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«Der Open-Access-Publikationsserver der ZBW – Leibniz-Informationszentrum Wirtschaft The Open Access Publication Server of the ZBW – Leibniz ...»

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Printed material, electronic material and face-to-face advice are the three approaches used by FAS. Advisory services related to compliance with SMRs and GAEC as well as the implementation of internal management system are also eligible for financial support. Compared with other FAS tools implemented in other Member States there are just a few tools which bundle SMRs and GAEC relevant information and are accessible by all farmers in all federal states8. According to the CIFAS Study (2006) these tools are very frequently used by both farmers and advisers9.

Great importance is attached to the enforcement of self-assessment tools to guarantee compliance with sound environmental practices and high standards of animal welfare. The usage of quality assurance systems is highly recommendable but not compulsory.


National legislation of the Member States provides a practical set of standards for agricultural market that must be consistent with the EU framework. General regulations and definitions related to the sales and rental market are codified in the Civil Code and the Law on Agriculture.

The main legal bodies of German land law in a narrower sense are the so called Landpachtverkehrsgesetz and Landverkehrsgesetz. These constitutive laws are supplemented by procedural regulations of each Federal State. The following overview summarises the key federal laws and regulations that are of high importance for agricultural sales and rental market.

• German Civil Code Bürgerliches Gesetzbuch (BGB), last amended on 26 March 2008 (BGBl. I p. 441) Since sale and rent contracts are subjects of private law, some basic concepts such as definitions of contracts, capacity to contract, adjustment or termination of contract, claims arising from ownership etc. are codified in the German Civil Code (BGB). Sale contract (act of sale) is defined in § 433 BGB. §§ 581-597 BGB are dealing with rental agreements in general. Land rent contracts are defined in §§ 585 ff. BGB as a mutual usufructuary agreement on property (res) and rights. Rights and duties of tenant and landlord are specified in §§ 585-597 BGB.

• last amended on Law on Agriculture Landwirtschaftsgesetz (LwG), 13 December 2007 (BGBl. I p. 2936).

Law on Agriculture is a systematic compilation of laws concerning the core aims of German agricultural policy. These main aims comprise (1) assurance and facilitation of agriculture by means of economical and agricultural policy, (2) best possible supply of food, (3) balancing drawbacks and differences to other sectors of economy, (4) enhancement of agricultural productivity, (5) equalization of social and economic opportunities for people working in agricultural sector.

CIFAS Study Report, 2006, p. 11.

Ibid, pp. 47-51.

Impact of the introduction of decoupled payments on functioning of the German land market 27

• Law on the Sale of Agricultural Land Grundstücksverkehrsgesetz (GrdstVG), last amended on 13 April 2006 (BGBl. I, p. 855).

This law is designed to comprehensively deal with issues related to ownership of land. Its main background is the property guarantee codified in the Article 14 of the Basic Constitutional Law Grundgesetz (GG). The Law on the Sale of Agricultural Land regulates procedure of land sale transactions. Thereafter every sale of agricultural or forest land, that is bigger than a certain minimum size, requires a permit by regulatory authority (Genehmigungsbehörde) according to § 9 GrdStVG. The minimum size is set by each Federal State (e.g. 2 ha in Bavaria).

The Genehmigungsbehörde can disagree to transaction during the first month after the sale announcement. During this time, the Genehmigungsbehörde examines if there are pre-emptive rights on the given land area. In case of land consolidation, for instance, the neighbouring farmer has a pre-emptive right against a non-farmer. Pre-emption rights according to the laws on natural preservation or to the forest laws (which are regulated by the Federal States) might apply.

Justification of the refusal can be an inefficient allocation of agricultural land, uneconomical reduction of land and sale price significantly higher or lower than the value of the given plot.

• German Reich Settlement Act Reichssiedlungsgesetz (RSiedlG), last amended on 19 June 2001 (BGBl. p. 1149).

The Reich Settlement Act Reichssiedlungsgesetz regulates the pre-emptive right for state/ municipalities in case of land consolidation (e.g. due to urban development measure). The Genehmigungsbehörde forwards the contract to the Siedlungsbehörde. The Siedlungsbehörde requests pre-emptor/owner whether the owner intends to set up another agricultural or forestry operation or claim replacement agricultural or forestry land. The results of such requests will be forwarded to the Genehmigungsbehörde.

• Law on the Rent of Agricultural Land Landpachtverkehrsgesetz (LPachtVG), last amended by Article 15 of this Law on 13 April 2006 (BGBl. I p. 855).

Rent of agricultural land is subject of both private and public law. While the Civil Code (private law) regulates the rights and duties of tenant and landlord, the Law on the Rent of Agricultural Land (public law) governs the reporting and registration procedure of land rent transactions and specifies measures that can be applied by non-compliance with the law. The application of land rent law is comparable to that of land sales. Every transaction on the rental market has to be reported to the responsible office. There is also a fixed minimum size (defined in each Federal State) above which the obligation applies. The Genehmigungsbehörde can disagree during the first month after response. Reasons for refusal of transaction are the same as for the GrdstVG.

• Building Law Baugesetzbuch (BauGB), last amended on 21 December 2006 (BGBl. I p. 3316).

To assure transparency on the land market, the Baugesetzbuch stipulates to establish an independent advisory committee. This committee consists of a chairman and several voluntary surveyors. Their task is to record land sales prices, to ascertain standard land values and to valuate land. This law is supplemented mainly by land register of ownership and other legal rights in plots (Grundbuch) and cadastre (Liegenschaftskataster) that provides a technical survey of the land. Land registration procedure applied by both institutions is codified in the Regulation on the Land (Grundbuchordnung), which is the same for all Federal States.

Additional regulations in East Germany In the course of the German Reunification, special laws that concerned privatization and reorganization of state-owned areas were adopted: the Agricultural Adjustment Law (Landwirtschaftsanpassungsgesetz,) and the State Agency Act (Treuhandgesetz). The Agricultural Adjustment Law governed the liquidation of the LPG or their transformation to new legal forms. It also made provisions for restoration of property rights to former landowners and the distribution of the LPG assets among the former members. The State Agency Act enabled the foundation Lioudmila Möller et al.

appointed the State Agency BVVG to manage the privatization of the state-owned farms. This special legal frame has had a decisive impact on the development of the East German rental market.

• Compensation and Indemnity Act Entschädigungs- und Ausgleichsgesetz (EALG), last amended on 22 September 2005 (BGBl. I, p. 2809).

The EALG (Entschädigungs- und Ausgleichsgesetz) and FlErwV (Flächenerwerbsverordnung) were released due to privatization and reorganization of state-owned areas. The trust company BVVG (Bodenverwertungs- und -verwaltungs GmbH) is the authority responsible for reassignment and privatization of the state-owned plots. Until 2009, physical and legal (e.g. LPG follow-up companies) entities that rented and used the land for at least 6 years, can buy a limited scale of it at reduced price (65 % of the current market price). Former farmers or owners, their heirs or spouses are also allowed to use their guaranteed compensation to get land from the BVVG at reduced price, even if they no longer perform any farming activity. During a period of 20 years after the sale of BVVG-managed land areas, the BVVG has to agree on every land sales transaction. In this period the BVVG is also authorized to cancel the contract in case the land is not used agriculturally or the operational concept of the buyer changed significantly.

• Regulation on Acquisition of Agricultural Areas Flächenerwerbsverordnung (FlErwV), last amended on 31 October 2006 (BGBl. I, p. 2407).

This Regulation substantiates the EALG and specifies its application.


The main objective of this study is to analyze the effects of decoupled payments on land value and on transactions on land market. In order to target this question, the changes in land value in response to changes in its main determinants must be identified. For this purpose a closer look at the land market development is needed.

8.1 Assessment of current situation The recent developments on agricultural market have led to an increase of rents nationwide

and of sales prices in the East German regions. The most important reasons for this are:

(1) Significant rise in prices for agricultural products worldwide;

(2) Growing demand for farmland by both farmers and non-agricultural investors;

(3) High reservation prices of land suppliers accompanied by a moderate land supply by private owners.

The current dynamics on the sales and rental market in East Germany is largely influenced by the lasting active role of the state trust holding BVVG (Bodenverwertungs- und -verwaltungs GmbH)10.

8.2 Sales market In the last 5 years the sales market has remained relatively stable. In this period only 0.6 % of agricultural land changed its owner annually. The main trait of the German agricultural sector, its two-fold nature, has made an even stronger appearance in the last years. An overview of

transactions on sales market in 2006 is given in the following table:

In the Anglophone literature it is also known as The State Agency for Privatization.

Impact of the introduction of decoupled payments on functioning of the German land market 29

–  –  –

Source: STATISTISCHES BUNDESAMT, 2007, and estimated values.

The land prices have also been relatively constant. Although land sales prices in West Germany have edged down, while they has slightly but steadily increased in East Germany, the gap between the two price levels has been nearly unchanged in the last 17 years. With the present share of 40 % of owned farmland and 0.6 % of new sales transaction p.a. the sales market plays a secondary role in the German land market. Taking into account the sales transactions at reduced prices, the sales market in East Germany reveals its own strong dynamics.

8.3 Rental market On the aggregate level the share of rented areas of the total amount of agricultural land has been almost unchanged in the last 5 years. With regard to the trend since 1991, the share of rented areas slightly dropped for the first time in 2005. The changes in the share of rental agreements have continued in the opposite direction in both parts of Germany, though the differences have not diminished over that time. While the share of rented areas has been rising in the West German regions, the share of owned land has been increased in the East regions (cp. Figure 5).

–  –  –

Source: STATISTISCHES BUNDESAMT (2007) values for 2007 are projected based on data from AES for the case study regions.

There exist a number of explanations for this gap. For instance, BALMANN (1999) shows, that these are, the low livestock density in East Germany, and unexploited returns to scale by family farms in West Germany, Another explanations lies in the way the BVVG awarded rental contracts after the reunification. The administrative prices by the BVVG served as focal point for the rental market. Although this changed in the last years (as we discuss later on) the effects are still present due to the often long duration of rental contracts.

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