Does a foreigner always need to obtain a permit to acquire agricultural real estate?
It all depends on the classification of the property, and sometimes even where it is located.
Under Art. 1(1) of the Act on Acquisition of Real Estate by Foreigners dated 24 March 1920, the baseline rule is that a permit is required for a foreigner to acquire real estate in Poland. When a permit is required, it is issued by way of an administrative decision by the interior minister, if no objection is raised by the defence minister and in the case of agricultural real estate if no objection is also raised by the minister for rural development.
The act does not define “agricultural real estate,” which makes it difficult in practice to determine the nature of the real estate in question. This is particularly important because even foreigners from the European Economic Area or Switzerland may be required to obtain a permit before they can acquire agricultural or forest land in Poland.
According to information published online by the Ministry of Interior, in practice, during the administrative proceeding for issuance of a permit to a foreigner to acquire real estate, the ministry determines the nature of agricultural real estate on the basis of the documents submitted with the application for the permit, which may include, as relevant:
- Certificate from the local commune on the designated use of the land in the applicable zoning plan
- Decision on construction conditions
- Decision on location of a development project for public purposes pursuant to the Planning and Zoning Act dated 27 March 2003
- Decision on removal of land from agricultural production under the Act on Protection of Agricultural and Forest Land dated 3 February 1995
- Classification according to the register of plots and buildings under the Survey and Cartography Law dated 17 May 1989.
The requirement to submit these documents, other than a decision on removal of the land from agricultural production, is set forth in §4(1) of the regulation of the Minister of Interior and Administration dated 26 April 2004 governing proceedings for issuance of such permits.
This raises the question of how this documentation enables the ministry to determine the nature of the real estate. In some cases, it is obvious that the land is agricultural—when the property is zoned for agricultural production and according to the register of plots and buildings it is actually being used for agricultural purposes. But in practice, there are cases that are not so clear.
For example, the Minister of Interior held that land of about 1,000 m2 for which there was no zoning plan in effect, and which was described in the register of plots and buildings as “other developed land,” was agricultural. In that case there did not appear to be any grounds for treating the land as agricultural. But in the past the property had been classified as pastureland. There was still a cowshed on the land, but it was not being used anymore for raising cattle. The change in the entry in the register of plots and buildings was made on the basis of the position taken by the Central Office of Survey and Cartography, the Ministry of Agriculture and Rural Development and the Ministry of Finance, in a statement dated 25 February 2003, issued with the intention of including as many properties as possible under the real estate tax system instead of the agricultural tax system.
These authorities requested local counties and communes to determine which agricultural and forest properties were being used for other purposes, and to amend the register of plots accordingly. The instructions included a recommendation that the register of plots be adapted to reflect tax regulations, under which developed land is classified as agricultural only if it is connected with operation of farms with an area exceeding 1 hectare.
These guidelines, which were in themselves controversial, were implemented only in very few cases. Moreover, even in cases that are not doubtful, local county officials do not always update the register of plots and buildings, for example after new buildings are erected. As a result, properties in different locations but otherwise the same may be classified differently in the register of plots and buildings. Within city limits today, there are some properties classified as developed agricultural land even though the construction on the land is not in the least bit agricultural. This is the case, for example, of land in a Warsaw suburb that is developed with an apartment complex, but for which there is no zoning plan in force.
Under Art. 461 of the Civil Code, agricultural land (or real estate) is defined as real estate which is or may be used to conduct agricultural production (vegetables or animals), including use for gardens, orchards or fisheries. In the first example mentioned above, there is a cowshed on the property, and thus the property could be used for raising farm animals. In the second example, where there is an apartment complex on the land, agricultural use is not possible.
We have determined that in proceedings now conducted at the Ministry of Interior, the current line of precedent from the state courts and administrative courts is being followed, under which Civil Code Art. 461 is regarded as the principal codified definition of “agricultural real estate.” This definition is also applied under other acts concerning agricultural land, unless otherwise provided. The distinguishing characteristic of agricultural real estate is its actual or potential use. Thus the property with the abandoned cowshed is regarded as agricultural land for purposes of the Act on Acquisition of Real Estate by Foreigners, but the property with the apartment complex is not.
In practice, it may be difficult to determine whether the test indicated in Civil Code Art. 461 is met. Meanwhile, Art. 6 of the Act on Acquisition of Real Estate by Foreigners provides that acquisition of real estate in violation of the act is invalid. Thus whenever there is any doubt on this issue, to avoid the risk of invalidation of the transaction a foreigner seeking to acquire real estate in Poland should seek a permit from the Minister of Interior. The decision on issuance of a permit will then assure that the property is validly acquired.
Iwona Kasperek and Przemysław Szymczyk, Real Estate & Construction practice, Wardyński & Partners