How the land market works in the European Union

In order to join the EU, Ukraine will have to bring its land legislation into line with European norms, which will also help it in economic recovery. Agricultural land markets operate in all EU countries without prohibitions or moratoriums on alienation. https://landlord.ua tells in detail how the degree of their regulation differs in the countries of Western and Eastern Europe.

Each EU country has its own rules and restrictions in land legislation, and the Court of Justice of the European Union is the guarantor of compliance with regulatory measures. We will analyze the work of the land markets of Western (Netherlands, Belgium, Ireland, Spain, France) and Central-Eastern Europe (Lithuania, Poland, Romania, Slovakia, Hungary, Croatia, Czech Republic).

The most liberal land laws are in the Netherlands and Belgium, as well as in the Czech Republic and Slovakia, while France and Hungary are the most restrictive.

So, in Hungary, only registered farmers - citizens of Hungary or the EU with confirmed qualifications in the field of agriculture or forestry, or those who have been engaged in such activities for at least 3 years during a 5-year period or own at least 25% of a registered agricultural enterprise, can purchase more than 1 ha of agricultural land in Hungary.

In Poland, plots of more than 1 ha can also be purchased only by farmers who are obliged to engage in agricultural activities on the purchased plot for at least 5 years without the right to sell it or transfer it to other persons. The purchase of agricultural land by non-farmers, including legal entities, is permitted only with the consent of the National Center for Agricultural Support.

In France, there are no restrictions on the purchase of agricultural land, but to engage in farming or winemaking, a permit is required, one of the conditions for which is issued is the presence of education and experience in agricultural activities. In Hungary, legal entities (both local and foreign) are prohibited from buying land.

In most countries of Western Europe, the rights of tenants are maximally protected, in particular by establishing minimum land lease terms of 5-27 years. In France and the Netherlands, the governments set the maximum rent every year, and in Belgium it is revised every three years with the participation of farmers and landowners' representatives. In Slovakia, the tenant can request a rent reduction if, due to a change in economic conditions or a drop in prices, he has not received the planned income. Another mechanism for protecting the rights of tenants is the automatic extension of the lease, which exists in Spain, certain regions of Belgium and the Netherlands.

In Spain, Hungary, Romania, Belgium and the Netherlands, the lessee has the right to buy the land if it is sold, while in France and Poland, an additional condition will be a lease term of at least 3 years. In France, the person who purchased the land must cultivate it for 9 years, and in the Czech Republic this rule applies only to the lease of state lands.

In most EU countries, consolidation of land is provided for at the initiative of owners, the government or municipalities, and participants in the procedure must receive compensation or land of equivalent value. However, such a procedure does not exist in Romania and Hungary.

In France, the municipalities implement the AFAFE land management system, which can be used to initiate the forced expropriation of land, which the owners have the right to challenge in court. In Croatia, the government is developing the Agricultural Land Consolidation Program, and the division of consolidated land is prohibited for 99 years from the date of the decision on consolidation. In Lithuania, the consolidation project must have an approved master plan, an area of at least 100 hectares and at least 5 participants. In Spain, there are special procedures for meliorative consolidation, for which a special government decree is required.

In almost all EU countries, there are no restrictions on land grants for individuals and legal entities from the EU. But for residents from countries outside the EU, the situation is significantly different.

Only EU citizens can buy agricultural land in Hungary. In Lithuania, this is additionally allowed for citizens of NATO countries and the European Free Trade Association. In Ireland and Poland, the acquisition of land by residents of non-European countries is possible only with the permission of the authorities. From July 1, 2023, foreigners are allowed to buy agricultural land (excluding forests and pastures) in Croatia. And in Slovakia, there are no restrictions on the citizenship of buyers, but there is a ban on acquisition by citizens of those countries that do not allow individuals or legal entities from Slovakia to buy their land (Ukraine is one of them). In Spain, you need permission to buy land in some regions: on islands, territories in North Africa and the Strait of Gibraltar.

The circulation of land in the EU is regulated by legislation taking into account the principles of free movement of goods, services, capital and workers. And the supervision of their observance is carried out by the Court of Justice of the European Union (CJEU). He formed the following positions on the regulation of land relations:

• Price fixing. The court allows the state, in order to avoid land speculation, to regulate the price of agricultural land based on objective, non-discriminatory and accurate criteria, if there are no other measures of influence.
• Fighting aggressive expansion. The state distinguishes between the "market value" of the plot and the "highest bid", so it can refuse the sale if the bid does not correspond to the value of the land.
• The requirement to carry out farming activities. The state may require the preservation of land in agricultural use, but it has no right to oblige the buyer to carry out farming activities on his own.
• The requirement that the buyer must live near the plot limits the free movement of capital and is unacceptable.
• Setting limits on the area of land acquisition also limits the free movement of capital.
• Administrative permission for alienation of land due to military risks. It is allowed to protect the interests of the state if there is a justification and there is no alternative.

In Ukraine, from January 1, 2024, legal entities founded by citizens of Ukraine are allowed to purchase agricultural land. And the maximum area of the plot to be purchased has been increased from 100 to 10,000 hectares. Now, passive income from land rental can exceed the yield on deposits.

Over the past 3 years, only 1% of agricultural land has been sold in the country. If in February 2022 an average of 10,000 hectares were sold per week, then in December 2023 – only 2,500 hectares. In January 2024, 73 agreements for the sale of 233 hectares of land were concluded.

About 10% of agricultural land is currently mined, another 22% is under occupation, so the demand for land in the central and western regions is the highest. Experts expect activation of the land market and an increase in its prices during the year. The increase in demand increases the value of land and the income of the state - both from sales and from personal income tax, military duty and rent.

In order to make Ukraine attractive for investors and to avoid lawsuits before the EU Court, it is necessary to do "homework" and adapt the legislation in accordance with European norms. Completing the land reform will speed up economic processes, give new opportunities to the country and farmers, and protect the rights of land owners and users.

Therefore, immediately after the victory, the third stage of land reform should be carried out and the purchase of agricultural land by foreign investors allowed. But first, this issue must be resolved in a national referendum.