Farm land purchase: The rules are stricter in Eastern Europe
By Dr Christian Bickert and Thomas Künzel
The spectrum of land ownership in Europe is broad. From large-scale producers with predominantly rented land, to family farmers with land ownership, to traditional small-scale producers and several million self-sufficient livelihoods. And the measures to control the sale of agricultural land in the individual member states are just as varied.
The countries of Eastern Europe in particular, when they joined the EU at the time, had insisted on restricting the sale of arable land to EU foreigners for fear of being sold off. We would like to take a look at the laws that have now been passed after these temporary measures expired.
In Romania, the land market used to be completely free. There were pre-emptive rights of the tenant and the municipality and the intention to buy had to be publicly posted with the price for 30 days, but basically anyone was allowed to buy, including non-farmers.
But a new land law is in force since 14 October, 2020. It regulates pre-emption rights in a new way. In addition to the tenant, neighbours and the municipality, relatives of the owner can now also exercise a right of first refusal. More important is the limitation of the group of persons who may buy land at all. As of October, these are only persons or companies who have been resident in Romania for at least five years and derive at least 75 % of their income from agriculture. In the case of legal entities, the main shareholder must have been resident in Romania for at least five years. The third important point is that if the land is resold within eight years, the state collects 80 % of the increase in value. So anyone who wants to set up a new business in Romania must first lease the land and transfer their residence to Romania for five years. Only then can he buy. This applies to all nationalities, including Romanian citizens who live abroad and no longer have a residence in their home country. A sale without residence is only possible if the Romanian business is a subsidiary of a German business or an independent company and the purchaser takes over the German company. In that case, the ownership situation in Romania does not change.
However, the new law is controversial and also contradicts the general EU requirements for land acquisition (residence principle). Therefore, shortly after it came into force, a moratorium was imposed for seven months. During this time, no more land may be sold at all. Of course, this makes it more difficult to secure loans, so it is unclear whether Romania will be able to keep it up until next summer. (CB)
Despite concerns from the EU Commission, the Latvian Parliament has passed a law to facilitate land acquisition for local farmers. Foreign buyers must have a good knowledge of the national language (at least B2 level). This requirement discriminates against investors from other EU countries and therefore constitutes a disproportionate restriction in the opinion of the EU Commission. Furthermore, natural or legal persons may not own more than 2 000 ha. If necessary, this scope can even be limited by the respective municipality.
The requirements are implemented as follows: In the case of acquisition, the buyer must submit an application for permission to the respective municipality in advance. On the one hand, this application describes the use of the land. On the other hand, the necessary documents are attached to the application, for example to prove language skills. The municipality then gives its consent to the purchase of the land in writing. Only then does the purchase contract become effective. (ku)
In Lithuania, natural persons and legal entities are generally entitled to purchase agricultural land. However, they must have certain professional qualifications: In order to be entitled to purchase, they must have practised agriculture in Lithuania for at least three years. Foreigners are also obliged to ensure the agricultural use of the land for at least five years. A minimum turnover level per ha set by the Ministry of Agriculture must be achieved.
In addition, a maximum of 300 ha may be purchased from the state or a maximum of 500 ha. However, this limit does not apply if the purchased land is used for animal husbandry. (ku)
Until now, the sale of agricultural land was prohibited by law in Ukraine. Leasing was free, but the land could only be inherited. At the end of March, parliament passed a law lifting this ban.
From July 2021, land sales are to be possible. Then private individuals will be allowed to buy up to 100 ha of farmland. Companies will only be allowed to buy from 2024 onwards, in order to enable a broad distribution of land. Those who cultivate state-owned land will receive preferential conditions. The government in Kiev specifically wants to create advantages for small and medium-sized farms. After all, there are large farms in Ukraine with well over 100,000 ha (some up to 500,000 ha) in the hands of oligarchs who are not supposed to "grab the land", as it is officially called. Ukrainian authorities speak of slightly more than 30,000 smaller farms, which together cultivate about 2.7 million ha, i.e. an average of 90 ha. Land acquisition by foreigners is still prohibited. There is to be a referendum on this, for which the legal basis is currently being created. (CB)
In Poland, the land market is very much determined by the Treuhand. So far it has taken over 4.75 million ha of land and privatised 3.4 million ha of it. Today, almost 1.4 million ha remain in the ownership of the Treuhand, which are leased out. Further sales have currently been halted. Most leases take place in "closed auctions". Only farmers in the immediate vicinity are admitted to these. The large farms that have not returned 30% of their land according to the 2011 law must now expect to lose their farms entirely to the Treuhand. This is because such leases are not to be renewed.
Not just anyone can buy land from a private owner. A new law prevents this. Europeans are not explicitly disadvantaged, because this would not be compatible with EU law. In future, only farmers who have lived in the place where they plan to buy land for a long time and who have owned a plot of land there before will be allowed to buy it. The notary is to check this for every transaction. In addition, the land sale must be advertised in advance in local magazines or in the community notice board so that everyone can exercise a potential right of first refusal or express their interest. Only if there is no other interested party for the land for sale, then it can be sold to other persons (including non-farmers).
Karol Bujocek, top agrar Polska