19 Jan 2016

Changes to the Agricultural Land Act

On 29 December 2015 Serbian Parliament amendments to the Agricultural Land Act (the “Act”) and with the changes effective as of 7 January 2016.

The amendments primarily focus on introducing new ways in which to manage and dispose of state-owned agricultural land. The key changes are:

  1. revision of the conditions for exercising the right of first refusal,
  2. establishment of the right of priority lease of agricultural land,
  3. modifications regarding lease and use rights, use without reimbursement, and disposal of state-owned agricultural land.

1. The right of first refusal can be exercised as part of the specific procedure, which local self – government initiates by way of a public call.  The right of first refusal may be exercised by natural persons and legal entities registered in the Register of Agricultural Households (the “Register”) that have held “active” status for at least three years, with the exception of livestock owners, which have to be “active” for one year only.  The condition is also that such persons and entities own alternatively farm animals, irrigation system, fisheries, agricultural installations, hothouse, plant nurseries or multi-annual planting.  Decisions on applicants’ right of first refusal are made by local self-government, with prior approval from the Ministry of Agriculture and Environmental Protection (the “Ministry”).

2. The right of priority lease of state-owned agricultural land can be exercised under several conditions. Firstly, the applicant must be a legal entity registered in the Register and holding “active” status. Unlike the condition set out for the right of first refusal, there is no time requirement for “active” status. The entity only needs to be “active” according to the Register data. Secondly, the applicant is required to submit an investment plan together with the proposition of the measures for the lease realization. Such plan is subject to approval by a special commission, formed by the Minister of Agriculture and Environmental Protection. Nonetheless, it should be noted that investment plan assessment criteria are not provided under the Act. Thirdly, the right of priority lease can be exercised for 30 (thirty) years. Fourthly, the maximum state-owned agricultural land area that can be leased cannot exceed 30% of the total state-owned agricultural land in the area that the local self – government in question has responsibility for. The local self – government is authorized to decide upon applicant’s right of priority lease within 30 days from the submission of the application. An applicant may appeal the decision to the Ministry, with its decision being final. If local self – government fails to make a decision, a decision will be made by the Ministry. However, the Act envisions that the Serbian Government will legislate for the conditions, manner and procedure regarding the right of first priority lease.

In both cases, the lease for the state-owned agricultural land is concluded between the applicant and the Ministry, after the applicant has provided the security for the lease payment.

3. The Act also introduces changes in the area of the state-owned agricultural land use without reimbursement. Namely, if agricultural land has not been leased or used for the previous three years, it can be made available for use without reimbursement to natural persons and legal entities registered in the Register and which hold “active” status. The duration for this type of state-owned agricultural land use is five years. Local self-government has the power to render decisions on this type of land use, but prior approval must be obtained from the Ministry. After the decision is enacted, the Ministry and the user conclude a contract on the state-owned agricultural land use.

Regarding the regular lease and use rights of the state-owned agricultural land, the Act envisages that the procedure for the exercise of these rights be governed by local self – government. In respect of regular state-owned agricultural land lease, a change of note under the Act is that leaseholders, those that are legal entities, must secure the employment of the unemployed persons. However, the Act remains silent on the manner and conditions for fulfillment of this obligation. It merely states that further regulation will be provided consensually by the Minister of Labor, Employment, Veteran and Social Affairs and the Minister of Agriculture and Environmental Protection. Hence, it is unclear how the foregoing provision will be applied in practice.

Finally, another major change is that state-owned agricultural land can now be sold to the natural persons that are Serbian residents. Apart from this condition, a person seeking to buy state-owned agricultural land must be resident in the area of responsibility of the local self – government in question, be registered in the Registry and have held “active” status for at least three years. He/she must possess the necessary agricultural equipment to farm the land. A person that already owns more than 30 hectares of agricultural land is not eligible to buy state-owned agricultural land. Also, a person that has sold more than 3 hectares of agricultural land in the previous three years, except where in cases of public interest, cannot buy state-owned agricultural land. Post-purchase a person cannot own more than a total of 40 hectares of agricultural land.

Together with the recently enacted amendments to the Act on Incentives in Agriculture and Rural Development, this piece of legislation is especially important for companies looking to invest in the Serbian agricultural sector.