New developer act – sale of real estate without a mortgage

The new developer act adopted on June 30, 2021 provides for a number of significant changes in the developer-client relationship. One of them concerns the purchase by clients of rights to real estate (flats, commercial premises, single-family buildings) without the mortgage securing the developer’s liabilities.

In a situation where the real estate on which the development project is carried out is mortgaged (e.g. to the bank financing the development project), the developer is obliged to have the consent of the mortgagee for the non-encumbered purchase of real estate by the client (apartment, business premises, land with a building) or, at least, the obligation of the mortgagee to grant such consent after the client pays the full price for the real estate purchased. The mortgagee’s declaration will constitute an obligatory appendix to the developer agreement.

Failure to meet the above obligation by the developer entitles the customer to withdraw from the developer agreement within 60 days from the date of its conclusion. In addition, the developer’s representative will be subject to a fine in the event of failure to comply with this obligation.

The introduced changes are to provide the buyer of the real estate with greater protection by eliminating the situation in which the client finally purchases real estate mortgaged on the property of the developer’s creditor.

The new developer act comes into force on July 1, 2022