Investments in the purchase of arable land for the purpose of its subsequent lease to farmers are popular in the Slovak Republic.
This time, however, Slovak and foreign investors should draw attention, especially if they are not used to taking an active interest in their arable land.
With effect from May 2021, there are changes in the legal regulation of leases of agricultural land, the aim of which is to resolve the legal position between the landlord of agricultural land and its tenant, this time preferencing the interests of landowners.
The changes affect two specific institutes of agricultural lease, namely the legal presumption of the establishment of a lease and the right of pre-emption on extension of a lease on the side of the land tenant.
In practice, there often arise cases where individual farmers or cooperatives use and cultivate agricultural land without having entered into a formal written lease contract with the landowner, which is the result of a passive approach mostly by both parties involved.
The law has so far dealt with this situation through the fact that the law contained a presumption of the establishment of a lease for an indefinite period in favour of the actual user of the land, even if he used the land without a lease contract.
In principle, it was sufficient for the land user to prove that, although he had proposed to the landowner to enter into a written lease, the landowner had nonetheless neither refused to enter into the lease within two months of the date of receipt of the proposal, nor called on the land user to return the land. If, however, the landowner had entered into a written lease contract with another person before delivery of a proposed lease contract from the ‘contractless’ land user, such formal lease contract took precedence and the contractless land user had to return the land to the landowner.
This presumption of tenancy was often criticised by the professional public as vague and set to the detriment of landowners. Although the change in the law effective from May 2021 has retained the principle of the presumption of lease, it has added several other conditions that a land user without a written lease must meet and prove in order to continue using the land.
In particular, under the new law, the land user must be a so-called authorised user, and thus must be able to point to some specific, even if outdated, legal reason for using the land without a written lease. It is therefore not possible for someone to just start cultivating someone else’s land, and thus eventually later lease it from the owner in the form of the aforementioned presumption of a lease.
The landowner can also, under the new law, enter into a written contract with someone other than the contractless land user, up to two months after receiving an invitation to enter into a lease contract from the land user.
Furthermore, the land user will not just have to inform the landowner in the invitation to enter into a lease contract that if the landowner neither rejects nor calls upon the land user to return the land to the landowner, a tenancy will thereby be established between them, but also has to explicitly instruct the landowner on the form and manner of rejecting the proposal. A legal safeguard, though, lies in the fact that a landowner will be able to terminate a lease contract concluded in the form of presumption of lease only with one year’s notice period, and this always as at November 1 of the calendar year.
As of May 2021, the pre-emptive right of an existing tenant to conclude a new lease contract is also removed from the legislation.
Until now, if the tenant had duly and timely fulfilled his obligations under a lease of agricultural land, he had the pre-emptive right to enter into a new lease contract for the land that the tenant had already been using, and this for the rent in the usual amount. The landlord was able to refuse the right to unilateral extension of the lease contract only for reasons listed exhaustively in the law, such as if the landlord himself was engaged in agriculture, or the tenant was a close or related person of the landlord, or if there was a transfer of ownership of the land. A breach of the pre-emptive right of an existing tenant invalidated any lease contract with a third party other than the tenant.
Although the amended law has kept the possibility for the tenant to claim against the landlord the right to extend the lease contract, the landlord can now refuse such a proposal for any reason until the expiry of the lease contract.
It should be added that application practice has also pointed to the need for further legislative changes, which have not yet been adopted, such as the long unresolved problem of co-ownership of fragmented agricultural land in Slovakia, where a particular piece of land may have dozens of co-owners, which is associated with legal problems in handling these lands, and which in turn subsequently limits their usability.
The Ministry of Agriculture and Rural Development of the Slovak Republic is already working on a completely new law on the lease of agricultural and forest land, which should solve this and certain other complex problems.
Daniel Grigel
Partner, Credis Law
Dalimir Jancovic
Senior associate, Credis Law
E: dalimir.jancovic@credislaw.sk
