Effects of the changes in the law on agricultural property trading

It has been 10 months since the entry into force of the new rules for trade in agricultural property. One of the “side effects” of the new law is exposing the immense planning backlog of towns and municipalities. What else has the act revealed? The new law is evaluated by Agata Zając, Associate Director, JLL.

The act on the suspension of sale of property from the Agricultural Property Stock of the State Treasury and amendment to certain acts which came into force on 30 April 2016 has introduced several restrictions on trade in private agricultural land with the surface area of 0.3 ha or more. The changes have significantly limited the access to investment areas that are not covered by local plans.

These areas could previously be used in investment projects on the basis of a decision on development conditions. The new regulations have blocked the sale of such plots, as they are now classified as agricultural land. Therefore, investors who want to use this kind of land in their projects must work with municipalities to begin the planning procedure and adopt local land use plans. Normally, this process takes from 12 to 24 months, while in large cities it may take up to 3 to 4 years.

The warehouse and industrial market has not seen a shortage of investment land, as developers use “land banks” that have been created earlier. However, one can see intensified activity when it comes to searching for land from the category that can be readily used for investment projects, as well as the type of land that will require preparation of 2 to 3 years. This way, developers are establishing new land banks that will be purchased gradually, as new local plans are adopted.

Low volume of available land in large cities

However, there are regions in Poland where the volume of land available for investment projects is low. This is mostly the case in large cities that have accumulated a considerable backlog in terms of adopting local plans, such as Łódź and Warsaw. Both urban centres have few “industrial” plans, and the supply of land there is low due to their high level of urbanisation. It is worth noting that within town boundaries, land without local plans that has never been developed is qualified as agricultural land available for purchase to individual farmers.
The underlying cause of the shortage of investment land in Łódź is not just the new law on agricultural property, but also the increasing demand in the region and the low level of local land use planning. Due to the construction of the A1 motorway and new transport links, there has been a several-fold increase in the interest in the Łódź region. However, local governments have not been prepared to receive new investors, as they have not done the necessary planning in advance. Only today, when the increased interest is evident, are the local authorities starting to prepare local plans, which will be completed in more than a year.

Such issues can be observed throughout Poland – land use planning is not keeping up with the growth of the transport infrastructure. The newly constructed expressways and motorways (especially in the proximity of transport junctions) provide growth opportunities to municipalities that have previously been seen as agricultural areas. In order to take advantage of these opportunities, the municipalities must take action and plan their land development through the adoption of local plans. Unfortunately, in many cases, these are adopted several years late or are never adopted at all.

Planning backlog

Therefore, exposing the immense planning backlog of towns and municipalities is one of the major “side effects” of the change in the law on agricultural land. However, some positive developments can be seen in this area – more and more local authorities are working with us to prepare the necessary documents and create favourable conditions for investments. Thus, the new agricultural law indirectly contributes to the improvement of the planning situation in Poland. Given that converting agricultural land into investment areas is a time-consuming process, changes that would release at least part of the land are urgently needed, especially in areas that function more as typically commercial rather than agricultural regions. One way to introduce such changes is excluding land within the administrative boundaries of towns from the provisions of the new act.

Agata Zając