Amendments to Law 17/2014 brought by Law 175/2020 became effective in February, as secondary legislation was published in the Romanian Official Gazette on February 8, 2021.

The chief innovations in the new legislation are:

1. Extending the list of pre-emptors from three to seven categories;
2. Extending the pre-emption period from 30 calendar days to 45 business days;
3. Creating a new category of preferential specialized buyers, which have an extra 30 business days following the pre-emption period to exercise their right to buy;
4. For leaseholders to qualify as pre-emptors, there are the requirements:
   • to have a valid lease agreement in force for the land being sold for at least one year before the farmland sale offer is published;for leaseholders and their controlling shareholders
   • to have a continuous domicile/residency/headquarters/secondary office in Romania for at least five years;
5. For land owned by the seller for less than eight years, there is an 80% tax calculated by reference to the positive difference between the land’s value on sale and its value when acquired.

Farmland acquisition

The law leaves the door open for acquiring farmland in two scenarios:

I. Acquiring land as pre-emptors or privileged potential buyers

1. The law creates two categories of preferential buyers:

1.1. Expressly named pre-emptors (seven categories): (i) first degree pre-emptors—co-owners, first-degree relatives, spouses, relatives and in-laws up to and including the third degree; (ii) second degree pre-emptors—owners of agricultural investments for tree crops, vines, hops, exclusive private irrigation and/or lessees; (iii) third degree pre-emptors—the owners and/or lessees of agricultural lands neighboring to the land subject to sale; (iv) fourth degree pre-emptors—young farmers; (v) fifth degree pre-emptors—Academy of Agricultural and Forestry Sciences; (vi) sixth degree pre-emptors—natural persons with domicile residence located in the administrative-territorial units where the land is located, or in the neighboring territorial administrative units; (vii) seventh degree pre-emptors—the Romanian state through the State Domains Agency. The pre-emptors can express their intention to buy within a 45 business day term.

1.2. Specialized potential buyers (mainly farmers that are not lessees). Specialized potential buyers must cumulatively observe the conditions below:

1.2.1. Domicile/Residence/Headquarters/Secondary office for potential buyers and their controlling shareholders on Romanian territory for a period of at least five years prior to the date of the sale offer;

1.2.2. Carrying out "agricultural activities" for a period of five years prior to the date of the sale offer;

1.2.3. For legal persons, achieving a turnover of at least 75% from carrying out “agricultural activities” in the last five tax years prior to the sale offer.

Specialized buyers are eligible only if no pre-emptor expresses its intention to acquire the farmland. In such case, if they want to buy, the specialized potential buyers have to submit a file to the city hall within 30 days from the 45 business day deadline, together with proof of their qualifying as specialized potential buyers.

The length of the procedure will depend on which category of preferential buyers above expresses their intention to buy and the moment such intention is communicated to, and approved by, the relevant authorities. In principle, it should not take longer than four months.

II. Acquiring farmland as non-preferential buyers

2. Although the secondary legislation is not explicit, our view is that even individuals/companies that do not fulfill the restrictive criteria under Section I can buy farmland.

3. Therefore, if none of the pre-emptors or specialized potential buyers expresses its intention to buy during the administrative procedures, the farmland can freely be sold to any individual/company - See art. 4¹ paragraph (5)/Law no. 175/2020: “If the pre-emption right was not exercised, and if no potential buyer, during the legal term, fulfills the conditions for buying the farmland, the farmland can be sold to any individual or company, under the conditions of this law.”

4. Consequently, entities falling outside the categories in points 1.1 and 1.2 above will be able to freely buy farmland, if the privileged potential buyers therein referred do not proceed with the acquisition.

5. The whole procedure will probably exceed four months instead of the one and a half months typical for farmland freely sold under the previous legislation.

Applicability of 80% tax

For farmland that the seller has not owned for a period of at least eight years, an 80% tax calculated by reference to the positive difference between the land’s value on sale and its value when acquired shall apply upon sale. It appears that both values will be determined by reference to the national notaries’ registries at the time of sale/acquisition.

However, the legal provisions fail to provide a full context and clear answers to essential questions, such as:

1. How exactly are the eight years calculated?
2. Does the provision apply only to land acquired by SPA, as appears to be the case based on the wording? Or is the same principle also applicable for land acquired by the seller based on swap, donation, inheritance, etc.?
3. Does the provision only apply to land acquired after this amendment entered into force? Or will it apply retroactively to all farmland, irrespective of when it was acquired?

We are currently chasing the Notaries Union and the Ministry of Agriculture for answers to these questions.