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Paralysis of turnover

The amended Act on shaping the agricultural system of 5th August 2015 (Journal of Laws pos. 1433, hereinafter as the act) is intended to adjust the turnover of agricultural lands in Poland to expiry of interim periods in area of acquisition of real estates by foreigners. The interim periods were negotiated by Poland before accession to the European Union.

Art. 19 of the act constitutes that a sum of agricultural real estate’s mortgage cannot exceed the value of this real estate. The value should be calculated according to the proper provisions in the area of real estate management.

This solution at first glance raises concerns and questions. Is a notary public obliged while establishing a mortgage to demand a report on the evaluation of the real estate? How can a notary public estimate the report’s reliability? What is the situation of real estates currently encumbered with such mortgage? Is every mortgage ex lege decreased to the value of the real estate? If many mortgages are encumbering the real estate, should they be proportionally decreased or some of them should expire?

These are only some questions which must be answered after 1st of January 2016 – the day when the act comes into force. From the economic point of view it is doubtless that credits are going to increase in price for farmers. Banks are supposed to grant smaller credits or increase commissions in order to balance their risk as their capability to gain property security is decreased.

This amendment and some other controversial provisions (e.g. on pre-emption) may result in a drastic drop in agricultural real estate’s turnover in Poland.

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