Tenant Favoritism and Right of First Refusals in Farmland Auctions

Abstract

Rights of First Refusals (RFRs) granted to tenants in land privatization auctions enable them to purchase their leased land by accepting the highest bid. RFRs may however deter bidders and incentivize non-right holders to adjust their bidding. We conjecture that tenant favoritism with RFRs reduces competition and thus sales prices at the expense of the public sellers. To test the conjectures, we compile a dataset of land auctions by two privatization agencies in eastern Germany, one favoring tenants along with an RFR, between 2007 and 2018. Double-robust matching results indicate RFR-related reductions in the number of bidders and prices.

How does tenancy affect farmland prices? Effects of lease status, lease term and buyer type

“…BVVG and LGSA sell only without existing lease contracts and at first-price sealed-bid auctions with public tenders. LGSA prefers selling to farmers and grants a right of first refusal to their tenants (see Isenhardt et al. , 2022 for details).…”

Profession and residency matter: Farmers' preferences for farmland price regulation in Germany

“…Scientific studies of the German land market suggest improved access to information as a first step, as well as consistent application of existing farmland market regulation across regions (Seifert & Hüttel, 2020, Seifert et al, 2021; Balmann et al, 2021). Yet, other studies emphasise additional (public) expenses of regulation measures to favour farmers, for instance, through land privatisation auctions granting rights of first refusal to tenants (Isenhardt et al, 2022) or by excluding non‐domestic buyers (Lawley, 2018).…”

The tenant's pre-emption rights in Italian agriculture: An introductory economic evaluation

“…According to a survey among tenants in Poland, they indicated that the PR for leased land was very valuable to them, given that 81.75% of tenants stated their will to use this PR [ 19 ]. A recent study based on data from first-price privatization auctions in East Germany [ 20 ] hypothesised that granting tenants PRs would decrease the number of bidders and estimated a reduction of the price paid in land sales by 16.7%, as an effect of the right. A similar result was found by Neyeter and Nivievskyi [ 21 ] for privatization auctions in Ukraine.…”