Real Estate

Expanded Opportunities for EU Citizens to Acquire Agricultural Land

Agricultural land and excellent soil are one of Hungary’s great national resources. Around 47% of the territory of Hungary is agricultural areas – one of the highest among EU countries. In the last years, the volume of agricultural production has increased, and market participants are reporting a rise in agricultural investments. The New Land Act increased the opportunities for land purchases and other agricultural investments for EU nationals, creating more favourable business conditions for potential investors.

Acquisition and use of agricultural land

Due to the lib­er­al­i­sa­tion of the Hun­gar­i­an mar­ket in agri­cul­tur­al land in 2014, EU nation­als are sub­ject to the same rules as Hun­gar­i­an pri­vate indi­vid­u­als in terms of land acqui­si­tion.

The aim of the New Land Act is, in par­tic­u­lar, to pro­tect small­hold­er pri­vate indi­vid­u­als, to sup­port the eco­nom­ic mod­el of fam­i­ly farms and to avoid the adverse impacts of large-scale land acqui­si­tions for invest­ment pur­pos­es. There­fore, the new act con­tin­ues to con­fer advan­tages to pri­vate indi­vid­u­als qual­i­fy­ing as farm­ers: legal enti­ties are exclud­ed from land pur­chas­es, while pri­vate indi­vid­u­als in gen­er­al may only own one acre of agri­cul­tur­al land. On the oth­er hand, Hun­gar­i­an cit­i­zens and nation­als of EU/EEA coun­tries qual­i­fy­ing as farm­ers may acquire agri­cul­tur­al land up to 300 acres, while the total area of land used by a farmer (includ­ing the lands in his own­er­ship) may not exceed 1200 acres.

Natural persons qualifying as farmers

Hun­gar­i­an and EU res­i­dent nat­ur­al per­sons may qual­i­fy as farm­ers if they have cer­tain agri­cul­tur­al or forestry qual­i­fi­ca­tions. Per­sons not hav­ing agri­cul­tur­al qual­i­fi­ca­tions must cer­ti­fy that they have been con­tin­u­ous­ly pur­su­ing agri­cul­tur­al activ­i­ties in their own name and at their own risk for at least three years in Hun­gary. Fur­ther qual­i­fi­ca­tion cri­te­ria are that farm­ers must cer­ti­fy that they have either gen­er­at­ed income from agri­cul­tur­al activ­i­ties with­in the above peri­od or oth­er­wise con­firm that their agri­cul­tur­al invest­ment has not gen­er­at­ed any income thus far.

Pre-emption rights

To sup­port sus­tain­able agri­cul­ture and to pro­tect small­hold­ing Hun­gar­i­an farm­ing tra­di­tions, the New Land Act cre­ates pre-emp­tion right for the Hun­gar­i­an state. Fol­low­ing the state, pre-emp­tion rights are grant­ed to local farm­ers.

Pre-emp­tion rights, how­ev­er, can­not be exer­cised if (i) the trans­fer is between close rel­a­tives, (ii) the sale and pur­chase aims to ter­mi­nate joint own­er­ship over the land, (iii) the own­er­ship of the land is trans­ferred to a farmer as a con­di­tion of state aid or (iv) the land is to be acquired by the local munic­i­pal­i­ty for pub­lic use.

Use restrictions

Land trans­fers are con­di­tion­al on cer­tain use restric­tions. For the first five years of own­er­ship, the pur­chas­er can­not assign the use of the land to any third par­ty, must com­ply with its oblig­a­tion to cul­ti­vate the land and must under­take not to use the land for non-agri­cul­tur­al pur­pos­es.

The above restric­tions and under­tak­ings of the land own­ers are con­tin­u­ous­ly mon­i­tored by the com­pe­tent agri­cul­tur­al author­i­ty. In case of non-com­pli­ance, the author­i­ty may impose penal­ties on the landown­er.

Approval of the acquisition by the competent agricultural authority

Agri­cul­tur­al land acqui­si­tions and agri­cul­tur­al land leas­es are sub­ject to the pre­lim­i­nary per­mis­sion of the com­pe­tent agri­cul­tur­al author­i­ty, while land acqui­si­tions are also sub­ject to the per­mis­sion of the local land com­mit­tees. Should the agree­ment not com­ply with the pro­vi­sions of the New Land Act, the author­i­ty declares the agree­ment as null and void. In case of land acqui­si­tions, the local land com­mit­tees shall eval­u­ate the sale and pur­chase agree­ment and pro­vide their opin­ion on the planned acqui­si­tion. If the land com­mit­tee fails to sup­port the acqui­si­tion by a cer­tain pur­chas­er, the rel­e­vant agree­ment will not become effec­tive between the par­ties con­cerned.

Acquisition or use of arable land by legal entities?

As a rule, under the New Land Act, only nat­ur­al per­sons are allowed to acquire agri­cul­tur­al land, while legal enti­ties are exclud­ed from agri­cul­tur­al land acqui­si­tions. Although exist­ing own­er­ship titles of legal enti­ties over agri­cul­tur­al lands are not affect­ed by the new act, it is for­bid­den to acquire own­er­ship of agri­cul­tur­al land by a legal enti­ty through merg­er, de-merg­er or any oth­er form of trans­for­ma­tion.

But con­trary to the above restric­tions on acqui­si­tions, cer­tain legal enti­ties oper­at­ing and qual­i­fy­ing as agri­cul­tur­al coop­er­a­tives may lease land up to 1200 acres. The New Land Act defines sev­er­al legal enti­ties pur­su­ing pre­ferred busi­ness activ­i­ties (oper­a­tors of breed­ing farms, pro­duc­ers of field seeds, etc.) that are allowed to lease agri­cul­tur­al land up to 1,800 acres.

The new legislative regime could expand agricultural investment opportunities in Hungary.