Romania: Legal Provisions Regarding The Acquisition Of Farmland In Certain Countries In CEE

The large-scale acquisition of farmland in CEE countries has been a highly debated topic for some time. This is mainly due to the relatively low price of land in comparison to that in other parts of Europe as well as the good quality of the soil. However, there has also been a constant tendency to restrict farmland acquisition to an individual country's nationals (legal entities and individuals), and to put up limitations to the acquisition of farmland by EU/European Economic Area individuals or companies.

Recently, in Poland and Romania, such tendencies have begun to take shape as proposed legal provisions. Please find below an overview of the key elements of such legal provisions.

POLAND

Farmland in Poland is among the cheapest plots of land in Europe despite a steady increase in prices since joining the European Union in 2004. One reason for this was that European Economic Area nationals and companies had to obtain a permit issued by the Minister of the Interior and Administration in order to purchase farmland until the 12th anniversary of Poland's accession. This requirement ceased to apply on May 1, 2016.

Many Polish farmers preferred the limitation to remain in effect, hoping that prices would stay at comparatively low values, enabling them to expand their farms at a relatively low cost. The main concern was that the end of the 12-year protection period would enable large-scale acquisition of farmland by foreign investors, threatening the interests of family farms.

To address these anxieties, a number of amendments have been introduced to the Act of 11 April 2003 on Shaping of the Agricultural System (the "Act on Shaping") which provide for restrictions related to acquisition of farmland through either asset or share deals.

As a rule, only an individual farmer being a natural person with agricultural qualifications may acquire farmland. Acquisition by other entities is possible only under certain strict conditions subject to a permit issued at the discretion of the National Centre for Support of Agriculture (the "National Centre"). The acquirer of farmland is obliged to operate the farm for at least ten years from the date of acquisition, and the land cannot be transferred to other entities during that period. The sale of farmland (directly or by way of stock ownership) is also subject to a purchase pre-emption right of the National Centre. The restrictions apply not only to acquisition on a contractual basis, but to all kinds of transfers, including acquisitions through mergers or done by way of a sale agreement. A transfer of the shares of a listed company would not be affected, however.

The new regulations have been a revolutionary change and have become a hot topic for discussion among the real estate community in Poland. This has severely diminished the trade of farmland, which has had an adverse effect on different sectors of economy, e.g., warehouse projects and farmers' activities (farmland value became less attractive for banks so it has been more difficult for farmers to receive financing). As a result, certain issues have been identified in the Act on Shaping and a number of proposals for its amendment have been submitted. Currently, the Ministry of Agriculture and Rural Development (the "Ministry") has decided to announce a new legislative proposal (the "Proposal") to address some of the issues.

One of the most important amendments included in the Proposal provides for the exclusion of the National Centre's right of pre-emption of shares with respect to companies which are owners of farmland with an area of less than 1 ha. The National Centre's right to submit a statement of acquisition in cases of a change of partner or a new partner joining a partnership would also be excluded with respect to companies which own less than 1 ha of farmland.

Another relevant amendment provides that in the case of any transfer (excluding again the transfer of shares of a listed company) parties may neither terminate, amend or withdraw from a transfer deed nor undertake any legal acts encumbering the shares or affected farmland until the deadline has lapsed for the National Centre to execute its pre-emption right.

The Proposal also intends to amend the Act of 19 October 1991 on Management of the Farmland of the State Treasury (the "Act on Management") which lays down rules concerning farmland under the management of the National Centre (the "Property Stock"). The Proposal would, in particular, exclude the requirement to (i) first conclude tenancy agreements or contracts of sale in order to establish or enlarge family farms, and (ii) limit the list of participants in the case of sale under a tender procedure, with respect to management of farmland of the Property Stock with an area of less than 0.3 ha. The proposed amendment in this respect would align the Act on Management with the Act on Shaping, which does not apply to farmland of such area. However, the suspension of sale with regard to the Property Stock for the period of 5 years from 30 April 2016 (which applies, in particular, to farmland with an area exceeding 2 ha) would still be applicable.

The Proposal aims to facilitate real estate transactions of Polish farmland. Certain restrictions would be limited and other provisions clarified. However, most of the existing restrictions would not be significantly changed leaving a very narrow opportunity for the free transfer of farmland.

Currently, the Proposal is subject to public consultation. There may be further changes to the Proposal, but it is difficult to predict the duration and outcome of the legislative process at this stage. However, given that the Proposal is advocated by the Ministry, it is probable that it will be submitted to the Parliament in something very close to its current form.

ROMANIA

The acquisition of Romanian farmland has been under constant debate for a number of years-ever since Romania joined the EU in 2007. Two opinions have emerged from such debates: (i) Romanian farmland should be acquired freely by Romanian and EU citizens alike, be they legal entities or natural persons; and (ii) restrictions should be adopted favoring the acquisition of Romanian farmland exclusively by Romanian nationals.

The latter opinion appears to have gained momentum recently.

Currently, Law 17/2014 regulates the acquisition of farmland in Romania and applies equally to Romanian nationals, EU citizens, citizens of European Economic Area member states, and citizens of the Swiss Confederacy.

One of the most important amendments proposed to be brought to Law 17/2014 provides that farmland can only be sold no sooner than fifteen (15) years after being acquired. More importantly, it also provides that after the passing of the fifteen (15) year period, the owner is entitled to sell the farmland exclusively to the Romanian state.

Another relevant amendment is the one stating that companies (no distinction on whether it is a Romanian company or an EU member state/third party state company) can acquire farmland only if all of the following conditions are met:

  • the company's main/secondary headquarters have been established in the same administrative unit as the land to be acquired, at least one (1) year prior to the acquisition;
  • the company has been performing agricultural activities in the same administrative unit as the land to be acquired, for at least five (5) years prior to the acquisition;
  • at least 75% of the company's income in the last three (3) fiscal years has been generated by agricultural activities.

The amendment could be viewed as a means to limit the acquisition of Romanian farmland to Romanian nationals. This is done indirectly, since the free movement of capital and freedom of establishment are some of the key principles set out in the Treaty on the Functioning of the European Union, and restrictions based on citizens' nationality could give rise to infringement procedures.

Presently, the proposed amendment to Law 17/2014 follows the legislative process, meaning that it is not yet applicable.  Moreover, the current version of the amendment may not be the final one. Given the strong bias that this amendment would introduce to limit the acquisition of farmland in Romania to Romanian nationals, we can anticipate further debates and modifications to the amendment will take place before it may be ultimately adopted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions