Regulation of the Sale of Agricultural Land Outside Built-Up Areas Requires Changes!

On 8 February 2021, it was published in the Official Gazette No. 127/08.02.2021, Order no. 311/2020 amending the Order of the Vice Prime
Minister, Minister of Agriculture and Rural Development, Vice Prime Minister, Minister of Regional Development and Public Administration, Minister of National Defence and Vice Prime Minister, Minister of Culture 719/740/M.57/2.333/2014 on the approval of new methodological norms for the application of Title I of Law 17/2014 on measures aimed at regulating the sale-purchase of agricultural land located outside built-up areas and amending Law 268/2001 on the privatisation of the commercial companies that hold in administration lands of public and private property of the state with agricultural destination and the establishment of the State Domains Agency.

Also, by Law 175/2020 published in the Official Gazette No. 741 of 14 August 2020, Law 17/2014 on some measures aimed at regulating the sale-purchase of agricultural land located outside built-up areas and amending Law 268/2001 on the privatisation of commercial companies that hold in administration lands of public and private property of the state with agricultural destination and the establishment of the State Domains Agency was amended and supplemented, and the amendments made in this regard entered into force on 13 October 2020, after the expiry of 60 days from publication in the Official Gazette.

Thus, although with the addition of the methodological rules for the application of Title I of Law 17/2014 as amended by Law 175/2020, the sale and purchase of non-urban agricultural land has received a clearer regulation, both in terms of the mandatory prior sale procedure and in terms of the conditions that must be met by natural or legal persons intending to purchase a non-urban land on the territory of Romania, in our opinion, de lege ferenda, it is necessary to clarify and simplify the sale procedure.

The methodological rules indicated above shall apply to applications registered after the date of entry into force of the provisions of Law 175/2020, i.e. after 13 October 2020, and shall expressly state the two methods of transfer of ownership to which they are applicable, i.e. the sale and purchase contract authenticated by the notary public and court judgements in lieu of a sale contract if the related bilateral promises of sale have been concluded in accordance with the provisions of the Civil Code and the relevant legislation.

Under these circumstances, at present, the procedure for concluding and consolidating the sale and purchase of non-urban land will involve the following steps to be taken before the actual transfer of ownership can take place:

1. The seller must register with the town hall of the administrative-territorial unit where the land is located an application requesting the posting of the offer for the sale of the agricultural land located outside built-up areas in order to bring it to the attention of pre-emptors (or potential buyers).

The application shall be accompanied by the offer to sell the agricultural land and the supporting documents provided for by the methodological rules, namely (a) a photocopy of the identity card of the natural person seller, (b) a photocopy certified as being according to the original by the town hall officials of the document of ownership of the land which is the subject of the offer to sell (sale and purchase contract, donation contract, final civil judgement/decision, title deed, certificate of inheritance, exchange contract, deed of liquidation of property, or any other document provided for by law attesting the acquisition of ownership), (c) land register excerpt for information purposes, issued no later than 30 days prior to the posting of the offer, accompanied by the excerpt of the cadastral plan, provided that the land subject to sale is registered in the integrated cadastre and land register system, (d) a photocopy of the trade register certificate or of the document on the basis of which it carries out its activity, in the case of a legal person seller, (e) in the case of representation, the notarial power of attorney, in photocopy certified according to the original by the town hall officials, and the delegation, the resolution of the general meeting of shareholders, the decision of the sole shareholder, the decision of the representative of the association, as the case may be, in original, (f) the resolution of the general meeting of shareholders, the decision of the sole shareholder, the decision of the representative of the association form, if applicable, in original, showing the agreement on the sale of the property owned by the company, in the case of the legal person seller, (g) the tax certificate issued by the town hall, (h) other supporting documents, if applicable.

2. Within 5 working days of the registration of the seller’s application, the town hall is obliged to display, for 45 working days, the offer of sale at its premises and, where applicable, on its website.

3. Within 5 working days from the registration of the documentation, the town hall will send to the structure of the central office of the Ministry of Agriculture and Rural Development and to the County or Bucharest Agricultural Directorates, as well as to the State Domains Agency a file containing the list of pre-emptors, copies of the request for posting the sale offer and of the supporting documents (listed in point 1 above) and the report of the posting of the offer.

4. Within 3 working days from the registration of the file received from the town hall, the structure of the central office of the Ministry of Agriculture and Rural Development and the county or municipal agricultural directorates will post on their websites the offer of sale for a period of 15 calendar days.

5. Within 10 working days of the registration of the seller’s application, the town hall shall notify the holders of the pre-emptive right, at their domicile, residence or, where applicable, registered office, of the registration of the sale offer; if the holders of the pre-emptive right cannot be contacted, the notification shall be made by posting at the town hall’s office or on the town hall’s website. If the area of land which is the subject of the intention to sell is located on the border of two administrative territories, the town hall shall notify the local public authority with which it adjoins, which in turn shall notify the holders of pre-emptive rights.

6. Holders of pre-emptive rights must express their intention to purchase in writing, communicate their acceptance of the seller’ offer and register it at the town hall where it was posted within 45 working days (indicated in point 2 above).

Who are the holders of the right of pre-emption?

In addition to the substantive and formal conditions laid down by the Civil Code for the conclusion of the sale and purchase contract, the seller must comply with the right of pre-emption regulated extensively by Special Law 17/2014 and amended by Law 175/2020, at equal price and on equal terms, in the following order:

(i) first-class pre-emptors: co-owners, first-degree relatives, spouses, relatives and affinities up to and including the third degree;

(ii) second-class pre-emptors: owners of agricultural investments for tree crops, vines, hops, irrigation, exclusively private and/or lessees. If agricultural investments for the cultivation of trees, vines, hops and irrigation are located on the land to be sold, the owners of these investments have priority for the purchase of this land;

(iii) third class pre-emptors: owners and/or lessees of agricultural land adjoining the land subject to sale if they meet the cumulative conditions laid down in this respect and which we will list below:

– In the case of exercise of the right of pre-emption by the owners of neighbouring agricultural land, priority for purchase shall be established as follows:

(a) the owner of neighbouring agricultural land having the common boundary with the largest side of the land which is the subject of the offer for sale;

(b) if the land which is the subject of the sale offer has two large sides or all equal sides, priority for the purchase of this land shall be given to the owner of the neighbouring agricultural land, who is a young farmer and whose domicile/residence has been located on the national territory for a period of at least one year prior to the registration of the sale offer;

(c) the owners of neighbouring agricultural land having a common boundary with the land which is the subject of the sale offer, in descending order of the length of the boundary common to the land in question;

(d) if the large side or one of the equal sides of the land which is the subject of the sale offer has a common boundary with the land situated within the radius of another administrative-territorial unit, priority for the purchase of the land shall be given to the owner of the neighbouring agricultural land with domicile/residence within the radius of the administrative-territorial unit where the land is located.

– The lessee wishing to buy the leased agricultural land must hold this status on the basis of a valid lease contract concluded and registered in accordance with the legal provisions at least one year before the date of posting the sale offer at the town hall and must meet the following conditions:

(a) in the case of individual lessees, provide proof of domicile/residence located on the national territory for a period of 5 years prior to the registration of the sale offer;

(b) in the case of lessees which are legal persons, the shareholders who are natural persons must provide proof of domicile/residence on the national territory for a period of 5 years prior to the registration of the offer of sale;

(c) in the case of lessees which are legal persons with a shareholding in another legal persons, the controlling shareholders of the company must provide proof of a registered/secondary office located on the national territory established for a period of 5 years prior to the registration of the sale offer.

(iv) fourth-class pre-emptors: young farmers – young farmer means a person of up to 40 years of age who has the appropriate occupational skills and qualifications and is setting up for the first time on an agricultural holding as the holder of that holding. In this case, priority for the purchase of the land to be sold will be given to the young farmer carrying out animal husbandry activities, provided that he/she has been domiciled/residing on the national territory for at least one year prior to the registration of the sale offer;

(v) fifth-class pre-emptors: The Academy of Agricultural and Forestry Sciences Gheorghe Ionescu-Sișești and research and development units in the fields of agriculture, forestry and food industry, organised and regulated by Law 45/2009, as well as educational institutions with an agricultural profile, for the purpose of purchasing agricultural land located outside built-up areas for the strictly necessary agricultural research, located in the proximity of existing plots in their heritage;

(vi) sixth-class pre-emptors: natural persons with domicile/residence located in the administrative-territorial units where the land is located or in neighbouring administrative-territorial units;

(vii) seventh-class pre-emptors: the Romanian State through the State Domains Agency.

7. If, within 45 working days (indicated in point 2 above), purchase intentions have been registered by the holders of the pre-emptive right, the town hall will display, including on its own website, within 3 working days of the registration of the acceptance of the sale offer and will transmit to the structure of the central office of the Ministry of Agriculture and Rural Development, and of the county agricultural directorates or of the municipality of Bucharest, the identification data of the pre-emptors in order to verify the fulfilment of the legal conditions.

8. If no pre-emptor expresses an intention to purchase, the town hall shall post the reports of the conclusion of the procedural stage concerning the exercise of the right of pre-emption, and the possibility for potential buyers to submit purchase applications shall be thus opened.

9. If, within the period of 45 working days (indicated in point 2 above), several pre-emptors of different class express in writing their intention to purchase at the same price and under the same conditions, the order of priority described above shall be followed. If a lower-class pre-emptor offers a price higher than that in the offer to sell or than that offered by the other higher-class pre-emptors that accept the offer, the seller may resume the procedure, with the registration of the offer to sell at this price and observing the order of priority of the pre-emptors described above (this procedure may be carried out only once, within 10 days of the expiry of 45 working days).

What happens if the holders of the pre-emptive right do not express their intention to buy?

10. If the holders of the right of pre-emption do not express their intention to purchase, the sale may be made to other natural or legal persons, referred to by law as potential buyers, who shall submit to the town hall a file with the documents proving the fulfilment of the conditions within 30 calendar days of the expiry of the 45 working days (indicated in point 2 above), but subject to the following conditions:

Cumulative conditions for sale of land to natural persons:

(a) to domicile/reside on the national territory for at least 5 years prior to the registration of the sale offer;

(b) to carry out agricultural activities on the national territory for a period of at least 5 years prior to the registration of the offer of sale;

(c) to be registered by the Romanian tax authorities at least 5 years prior to the registration of the sale offer.

Cumulative conditions for alienation of land to legal persons:

(a) to have its registered office and/or secondary office on the national territory for at least 5 years prior to the registration of the sale offer;

(b) to carry out agricultural activities on the national territory for a period of at least 5 years prior to the registration of the offer of sale;

(c) to provide documents showing that at least 75% of the total income of the last 5 fiscal years represents income from agricultural activities;

(d) the partner/shareholder that controls the company must have had its domicile in the national territory for at least 5 years prior to the registration of the sale offer;

(e) if in the structure of legal persons, the partners/shareholders controlling the company are other legal persons, the partners/shareholders controlling the latter companies must provide proof of residence on the national territory for a period of at least 5 years prior to the registration of the sale offer.

11. If the holders of the right of pre-emption have not expressed their intention to purchase within the 45 working days, and the potential buyers have submitted their intention to purchase to the town hall within 30 calendar days of the expiry of the 45 working days, the town hall will forward the file or the files submitted by the potential buyers to the structure of the central office of the Ministry of Agriculture and Rural Development and to the county or municipal agricultural directorates within 5 working days of the registration of the documentation.

12. It should be noted that if the right of pre-emption is not exercised and if none of the potential buyers fulfils the conditions to be able to buy the agricultural land or has not expressed the intention to buy within the indicated time limit, the land may be sold to any natural or legal person, in accordance with the law.

13. Another substantial amendment introduced by Law 175/2020 stipulates that agricultural land located outside built-up areas may be sold before the expiry of 8 years from the date of purchase, subject only to payment of a tax of 80%, applicable to the amount representing the difference between the sale price and the purchase price, on the basis of the notaries’ scale for that period. The legislative amendment also specifies that, in the case of direct or indirect sale before the expiry of 8 years from the date of purchase of the controlling interest of companies owning agricultural land located outside built-up areas and representing more than 25% of the value of their assets, the seller will be required to pay a tax of 80%, applicable to the difference in value of the land in question calculated on the basis of the notaries’ scale between the date of acquisition of the land and the date of sale of the controlling interest.

14. In view of the above amendment, the Methodological Rules mention the 80% tax by listing the documents that the seller must submit to the notary public at the conclusion of the sale contract, essential in this respect being the submission of documents relating to the proof of calculation and payment of the 80% tax on the amount representing the difference between the sale price and the purchase price, based on the notaries’ scale for the period in question, as the case may be, without which the sale cannot be completed.

15. Another important clarification to be mentioned is that the sale of land over which a pre-emptive right has been established cannot take place without obtaining a specific opinion from the Ministry of Agriculture and Rural Development attesting to compliance with the procedure laid down by law for exercising the pre-emptive right or, if the holders of the pre-emptive right do not express their intention to buy the land, a specific opinion attesting to the fulfilment of the conditions for potential buyers, whether natural or legal persons.

16. Law 17/2014 also establishes, in addition to the specific opinion mentioned above, two other types of required opinions, each of which is of a special nature but imperative where appropriate. Thus, the specific opinion of the Ministry of National Defence is required in the case of agricultural land located outside built-up areas within 30 km of the state border and the Black Sea coast, inland, as well as those located outside built-up areas at a distance of up to 2400 m from special objectives. This type of opinion is not required to pre-emptors. The second situation provided for by the law requires a specific permit to be issued by the Ministry of Culture in the case of agricultural land located outside built-up areas where archaeological sites are located.

The procedure for the sale of agricultural land, as governed by the above-mentioned legal provisions, is a cumbersome one, involving many conditions applied both to the owners selling the land and to the natural or legal persons intending to purchase it, which is very sensitively positioned on the borderline of the right to private property. Also, in addition to all the restrictions that the procedure brings to landowners and potential buyers, it does not fully cover the situations for which it was regulated (e.g. the procedure does not regulate the conditions applicable to the Exchange Contracts provided for in Article 1763 – Article 1765 of the Civil Code, it does not bring concrete amendments regarding the transfer of the right of ownership in the framework of the enforcement, etc.).

In conclusion, the purpose of the legal provisions addressed remains, unfortunately, partially unclear, even in the context of the amendment of the methodological rules for the application of the law, and real estate transactions concerning the sale of non-urban agricultural land, although legally regulated in a broader framework, remain hampered, thus requiring further legislative changes in this area.

Atty. Bogdan Bâte