New Developer Law in Poland

New Developer Law in Poland – property purchase protection law

Real Estate Attorneys of our Law Firm in Poland [link do: https://www.dudkowiak.com/sectors/real-property.html] indicate that the legislator plans significant changes in the Developer Law in Poland. The new Polish Law will affect everyone who intends to buy a property in Poland from a developer. The law intends to protect buyers in big cities i.e. Warsaw, Krakow, Wroclaw and Poznan. The rights of purchasers of real estate from developers and obligations of developers’ entrepreneurs will be secured by the

• new Law on the Protection of Rights of Buyers of Residential Premises or Single-Family Houses and the Developer Guarantee Fund, dated 20 May 2021,
• which will replace the existing Law on the Protection of Rights of Buyers of Residential Premises or Single-Family Houses, dated 16 September 2011 and binding since 2012.

The new piece of Polish law is a response to frequent cases of bankruptcy of developers. Due to insufficient legal regulations in this matter, interests of potential property purchasers are not sufficiently protected in such circumstances. In such situation, most commonly, the apartment buyers bear financial consequences of the bankruptcy of development companies.

Developer Guarantee Fund – safer property purchase in Poland

Our Polish property lawyers underline that the new regulations primarily introduce the institution of a Developer Guarantee Fund. According to the proposed regulation, in order to ensure protection of the payments made by the real estate purchaser in Poland, the developer will be obliged to establish an open or closed housing trust account. Currently, open trust accounts are offered with an insurance or bank guarantee. In addition, the developer will also be obliged to pay contributions to the Developer Guarantee Fund. The funds accumulated there will constitute, among others, the subject contributions, but also means from satisfying the bankruptcy estate in the event of the developer’s bankruptcy. It means that the already binding solutions will be enriched with an additional element – the developers will maintain the Fund, the means from which will be used to repay the purchasers.

Reservation Agreement when Buying Apartment / House in Poland

The Act codifies, i.e. regulates by law, the so-called property reservation agreement. Until now, the reservation agreement has been regularly used in the purchaser-developer relations, but due to the lack of statutory regulations, its form usually depends on the will of the stronger party to the contract, i.e. the developer. The new law aims at curbing various prohibited practices by introducing statutory requirements and grounds for concluding a property reservation agreement in Poland. The reservation agreement may precede conclusion of any of the contracts, i.e. the developer agreement, the agreement establishing separate ownership of the apartment or the sale agreement, and may be free of charge. The reservation agreement must be concluded in writing and must contain specific information, including the price of the apartment, the reservation fee and the reservation period. A maximum reservation fee is also set 1% of the price of the apartment or house specified in the prospectus).

Information Prospectus when Buying Apartment / House in Poland

The information prospectus will also be a part of the developer agreement and the reservation agreement. The developer will be required to include therein, among others, a sketch of the housing estate where the investment is to be developed. The developer will also have to include information about facilities located in the vicinity of the property that may affect the residents’ lives. The new law introduces the requirement to deliver the information prospectus to each person interested in purchasing the real estate. So far the developer was obliged to deliver it only upon request.

Breach of Property Reservation Agreement

The change of the amount that the developer has to return in case of not fulfilling the apartment / house reservation agreement is also significant. So far the developer was obliged to return only the amount paid by the prospective purchaser as a reservation fee. Currently, this obligation has been extended to include payment to the reserving party of another amount in the same amount. The reservation fee will then be refunded twice. This obligation will now result from the law, and the reservation amount itself will de facto function as a specific deposit.

The rules of applying for the investment credit by the developer will also be different. The new regulations introduce an obligation for the developer to sign an agreement with the general contractor, trust account agreement and credit agreement before any reservation agreement is concluded.

Entry into force – property purchasers protection provisions

The planned amendment of Polish Law will, in principle, enter into force on 1 July 2022, however, some of the provisions have already been in force since July this year (Developer Guarantee Fund regulations).

Questions regarding protection of apartment / house buyer in Poland

If you have any questions regarding property purchase in Poland or any related topics, i.e. purchaser protection, property reservation agreement, developer guarantee fund, property purchase prospectus – feel free to contact our Polish Property Law Firm in Warsaw, Krakow, Poznań or Wroclaw.