New law for agricultural land acquisition

Law no. 175/2020 amending and supplementing Law no. 17/2014 on measures regulating the sale and purchase of extra-muros agricultural land, and amending Law no. 268/2001 on the privatization of commercial companies administrating agricultural lands publicly and privately owned by the state, and on the establishment of the State Domains Agency. This is the name of the legislative act regulating the sale of agricultural lands in Romania from October 13th. Within 15 days, the Ministry of Agriculture must draft and adopt several implementing rules to mainly regulate some issues pertaining to the responsibility of state authorities, and the documents based on which the pre-emption right is exercised.

”If the term will not be extended, the law enters into force and must be observed. There are clear things in the law, which must be followed even without those rules", stated for Agrointeligența - AGROINTEL.RO deputy Alexandru Stănescu, president of the Agriculture Commission in the Chamber of Deputies.

New rules for the sale of land

All those wanting to sell or buy agricultural land have several obligations, according to Law 175/2020. Some of them are still valid from Law 17/2014, the biggest changes being made to aspects pertaining to the pre-emption rights over the area for sale, and to the subsequent use of the land.

The law on the sale of agricultural land is applicable only for extra-muros agricultural land, and not for intra-muros land.

What the seller of an agricultural land must do

The seller of an agricultural plot will register at the town hall where the land is located an application requesting to display the sale offer for extra-muros agricultural land, in order to inform the pre-emptors. The application will be accompanied by the sale offer for the agricultural land and by the supporting documentation, as indicated int the implementing rules of this law (rules not yet in force).

Obligations for the town hall where the land is located

Within 5 working days from the date of registration of said application, the town hall must display for 45 working days the sale offer at its headquarters and, as the case may be, on its website. The town hall has the obligation to forward to the appropriate structure within the central apparatus of the Ministry of Agriculture and Rural Development, respectively to the county or Bucharest agriculture directorates, as well as to the State Domains Agency, a file containing the list of pre-emptors, copies of the sale offer and of the supporting documents, the minutes of sale offer displaying, within 5 working days from the registration of the documentation.

Within 10 working days from the registration of the application, the town hall has the obligation to notify the holders of pre-emption right, at their domicile, residence or, as the case may be, their headquarters, of the registration of the sale offer; if the holders of pre-emption rights cannot be contacted, the notification will be sent by display at the town hall headquarters or on its website. The procedure on notifying the holders of the pre-emption rights of the registration of the sale offer for extra-muros agricultural land is regulated by the implementing rules for the law. If the plot of land subject of the sale is located at the border of two administrative territories, the town hall will notify the adjoining local public authority, which in turn will notify the holders of pre-emption rights.

Who has pre-emption rights on agricultural land?

The transfer by sale of extra-muros agricultural land will be made in compliance with the substantive and procedural conditions provided by Law no. 287/2009 on the Civil Code, republished, with subsequent amendments, and in observance of the pre-emption right of the following, at the same price and under the same conditions, in the following order:

• a) 1st rank beneficiaries: co-owners, 1st degree of kin relatives, the spouses and relatives up to the 3rd degree of kin, inclusively;
• b) 2nd rank beneficiaries: owners of agricultural investments in fruit tree, vineyard, hop cultures, in exclusively private irrigations and/or agricultural leaseholders. If certain projects (i.e. agricultural investments in fruit tree, vineyard, hop cultures or in irrigations) are located on the lands on sale, these lands may be acquired with priority by the owners of such investments;
• c) 3rd rank beneficiaries: owners and/or agricultural leaseholders of agricultural lands neighbouring the land on sale;
• d) 4th rank beneficiaries: young farmers;
• e) 5th rank beneficiaries: the Academy of Agricultural and Forestry Sciences “Gheorghe Ionescu-Șișești” and the research-development units in the agricultural, silviculture and food industry field, established and regulated by Law no. 45/2009 on the organization and functioning of the Academy of Agricultural and Forestry Sciences "Gheorghe Ionescu-Șișești" and the research and development system in agriculture, forestry and food industry, with subsequent amendments and completions, as well as agricultural educational institutions, with a purpose to purchase extra-muros agricultural land strictly intended for agricultural research and located in the nearby area of the land plots already owned by them;
• f) 6th rank beneficiaries: natural persons domiciled/residing in the administrative-territorial units where the land is located or in the neighbouring administrative-territorial units;
• g) 7th rank beneficiary: the Romanian State, through the State Domains Agency.

How can a leaseholder buy the land he is working?

The leaseholder wishing to buy the leased extra-muros agricultural land must have this quality under a valid lease contract, concluded and registered in accordance with the legal provisions at least one year before the date of display of the sale offer at the town hall, and meet the following requirements:

• a) for leaseholders natural persons to be able to prove that their domicile/residence was located in Romania for at least 5 years before the registration of the sale offer for the extra-muros agricultural land;
• b) for leaseholder legal entities and their associates natural persons, to be able to prove that their domicile/residence was located in Romania for at least 5 years before the registration of the sale offer for the extra-muros agricultural land;

Requirements for young farmers buying agricultural land

If the pre-emption right is exercised by young farmers, priority to purchase the land subject to sale has the young farmer who carries out activities in animal husbandry, and with observance of the condition of domicile/residence established in Romania for a period of at least one year prior to the registration of the sale offer for extra-muros agricultural land.

For the purposes of this law, a young farmer is a person of up to 40 years of age, as defined in art. 2 para. (1) under (n) of the Regulation (Eu) No 1305/2013 of the European Parliament and of the Council of 17 December 2013, on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) and repealing Council Regulation (EC) No 1698/2005, who intends to conduct or who already conducts agricultural activities

Rules for the sale of land to neighbours

If the pre-emption right is exercised by owners of the neighbouring agricultural land, the priority to purchase extra-muros agricultural will be established as follows:

• a) the owner of the neighbouring agricultural land with a common border with the largest side of the land subject to the sale offer;
• b) if the land subject of the sale offer has two large sides or all sides equal, priority to purchase this land has the young farmer towner of the neighbouring agricultural land, with domicile/residence in Romania for at least one year prior to the registration of the sale offer of extra-muros agricultural land;
• c) the owners of neighbouring agricultural land with a common border with the land subject of the sale offer, in descending order of the length of the common border with the plot in question;
• d) if the large side or one of the equal sides of the land subject to the sale offer has a common border with a land located within another administrative-territorial unit, priority to the purchase of the land has the owner of neighbouring agricultural land with domicile/residence in the administrative-territorial unit where the land is located.

Requirements for natural persons buying agricultural land

If the holders of the pre-emption rights do not express their intention to buy the land, the transfer by sale of extra-muros agricultural lands can be done to natural persons, with the observance of the following cumulative requirements:

• a) they have their domicile/residence in Romania for a period of at least 5 years prior to the registration of the sale offer;
• b) they conduct agricultural activities in Romania for a period of at least 5 years before the registration of the sale offer;
• c) they are registered by Romanian tax authorities at least 5 years before the registration of the sale offer.

Requirements for legal entities buying agricultural land

If the holders of the pre-emption rights do not express their intention to buy the land, the transfer by sale of extra-muros agricultural lands can be done to legal entities, with the observance of the following cumulative requirements:

• a) they have headquarters/secondary establishment in Romania for a period of at least 5 years prior to the registration of the sale offer;
• b) they aconduct agricultural activities in Romania for a period of at least 5 years before the registration of the sale offer for extra-muros agricultural land;
• c) they submit documents showing that, out of the total income for the last 5 fiscal years, at least 75% represents income from agricultural activities, as stipulated in Law no. 227/2015 on the Fiscal Code, as further amended and supplemented, classified according to the NACE code by order of the minister of agriculture and rural development;
• d) that the domicile of the controlling shareholder has been located in Romania for at least 5 years prior to registration of the sale offer for extra-muros agricultural land;
• e) if, in the structure of legal persons, the controlling shareholders are other legal persons, the controlling shareholders must prove that their domicile has been located on the national territory for at least 5 years, before the registration of the offer for the sale of the extra-muros agricultural land;

In case the pre-emption rights are not exercised, the potential purchasers must lodge with the town hall a file containing the documents proving the fulfillment of the conditions, within 30 days as of the expiry of the 45 business days provided the for the display of the notice must be displayed at the town hall or on its website.

In case the pre-emption rights are not exercised, if none of the potential buyers, within the legal term, does not meet the conditions allowing him to purchase the extra-muros agricultural land, the land can be transferred by sale to any natural person or legal entity, under the conditions of this law.

How to conclude the sales contract for agricultural land

The holder of the pre-emption right must express in writing withing 45v working days the intention to purchase, communicate the acceptance of the seller's offer, and register it at the town hall where it was displayed. Within 3 working days from the registration of the acceptance of the sale offer, the town hall will display, also on its website, the data provided in the implementing rules of this law, and will respectively send them to be displayed on the website of the central structure or territorial structures, as the case may be.

The communication of the acceptance of the seller's offer will be registered with the town hall by the holder of the pre-emption right, together with the supporting documents indicate in the implementing rules of this law.

If, within 45 working days, more pre-emptors of the same rank express in writing their intention to purchase, and no other pre-emptor of a higher rank has accepted the offer, at the same price and under the same conditions, the rules of Civil Code are applicable.

If a lower-ranking pre-emptor offers a higher price than the price in the sale offer or the one offered by the other pre-emptors higher-ranking than him who accepted the offer, the seller may resume the procedure, by registering the sale offer with this price. The procedure may be carried out only once, within 10 days as of the expiry of the 45 business days.

Within 3 working days from the registration of the communication of acceptance of the sale offer, the town hall must forward to the central structure, respectively to the territorial structures, as the case may be, the identification data of the pre-emptors potential buyers, in order to verify the observance of the legal requirements.

If, within 45 working days, the town hall establishes that none of the holders of pre-emption rights has expressed the intention to purchase the land, the provisions for direct sale to natural persons or legal entities will apply. Selling the land at a lower price than the one requested in the sale offer, or in more favourable terms, with the failure to comply with the requirements laid down for the buyer triggers the absolute nullity of the sale contract.

Opinion necessary for the sale of land

The final opinion necessary for the conclusion of the sale contract in authentic form by the notary public, or for the court to render a judicial decision in lieu of the sale agreement, will be issued by the territorial structures for lands up to 30 ha, and by the central structure for lands over 30 ha.

Cancellation of the opinions issued by the central structure or by the territorial structures will occur in case the seller or the pre-emptor dies before the sale agreement is concluded or before the judicial decision in lieu of the sale agreement is rendered, as the case may be.

The issuing authority can correct material errors in the document, ex-officio or at the request of a person concerned.

Obligations after the purchase of agricultural land

The extra-muros agricultural land can be sold before the expiry of an 8-year term from the acquisition, with the obligation to pay an 80% tax on the amount representing the balance between the sale price and the purchase price, based on the applicable notary fees at the respective date.

In case of a direct or indirect sale, before the expiry of an 8-year term from the acquisition, of the controlling stake in the companies owning extra-muros agricultural land representing more than 25% of their assets, the seller will have to pay an 80% tax on the balance value of the respective land calculated based on the applicable notary value lists between the acquisition of the land and the sale of the controlling stake. In this case, the tax on profit applied to price balance of the sold shares will be applied to a basis reduced pro rata with the share percentage that such agricultural land holds in the company’s fixed assets, any double taxation being prohibited.

The owners of agricultural land located in the extra-muros are required to use it exclusively for continuing to carry out the agricultural activities as carried out at the date of the purchase, and if on the agricultural land there are agricultural investments in fruit trees, vineyards, hops and exclusively private irrigation works, the agricultural use of such investment must be maintained.”

Sanctions for non-compliance with the law on the sale of agricultural land

The transfer by sale of extra-muros agriculture land in violation of the pre-emption right or without obtaining the specialist opinions is strictly forbidden and is liable to absolute nullity.

The following acts are contraventions:

• a) the sale and purchase of extra-muros agricultural lands where archaeological sites, are located, where areas with registered archaeological value or areas with archaeological potential discovered by chance have been established, without the specific opinion of the Ministry of Culture, respectively of its deconcentrated public services, as the case may be, as indicated in art. 3 para. (4);
• b) the sale and purchase of extra-muros agricultural lands without the specific opinion of the Ministry of National Defence, as indicated in in art. 3 para. (1), if the situation was registered in the land register at the date of requesting the land register extract for authentication;
• c) the sale and purchase of extra-muros agricultural lands without the specific opinion of the central structures or of the territorial structures of the Ministry of Agriculture and Rural Development, as the case may be, as indicated in in art. 9 para. (1) and (2);
• d) failure to observe the pre-emption right, under the requirements provided in art. 4 and the requirements provided in art. 41 and 42;
• e) failure to comply with the obligations indicated in art. 6 para. (2), (3) and (6) and art. 7 para. (1) and (7) by town halls.

The contraventions in art. 14 are liable to be sanctioned with a fine from 100,000 lei up to 200,000 lei.