Acquiring agricultural and non-agricultural real property.
A client approached the law firm as their debtor intended to transfer the ownership right in
real property to the law firm’s client in order to release themselves from an existing pecuniary obligation. In connection with the planned transaction, the client instructed the law firm to conduct a due diligence audit of the real property to assess whether the intended transaction could be completed and to identify any risks involved therein.
Within the conducted property audit, it was determined that the property had been classified as agricultural land in the land registry. However, based on the client’s certificate regarding the property’s designation in the local spatial development plan, it was determined that the property in question was subject to the provisions of the local spatial development plan and designated for farmstead and single-family housing purposes.
Due to the classification of the property in question as agricultural land in the land registry and its designation in the local spatial development plan, amongst other things, for farmstead purposes, which falls within the scope of agricultural areas, the law firm conducted an analysis to determine whether the provisions of the Act of 11 April 2003 on Shaping the Agricultural System (Journal of Laws of 2022, item 461, as amended, hereinafter referred to as “the SAS”) will be applicable to the property in question. Consequently, the analysis aimed at assessing whether the client can effectively acquire ownership rights in the said property.
The above-mentioned Act provides for a number of restrictions on transactions involving agricultural land and establishes the principle of acquiring agricultural properties by individuals with the status of individual farmers, meaning those who personally operate agricultural holdings and have acquired agricultural qualifications. However, if it is determined that the property is designated for purposes other than agricultural ones in the local spatial development plan, we would not be dealing with agricultural land within the meaning of Article 2(1) of the Act on Shaping the Agricultural System. As a result, the provisions of the above-mentioned Act would not apply to the acquisition of the property in question.
The law firm conducted an analysis of the provisions of the local spatial development plan and decided that the property in question does not constitute agricultural land and is not subject to the provisions of the Act on Shaping the Agricultural System. While it is generally accepted both in legal doctrine and in the holdings of common courts that the “farmstead development” is considered agricultural land, there are also views in legal doctrine and court holdings that a property designated for farmstead purposes, alongside an equivalent non-agricultural designation in the local spatial development plan, is not subject to the provisions of the Act on Shaping the Agricultural System and is not considered agricultural land. The above applied to the instant case. Single-family residential development had an equal status to farmstead development in the provisions of the local spatial development plan, constituting
an alternative and independent type of land use for the entire property.
The law firm’s opinion is supported, amongst other things, by the joint position of the Ministry of Agriculture and Rural Development, the National Support Center for Agriculture, and the Polish National Council of Notaries of February 27, 2020, regarding the practical application of the Law on Shaping the Agricultural System (section I, paragraph 3 of the statement available at the link: https://www.kowr.gov.pl/ukur/porozumienie-mrirw-krn-i-kowr).
As a result, the planned transaction was successful, and the client acquired ownership rights in the property in question.
However, it is important to remember that each situation should be treated individually, and it is crucial to conduct a detailed analysis of the legal status of the property, including the proper identification of the property in land registers or its designation in the local spatial development plan.
Having cooperated with our law firm, the client:
- received support in the process of acquiring real property,
- eliminated potential risks associated with the acquisition of real property,
- successfully acquired ownership rights in the real property, and thus enabled their debtor to be released from the existing pecuniary obligation.
Providing assistance in the due diligence process in the course of acquiring real property constitutes our specialty, which can be successfully carried out thanks to our extensive experience.
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