AMENDMENTS TO THE LAW OF COLONIZATION

The recent approval of Law No. 19.577 of December 22nd, 2017,) introduces several modifications to )article 35 of Law No. 11.029 of January 12th 1948) (in the redaction given by article 15 of Law No. 18.187 of November 2nd, 2007 and article 1 of Law No. 18.756 of May 26th, 2011), known as the Law of Colonization.

Article 35 of the Law of Colonization, establishes a “right of preference” or “right of estimate” or of “purchase option” in favor of the National Institute of Colonization for the cases of “transfer” of “fields” that comply with the conditions established in said legal regulation.

The appointed modification comes to broaden the list of situations in which “every owner (obligated subject) in the occasion of the “transfer” (comprised legal transaction) of a “field” (real estate of agricultural character) that is under the “situations” foreseen by the legal regulation, has the obligation to “offer” the legal business to the National institute of Colonization, who will have "preference for the purchase in equal conditions”.

The legislative amendment to article 35 of the Law of Colonization, broadens the list of "situations" in which the offer referred to above must be made (highlighted in italics), and maintains those existing in the previous wording, provided that we are facing a "transfer":

(i)) a field of an area equal to or greater than the equivalent of 500 (five hundred) hectares of productivity index CONEAT 100 throughout the national territory:

(ii)) the fields located in the departments of Colonia, Florida, Maldonado and San José that have an area equal to or greater than the equivalent of 200 (two hundred) hectares of productivity index CONEAT 100;

(iii) the fields located in the department of Canelones that have an area equal or greater than the equivalent of 100 (one hundred) hectares of productivity index CONEAT 100; and

(iv) the fields "bordering on standards affected by the Law of Colonization" that have an area equal to or greater than the equivalent of 200 (two hundred) hectares with index CONEAT 100, throughout the national territory.

It should also be borne in mind that this obligation also applies in the case of "forced transfers" and in those "transfers in which the consideration of the purchaser consists totally or partially in the delivery of shares, securities or other property, movable or real estate”.

The importance of compliance with this obligation lies in the consequences of its non-compliance that are established by the aforementioned rule in: (i) the absolute nullity of the legal transaction; and (ii) the application of a fine to the transferor equivalent to 25% of the total value set by the General Directorate of Cadastre, for him or each of the properties included in the operation, and in turn will be subsidiarily responsible: (i) the parties in the legal business and (ii) the notary who will grant the documentation that will be registered in the corresponding registry.

Montevideo, December 2017