Real Estate Due Diligence in Poland

Updated: 6.03.2024

Objectives of Property Due Diligence

Transactions related to the acquisition of real estate in Poland usually require investment of significant funds. Potential risks associated with such transactions should, therefore, be subject to a particularly careful evaluation.

The negative effects of not identifying legal defects or adverse facts relating to property acquisitions may endanger not only the viability of the project, but sometimes even the financial stability of the entrepreneur.

The more complex the transaction is (e.g.  such as the acquisition of several objects or real estate portfolio), the harder it is rely on your own knowledge or experience. Due to complex nature of Polish real estate legal environment, it is advisable to conduct legal examination even prior acquisition of individual properties / apartments.

For this reason, the increasing number of real estate investors, entrepreneurs decide to carry out a legal due diligence as a part of property acquisition process in Poland.

Legal Due Diligence of Property in Poland

Legal audit includes a detailed analysis of the legal status of the property to be acquired and evaluation of risks that may be associated with the planned investment.

Property legal due diligence most usually covers verification of:

• legal title to the property,
• existence of a property encumbrances/ burdens in the form of mortgages, other limited property rights, easements, rights of use, etc.
• the existence of agreements or claims of third parties, especially the rental and leasing of real estate,
• construction compliance for facilities that are located on it,
• issues related to planning and zoning and requirements of construction law, and compliance with the construction and
• environmental requirements by buildings.

Property Purchase Due Diligence – shall I do it?

Yes – you should, there is no doubt about it. Due diligence may reveal findings or conclusions that will lead you to renegotiate terms of purchase, or resign from purchase. You may save a lot of money, efforts and stress by examining the property prior to purchase.

Other Types of Property Audits

A comprehensive examination of the subject of the transaction is, of course, not confined to legal analysis. Other aspects, incl. safety,  profitability of the purchase / investment may be examined as part of:

Accurate examination requires specialized knowledge and experience, each of these audits should be conducted by experts in the field.

It is desirable to perform various types of audits at the same time so that entities conducting research could work together and exchange their findings and identified risks related to the property or properties.

Property Due Diligence Report

As a result of real estate due diligence – the report is produced.

The report most usually contains the following sections:

• findings, incl. description of the legal status of real estate, etc.
• identified risks, along with description of the risks and evaluation (low, medium and high),
• recommendations suggesting how to exclude or minimize the identified risks.

The report has significant informative value, as aside from risks evaluation, it provides data that allows to understand related costs or income; e.g.: maintenance costs, related taxes or other public charges, and income, such as rent.

FAQ – Property Due Diligence in Poland