannot exceed the size of 300 ha. An individual farmer should live at least 5 years in the commune where one of his properties is located.
Whenever new exclusion of agricultural lands from the lease contracts will be considered in cases of renewing lease contracts, the Agency, before presenting terms of the further lease, will analyze the potential demand for land reported by local farmers and the current situation of the lessee (e.g. the profile of agricultural production, participation EU programmes, expenditures taken for this agricultural activity). This analysis should be a basis either for potential exclusion of agricultural lands from the lease contract or for a reservation, written in the contract, that would allow the exclusion of land in the future.
If there is a significant demand for land from individual farmers, however, for legitimate reasons like economic, social, formal or legal, not extending the term of the lease or reducing the leased agricultural land would have negative consequences – the Agency should propose to the lessee a shorter lease term, or indicate a later date for land exclusion. This would allow for a rational restructuring of the leased agricultural land by the Agency, and the lessee - to take measures to change the production profile or reduce the activity of the farm.
Extension of lease contracts for the periods mentioned above will be a general principle. However, this might not be sufficient. Therefore, in justified cases, for the prior agreement of the General Director of the Agency, the extension of the contract may take place for a longer period. This can happen in particular if:
- The lessee has invested a lot in his agricultural activity, or the lessee has acquired a substantial portion of the leased property, including an economic center, with the payment of the purchase price in installments or with the use of funds from the loan. Then, the extending of lease is necessary to preserve the stability of the farm's management and financial fluidity;
- The subject of the lease is a joint property (nieruchomości stawowe) or land with multiannual plantations;
- Extension of lease contract is necessary in order to grant to the lessee a financial support from EU programmes and/or there are strong socio-economic considerations (e.g. employment, production profile.
To centralize decision on larger farms, the regulation specifies also in which circumstances a written agreement of the Director General of the Agency is needed to proceed with the changes of lease contracts, these are:
- For changes in lease contracts (of agricultural land with area above 500 ha) on dates or the lessee in the course of assignment of rights and obligations, a special mandate is needed from the Director General of the Agency;
- For changes in lease contracts (of agricultural land with area beyond 50 ha) on dates or the lessee in the course of assignment of rights and obligations, or exclusion of some plots of lands from the contracts, a written agreement is needed from the Director General of the Agency;
- When refusal of extension of dates of lease contracts, every time when the lease contract is of agricultural land with area beyond 50 ha, a written agreement of the Director General of the Agency is needed as well.
It is a role of the regional office of the Agency to apply for the mandate or written agreements to the Director General of the Agency.
The original document (in Polish) can be found here.