The Financial Supervision Authority and the Office of Competition and Consumer Protection warn about the risk of investing in aparthotels and condo hotels

On September 26, 2019, the Polish Financial Supervision Authority (UKNF) and the Office of Competition and Consumer Protection (UOKiK) issued separate announcements regarding investments in the so-called „condo hotels” and „aparthotels”. Both authorities warn about the risk associated with alternative investments in this type of real property.

Aparthotels and condo hotels are the facilities used for hotel purposes or short-term rentals. Developers usually offer the opportunity to purchase a separate part of such an object (less frequently a share in joint ownership) to external investors, while guaranteeing them a relatively high rate of return on such investment through income from rent or hotel services. The condo hotel or aparthotel is usually managed by an external operator with whom the investor concludes a contract usually for a period of 5-15 years.

UKNF and UOKiK warn that investing in aparthotels or condo hotels may entail a risk for the investor, especially if

• the construction of the facility is financed exclusively with funds from investors, and the developer does not use its own resources – the investor bears the entire risk of investment failure,

• the investor’s agreement with the developer does not provide collaterals at least at the same level as the residential development agreement – the purchase of a segment in an aparthotel or condo hotel is usually not covered by the development act, as hotel or tourist facilities are not classified as commercial premises only,

• the profit guarantee offered by the developer does not cover the costs of maintenance and property management charged to the investor, and does not include a reduction of income as a result of lower occupancy of hotel rooms and places in the facility,

• the investor finances the purchase with funds from the loan, which exposes him to additional financial risk in the event of unprofitable investment.

The full content of the messages is available on the websites of UOKiK https://www.uokik.gov.pl/aktualnosci.php?news_id=15799 and UKNF https://www.knf.gov.pl/o_nas/komunikaty?articleId=67218&p_id=18 (both in Polish)

Our Law Firm advises and represents clients in real estate transactions, including investments in condo hotels and aparthotels.

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