Contracts

Liability of the real estate buyer for the illegal construction works – a significant risk when dealing with real estate transactions

Recently, two important judgments of administrative courts regarding administrative liability for the illegal construction works. Supreme Administrative Court in the judgment of 18th of July 2018, reference number: II OSK 2066/16 and the Regional Administrative Court in Olsztyn in the judgment of 6th of November 2018, reference number: II SA/Ol 606/18, took the position, according to which, in the proceeding regarding the legalization of the building, the construction supervision authority is obliged to determine whether the investor has the right to use the property for construction purposes.

The judgements of administrative courts referred to above are part of a broader ruling practice indicating the necessity for the construction supervision authorities to determine each time, who has the legal title to use the property for construction purposes. Only such entity can be the addressee of rights and obligations resulting from decisions regarding the legalization of illegal construction or the demolition of a building or its restoration to a lawful state.

In practice, this can mean a significant risk for the buyer of built-up real estate or particular residential or commercial premises that were built or where the construction works were carried out against the law. The buyer of such a real estate may be exposed to the necessity of legalization of illegal construction works carried out by the previous owner as well as to payment the legalization fee, the amount of which depends on the type and size of the building and may amount to several dozen or several hundred thousand Polish zlotys.

Bearing in mind the above, it is clear that every transaction involving the real estate requires a prior thorough examination of the history of the constructed object or construction works carried out with regard to the risk of illegal construction works, possible legalization and potential sanctions imposed by the building supervision authority against the buyer of a property. In addition, a due diligence audit of the legal status of real estate prior to the transaction may at least partially transfer legal and economic risk to the seller by including appropriate warranty clauses in the contract and establishing additional security measures.

Our Law Firm has a team of specialists in the field of real estate and construction law, which deals with the due diligence audit of the legal status of real estate and advisory on the purchase or lease of commercial or residential real estates.
We encourage you to contact our Law Firm in order to learn the offer in the scope of the above mentioned services.

Author team leader DKP Legal Marcin Kręglewski
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