Changes legislation regarding purchase of agricultural land in Poland
Strengthening the protection of agricultural land against speculative purchase by domestic and foreign entities (legal and natural persons), stopping the negative trend in structural changes in agriculture and improving the economic situation of Polish farmers – these are the most important goals of a legal proposal adopted by the Polish parliament in April 2016. Protection of Polish agricultural land was one of the most important commitments made by the now governing party Law and Justice (PiS). The new act should prevent the speculative buyout by domestic and foreign entities after ending of a 12 year moratorium.
On May 1, 2016, 12-year- moratorium of Poland on selling the agricultural land to foreigners has ended. With the expiry of this period and opening of the market for buying and selling of agricultural land, last year the former coalition PO/PSL prepared a new land Act which aimed to protect the Polish interests and agricultural land. It was planned to come into force on January 1, 2016.
However, in November 2015, when PiS won the parliamentarian elections in Poland, the issue of protection the Polish agricultural land came back as one of the priority of the first 100 days of the new PiS government. A new land act proposal was submitted to the Polish parliament by the new government with the justification 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. In April 2016, a new Act was adopted, starting April, 30, 2016.
Importance of landownership for small farmers
As a result of historical and cultural conditions, the issue of ownership of agricultural land in Poland is a sensitive topic. Under this system, the State owned a lot of agricultural land. Land reforms dating back to the 19th century and continuing in to the 20th century abolished large state estates, resulting in atomized holdings is Central and Southern Poland, only in the North and the West more sizeable farms retained (areas formerly belonging to Germany). At the moment, 90% of agricultural land is being owned by private persons/entities and cultivated by 1,4 mln farmers (average farm size of approximately 10 hectares). For many, owning agricultural land is a form of a security, especially for small farmers who can benefit from social exemptions due to being a farmer and receiving direct payments from the Common Agricultural Policy. This enables owners of small holdings to sustain modest living standards from otherwise economically unviable farmland. As a result, there is also a tradition of splitting holdings. In the past, at inheritance, land was divided among heirs to give them the same form of security.
At the end of the socialists system in Poland, the Agricultural Property Agency (APA) was established to manage the state land (in 1991). At the beginning, it took over nearly 4,7 M hectares of land and in order to improve the land and farming structure via privatization and lease contracts. These lands were mostly located in the western part of Poland and had bigger sizes than average in Poland. Up to the year 2013, the APA released over 3,1 M hectares, in which 2,5 M of hectares were sold. Currently, the Agency owns 1,5 M hectares, from which the majority is leased. According to the data of the APA, the Agency has around 54,6 thousands of lease contracts.
During the accession period of Poland to the EU, 12 years was granted for a transition period (moratorium) in order to prevent massive sales of agricultural land to foreigners due to low land prices. During this moratorium, the Polish land market was given time to adjust to free market principles; Foreigners could not acquire easily the agricultural land from the Polish state. But exemptions of the ban were possible, since 1990, 24.739 permits were granted to foreigners, covering 51.996 hectares in total (2% of the total sales).
Polish farmers are afraid that when it comes to buying the remaining state land in the open competition, they will not be able to compete with the foreigners/investors, as they do not have enough investment capital. In some regions such as Wielkopolska or Kujawy they are experiencing ‘hunger for land’. In these regions there is competition for land between small and big farmers; therefore the price for land is much higher than in other regions. In addition, many efficient farms attempt to increase incomes via land’s size.
New land Act
On February, 2016 the Minister of Agriculture and Rural Development submitted the new Act suspending the sale of the state land of the Agricultural Property Agency for a discussion to the Polish Parliament. This Act includes provisions that regulate who can purchase agricultural land. From the beginning, the Act was criticized for being too restrictive in relation to the property rights, limiting the free turnover of land, bringing lot of problems with sales/purchases for the Polish farmers at first place. Although, the new Act is only suspending the sales of state land, it also provides criteria on eligibility of buyers of agricultural land and gives several pre-emptive rights to the APA in order to monitor and intertwine (private) land transactions.
According to the proposal, the sale of state owned land will be suspended for 5 years; lease is to be the basis of the management of agricultural land owned by APA. The sale prohibition does not cover:
- Land used for non-agricultural purposes
- Real estate located within special economic zones
- Houses, dwellings, outbuildings, garages, home gardens
- Agricultural property with an area of less than 2 ha.Some restrictions regarding the purchase and lease of agricultural land which are introduced
- The land can be bought by 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.
- For other entities, the purchase will be possible but under certain conditions. Other forms of entities than individual farmers will have to receive permission of the APA to buy a land (an administrative decision) if all the preemption buyers are excluded.
- The young farmers (up to 40 years old) who wants to start farming business and buy land will have to declare that they want to cultivate the land and that they will live in the commune where the land is located
- The bought land cannot be sold for the minimum of 10 years and it must be cultivated. It is not clear if the land will be able to be leased.
- The land bought from APA (after 5 years of moratorium) cannot be sold for 15 years counting from the date of acquisition
- The APA receives additional rights to be also one of the preemption buyers for all the transaction of selling land above 2 ha. The new land Act exempts 2 cases in which the APA has no pre-emption for purchase, firstly when changing of ownership is among family members for both farms and companies (father to son, brother to brother etc.), secondly, when the buyer is from the neighbourhoods and his aim is to enlarge his own farm (but up to 300 ha).
- When the APA will use its rights as a preemption buyer, APA will decide case by case about the criterion on how to calculate the land price.
- The Church and religious organizations are being exempted which means they can also buy agricultural land
- The Ministry of Agriculture by mean of a regulation will propose a way for calculating the lease payment depending on the production potential of the lessee object, especially including the type of soil, location and the value of agricultural buildings.
- Land of the size up to 0,3 hectares are fully exempted from this regulation, which means that a buyer does not need to have agricultural qualification and leave in the commune.
The Polish Ministry of Agriculture provided a special e-mail address to which questions can be sent in case the Act is not clear. Questions can be sent at ustawaoziemi@minrol.gov.pl
Prices of land
When comparing land prices in the EU, Poland could be still seen as relatively low-cost.
In 2015, the average price of state land sold by APA amounted to 29.5 thousand. zł / ha. More expensive was the land on the open market, the average selling price of 1 ha on the private market reached 38.6 thousand. Zł/ha. Agricultural land in Poland is steadily becoming more expensive an accelerated since the entry into the EU. But there are strong regional differences in the prices of agricultural land. In the most expensive provinces, Kujawy, Pomorskie, and Wielkopolska prices slightly exceeded the level of 40 thousand. zł/ha., whereas in the Lublin and Podlasie prices amounted only 14.9 thousand. zł/ha and 16.9 thousand. zł/ha.