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Changes on Purchase of Agricultural land

The Romanian legislation regarding the sale and purchase of agricultural land located outside the city boundaries (extra vilan) has been amended significantly by the Law no. 175/2020 (Law) and by the subsequent enabling legislation.

The Law established new conditions for the purchase of this type of agricultural land for all buyers and established a new order of persons with pre-emption rights in relation to agricultural land. Accordingly, now on the sale and purchase of agricultural land situated outside the city boundaries, the parties must respect the rights of pre-emption given by the lLaw before they proceed with finalising the transaction.

The Law introduced new categories of persons entitled to pre-emption rights and their ranking. Under the Law the persons who have the legal pre-emption right are entitled to purchase the land at the same price and under the same conditions as those negotiated between the seller and the buyer.

The Law has increased the number of categories of persons who can exercise the pre-emption right from four to seven categories.

The seven categories of persons entitled to the pre-emption rights and their order are the following:
– Rank I: co-owners, together with relatives of the first degree, spouses, relatives and in laws up to and including the third degree.
– Rank II: lessees, together with the owners of agricultural investments for the cultivation of trees, vines, hops and exclusively private irrigations.
– Rank III: the owners and lessees of agricultural lands adjacent to the land being sold .
– Rank IV: young farmers.
– Rank V: The Academy of Agricultural and Forestry Sciences ”Gheorghe Ionescu-Sisesti” and a research-development units in the fields of agriculture, forestry and food industry, as well as agricultural educational institutions.
– Rank VI: natural persons with domicile / residence located in the locality of where the land is located or in the neighbouring administrative-territorial units.
– Rank VII: the Romanian state, through the State Domains Agency.
It should be noted that the legislation stipulates the conditions that each of the categories of the persons with pre-emption rights must meet to exercise their right of pre-emption when buying the agricultural land in question.

It should be noted further that if any person who has a pre-emption right does not express their intention to buy the land within 45 working days from the date of posting of the sale offer, then the land can be sold to the original purchaser on the original terms and conditions. For the purpose excercising the pre-emption right the ranking list is cumulative.

Regarding the new category of person entitled namely, Rank IV – young farmers. The special conditions for the young farmers provided by the Law are that they have to carry out farming activities and to have the domicile/residence established in Romania for a period of at least one year prior to the registration of the pre-emption purchase offer.

The government also introduced new restrictions on the use of agricultural land which is applicable to all agricultural land in Romania. According to the Law the landowner has the obligation to use the agricultural lands exclusively for the activities for which they were used at the date of their purchase. If there are investments on the land such as for trees, vines, hops and exclusive private irrigation then the destination of the agricultural land must be kept. The legislation also provides as well that the Romanian Ministry of Agriculture must keep a National Register regarding the circulation and ownership of agricultural land located outside the city boundaries.

The new Law also imposes new a condition in relation to the transfer of agricultural land within eight years from the date of it’s purchase by any party. Under the new Law if the agricultural land is sold within eight years from the date of purchase it can only be done if the seller pays a tax of eighty percent (80%) of the difference between the current sale price and the original purchase price, based on the public notaries valuation grids for that period. After eight years from the date of purchase this tax will no longer apply or be payable. Finally, it should be noted that in order to sell agricultural land it is now necessary to obtain a soil quality certificate.

The Law has now clarified the position regarding the elimination of the seller’s option between the various person whatever their rank who have the right of pre-emption. Before the new Law the seller had the right to choose between buyers if during the pre-emption period several persons with a right of pre-emption but with different rankings expressed their intention to purchase the agricultural land at the same price and under the same conditions. Under the new regulation, the seller must respect the ranking and the order of the persons entitled as they are provided for by the Law. However, in case of competition between persons entitled who have the same ranking the seller can still choose to whom he wishes to sell the land.

Penalties
The Law introduces additional penalties and has increased the amount of the fines for non-compliance with its provisions. The amount of the fines has been increased from 50.000 lei – 100.000 lei to 100.000 lei – 200.000 lei.

The Law has also introduced a new sanction for the noncompliance with its provision, namely the nullity of the transaction. This sanction will arise if the seller of the land does not respect the pre-emptors preference order; the conditions imposed on the persons entitled; the conditions for transfer to other persons who did not benefit from the pre-emption right or payment of the additional taxation on the transfer of the agricultural land within the eight years period form its purchase.

It is important to realise that the changes must be seen as part of a larger European context and similar provisions were introduced in many European Union countries. The above-mentioned modifications to the legislation may be seen as favourable for those who intend to invest for a long period in the agricultural sector in Romania, by taking advantage of the stability of the ownerships of the lands brought about by these changes in the law.

Ana-Maria Onuța/Nicholas Hammond