We are only 2-3 weeks away from changing the regulations regarding agricultural plots and the rules for establishing mortgages on them. On 30 July, the President of the Republic of Poland signed an amendment to the regulations, which will allow for granting loans for the construction of a house on agricultural plots again.
The new regulations in force since April 30 this year changed the rules for trading agricultural land and the rules for establishing mortgages on such plots. From the borrowers’ point of view, the most important change was the amendment to the act on land and mortgage registers and mortgage. The principle was introduced that the sum of the mortgage established on agricultural property cannot be higher than the current value of the property. In practice, this blocked the possibility of financing the construction of a house on such land. Until now, when the loan amount and mortgage were not related to the current value of the property, the bank estimated the future value of the loan collateral after completion of the assumed construction works. Only on this future value, of course, taking into account the requirements of Recommendation S, was the amount of credit granted. Possible and frequent situations were when a mortgage was established with a value even 3-4 times higher than the current value of an undeveloped plot of land. The restriction introduced on April 30 this year resulted in suspension of the possibility of granting loans for the construction of houses on agricultural plots. Many clients have been unable to finance the already started construction works.
What does the amendment change?
The amendment, carried out almost at an express pace, restores the legal status from before April 30 this year to establishing mortgages. After the new regulations come into force, the sum of the mortgage will not be related to the value of the property in any way. It will be possible to grant a loan and, above all, to establish a mortgage on the plot of land on which the house is being built.
Internal roads are not agricultural plots
In parallel with the amendment to the mortgage regulations, the content of the act on shaping the agricultural system was also changed. We would like to remind you that agricultural land with an area of less than 0.3 hectare is excluded from the rigors of this Act. The amendment also excludes real estate being internal roads, regardless of their area. This means that the arable plot of land, which is e.g. a road at the estate, will also be able to be purchased by persons who, under the provisions of the abovementioned laws are not farmers. The currently binding rules prevent the sale of shares in agricultural land to a “non-farmer” (also if it is an internal road) if the area of this property is greater than 0.3 hectares. Thus, if a developer builds, for example, a single-family housing estate, and the internal road would be a plot of more than 0.3 hectare, it could not buy homeowners to sell shares in this road, as is often the case. The amendment to the act excludes from the regulations on shaping the agricultural system also real estates being access roads.
When will the regulations come into force?
The next stage on the legislative path is the publication of the act in the Journal of Laws and we can assume that it will take place within the next few days. The new regulations will enter into force 14 days after publication, so it will be around August 20. It is worth noting, however, that several banks are already accepting applications taking into account the new provisions. It is possible to submit documents before the provisions enter into force, the bank will issue a relevant credit decision, however it will be necessary to withhold the submission of an application for entry of a mortgage until the new provisions enter into force.