The new provisions related to the Act on agricultural land turnover, which entered into force on April 30, not only introduced large restrictions on the trade-in agricultural land. They also became a big problem for people who were hoping to get a mortgage to buy such a plot or build a house on it.
Agricultural plots have enjoyed great interest
Especially among those looking for cheaper land for building a house. In addition, the ease of obtaining a building permit on an agricultural plot, for which the municipality issued building conditions or was included in the local spatial development plan (MPZP) as a residential area meant that individual investors dreaming of building their own house treated them as construction plots.
On April 30, new provisions related to the Act on the trading of agricultural land entered into force. In addition to the time-consuming procedures associated with the transformation of land, there were also additional restrictions associated with obtaining a mortgage for the purchase of agricultural real estate.
No credit for the agricultural plot
The actin question aroused a lot of emotions, mainly related to limiting the purchase right, but not everyone took into account the fact that it would also limit the possibility of obtaining a loan for the purchase of agricultural plots or building houses on them. It introduced changes, among others in the Act on Land and Mortgage Registers, the Civil Code and in the Act of 11 April 2003 on shaping the agricultural system, which directly translated into the banks’ credit policy regarding agricultural real estate.
As a result of the lack of market practices and growing doubts, in early May most banks withheld their decisions regarding the lending of agricultural plots until a uniform position was developed and the procedures for granting loans were adjusted to the applicable law. Some banks refused to grant a loan due to the type of property being secured.
In the last month, the basic problem, which surprised not only borrowers but also banks and land and accounting courts, was the change of guidelines regarding the principles of establishing a mortgage, which is the bank’s obligatory collateral when granting housing loans.
If we are dealing with real estate which is intended for agricultural use in the Land and Mortgage Register, in the land register or in the local plan, in accordance with the introduced act, the bank may establish a mortgage only up to the value of the plot being the subject of collateral. The value of an agricultural plot will be determined on the basis of an appraisal report, which should be obligatorily submitted to the court along with the application for mortgage entry.
Unfortunately, the amount of mortgage established by banks in Poland as collateral for the loan ranges from 150 to 200 percent. loan value. In practice, this means that the bank can finance the transaction for an amount not exceeding 50-66 percent.
The market value of the agricultural plot provided that it has not completely given up hedging on this type of real estate. When planning additionally to build a house on an unconverted agricultural plot, we should take into account the refusal to grant a loan due to the inability to establish a mortgage in the required amount.
What agricultural land and what not?
If the requirements for granting a loan for an agricultural plot or building a house are not met, some banks currently allow the possibility of establishing collateral on another borrower’s property.
However, not all of us have the required cash or additional real estate to secure the loan, which is why owners of agricultural plots must reckon with their transformation before selling.
The lack of transparent provisions of the Act also means that currently there is no uniform position determining which properties should be treated as agricultural, and therefore subject to the Act. Therefore, we can meet with different positions of banks regarding the definition of agricultural land.