Building / Construction in Poland
Construction / Property Development market in Poland
The construction market in Poland is divided into:
- infrastructure (transportation),
- energy and utilities sectors.
According to preliminary data published in Statictics Poland, 167.000 housing units were completed in January-September 2022, 1.8% more than in the previous year. Developers completed more than 99.000 apartments – 2.3% more than in 2021, while individual investors completed more than 65.000 apartments, up 2.9%.
According to Statistics Poland, between January and November 2021, the number of completed residential buildings rose by more than 10% year-on-year, along with a 4.5% increase in construction permits. The construction market in Poland is currently rebounding, in commercial investment sector as well after a time of pandemic.
Admittedly, the Polish construction sector is currently struggling to cope with high interest rates on loans, rising costs of construction materials and increased labor costs, but the demand for investment in Poland is not waning, and the Polish market remains highly competitive.
Construction / Building in Poland – Legal Framework
The construction process in Poland is complex and it consists of a number of stages, regardless whether it involves the construction of small-scale structures, such as residential buildings, or construction of large scale commercial structures, offices or industrial facilities. In both cases – legal procedure is quite similar – the entire investment process is carried out in accordance with the Construction Law of Poland of July 7, 1994 (hereinafter: “Construction Law” or “Polish Construction Law“).
In principle the property development process / construction process shall consists of the following stages:
|Preparation of construction investment||
|Design and obtaining the necessary administrative decisions||
Stages of property development process in Poland
By convention, there are 4 phases of the construction process in Poland:
- preparation of the investment project,
- design and obtaining the necessary administrative decisions,
- execution of construction works,
- handing over the construction object for operation.
Each of the above-mentioned stages is closely interrelated. Below you can find a brief description of each stage.
Stage 1 – Construction preparation phase
The preparation phase includes, among other things, the selection of the location of the investment, verification of environmental conditions, legal status, checking whether the area planned for the investment is covered by the local zoning plan (hereinafter: “Zoning Plan“), a detailed risk assessment and determination of the cost value of the investment. From this perspective, for example, the implementation of an investment at the Polish seaside in the first coastline will be much more complicated. It is also worth conducting due diligence on the property to have a complete overview.
Property due diligence
Before starting the investment, the investor should, in particular, verify the use of the property and its legal status. Information on the area of the plot, land classification, land register number is available from the Departments of Geodesy, Cartography, Cadastre and Real Estate Management of the locally competent City Hall or County Office. An extract from the land register can be applied for by the owner or co-owner of a plot of land, and if the application is for a property not owned by the applicant, a legal interest in the land, buildings or premises that are the subject of the application must be indicated. Without being the owner of the land, you can apply for a copy of the cadastral map made for one parcel of land or several parcels of land with neighboring parcels.
Information on the legal status of the property is available at the Land and Mortgage Register Departments of the locally competent District Courts, or directly on the website of the Ministry of Justice in the Electronic Land and Mortgage Register tab (https://ekw.ms.gov.pl/eukw_ogol/menu.do).
Zoning plan and spatial development
The investor should check whether the property is covered by Local Zoning Plan. If the area is not covered by an Zoning Plan, one should apply to the mayor of the city for a decision on land development conditions (hereinafter referred to as “the decision on development conditions“), and in the case of a public purpose investment, apply for a decision on the location of the public purpose investment.
If the area is covered by a Local Zoning Plan, you should check whether the planned investment project fits into the arrangements of the plan. If not, you need to look for another location. Municipalities are required to publish records of local plans on their websites. Most often, resolutions on local plans are published in the so-called public information bulletin (BIP). All acts of local law passed by municipalities are published on the websites of provincial official journals.
|If the property is covered by Zoning Plan||If the property is covered by Zoning Plan|
|The investment can be planed and designed based on the terms and conditions of the Zoning Plan||The investor has to apply for individual decision regarding conditions of development, called also zoning decision.
The decision is issued in separate procedure (independent from construction permit procedure) by the Mayor of the City. Unsatisfactory decision can be appealed against.
From the perspective of starting the construction process, it is also important to determine the applicable requirements for environmental protection, incl.:
- possible proximity to a zone under the supervision of a conservator; or
- areas located in a protected landscape area,
- availability of utilities,
- communication accessibility or geological conditions.
Decision of environmental conditions
Therefore, before taking further action, and in particular before applying for a decision on development conditions as well as an application for a construction permit, one should check whether the planned activity requires a separate decision on environmental conditions or not. If a decision on environmental conditions will be required, the investor shall apply for its issuance. The list of projects requiring an environmental decision is specified in the Regulation of the Council of Ministers of September 10, 2019 on projects that may significantly affect the environment (Journal of Laws 2019, item 1839).
It is also worth verifying whether the cutting of trees or shrubs will not be necessary for the implementation of the construction project, which requires a separate permit. For this purpose, it is worth ordering an inventory of the greenery planted on the property, if it is located there.
If all the findings of the local plan suit the investor, efforts can be made to acquire the property.
Once the legal status and designation of the property has been verified and the title to the property has been obtained, it is possible to proceed to the next phase of the construction process.
Stage 2 – Design and administrative approvals
The design and decision-acquisition stage is characterized by the selection of an appropriate designer – an architect and professional designers – and then, in principle, the acquisition of a construction permit.
Construction design project in Poland
One of the key documents in the investment process in Poland is the construction design project.
The construction project design includes, among other things:
- plot or land development project,
- architectural and construction project,
- technical design,
- required opinions, agreements, permits and other documents.
Copyrights to the construction design project
In the aspect of a construction project, the issue of copyright and related rights to the project remains extremely important. The architect can either:
- grant the investor permission to use the project (by way of a license), or
- transfer to the investor the author’s economic rights to the project (by way of assignment).
From the investor’s point of view, the best solution is to make an assignment of the economic copyright, which can prevent possible future conflicts with the architect and gives the investor more options in legal terms. However, even when the investor has effectively acquired all of the author’s economic rights and the creator has waived the exercise of his moral rights, the investor still cannot make changes to the project if he has not obtained permission from the architect to exercise so-called derivative rights. A derivative work, in simple terms, is a modification of an earlier work.
Therefore, the investor should take special care to include provisions in the contract with the architect regarding economic, personal, derivative copyrights. When drawing up a contract with an architectural company, it is especially worthwhile to establish cooperation with a law firm.
Compliance of the construction design with local building conditions
Any construction should be built in accordance with the development conditions established for the land on which it is located, which are stipulated in the local zoning plan, and if the property is not included in the local zoning plan, the investor should apply for the establishment of development conditions by means of an individual zoning decision.
In the local zoning plan, we can find, for example, the determination of the color scheme of buildings or the boundaries of areas for the construction of large-scale commercial buildings.
Only after this stage does the investor apply to the competent administrative authority for a construction permit.
Stage 3 – Construction permit in the investment process
A construction permit is generally required for construction, expansion, superstructure, reconstruction and reconstruction of buildings.
Authority competent for Construction Permits
As a rule, the decision on a construction permit is issued by the district governor competent for the location of the investment, who is the architectural and construction administration authority of the first instance. In matters of construction permits in relation to objects and construction works listed in Article 82, paragraph 3 of the Construction Law, and in matters listed in the Council of Ministers regulation issued under the authorization of paragraph 4 of that article, the first instance authority is the provincial governor. The provincial governor is the higher level authority with respect to the head of the district administration (president of a city with district rights), while the Chief Inspector of Construction Supervision is the higher level authority with respect to the provincial governor as the authority of first instance.
Participants to the Construction Permit Procedure
A party to the procedure for obtaining a construction permit is an investor who can be a natural person, a legal entity or an organizational unit without legal personality, which, having the right to dispose of real estate for construction purposes, organizes the construction process and bears its economic burden. As a rule, it is the investor who applies for a construction permit and is the addressee of the construction permit decision.
Construction permit proceedings. is run with participation of neighbors – i.e. owners, perpetual usufructuaries and managers of real estate located in the area of influence of the construction project. If the architectural-construction administration body (i.e., the mayor or the voivode) in the course of the proceedings finds that the properties of the above-mentioned entities are in the area of influence of the planned investment, then it should grant them the status of a party to the proceedings and send them the construction permit decision issued by it. This allows such entities / persons to file an appeal against this decision within 14 days of its delivery.
Construction permit application
An application for a construction permit is submitted to the architecture and construction department of the architectural and construction authority of the first instance (so most often to the district administration) on a ready-made form. In particular, the application for a construction permit must be accompanied by:
- the plot or land development project and the architectural and construction project in the form: paper – in 3 copies or electronic – along with opinions, agreements, permits and other documents, which are required to be attached under the provisions of separate acts, or copies of these opinions, agreements, permits and other documents;
- a statement on the right to use the real estate for construction purposes;
- decision on the conditions of development and land use, if it is required under the provisions on planning and spatial development.
Time to issue the construction permit
The authority should issue a decision on the construction permit within 65 days from the date of submission of the application, and it is not a discretionary decision.
The architectural-construction administration authority examines the submitted application in terms of completeness, compliance of the construction project with the Zoning Plan regulations or the decision on the development and building conditions, compliance of the project for the development of the plot or land with the regulations (including technical-construction regulations), and execution of the project by an authorized person. If deficiencies are found, the authority sets a deadline for their removal. If the application is not burdened with irregularities or they are removed – the authority issues a construction permit to the investor.
If the deficiencies found by the authority are not corrected within the prescribed period, the authority will issue a decision to refuse to approve the project and grant a construction permit. This can be appealed to a higher authority within 14 days of the delivery of such a decision.
Expiration of construction permit
It should be remembered that the construction permit decision is not indefinite and expires if construction / building has not commenced before the expiration of 3 years from the date on which the decision became final or construction has been interrupted for more than 3 years.
It is possible that after obtaining a construction permit, the investor will change the concept in the scope of the planned investment. Then it is necessary to initiate a separate administrative procedure, which will focus on the scope of the change made and the existing construction permit decision.
There is also the possibility of transferring to another entity the final decision on construction permit. Such a decision can be transferred at any time and at any stage of construction work, taking into account the requirements of Article 40 CL.
It is worth mentioning that not all construction requires the issuance of a construction permit.
In some cases, a construction permit is not required – a notification of construction or construction works is then sufficient. A list of construction and construction works that can be only notified without a construction permit can be found on the following website: https://www.biznes.gov.pl/pl/opisy-procedur/-/proc/550
In some cases, neither a construction permit nor a notification is required. You can find a list of such cases here: https://www.biznes.gov.pl/pl/opisy-procedur/-/proc/34.
As a rule, however, investments of a larger size, including almost any commercial investments, will require a construction permit.
Stage 4 – The construction implementation phase
Construction work may not begin until a final construction permit is obtained, except for the exceptions indicated in the law for notification of construction or exemption from notification or approval by the authority. The decision becomes final after 14 days from the date on which it was delivered to the parties to the proceedings, unless they file an appeal against the decision within this period.
First of all, the investor is obliged to notify the construction supervision authority and the designer supervising the compliance of the construction with the design of the intended date of commencement of construction works. The date of commencement of construction works is connected with undertaking preparatory works on the construction site, such as development of the construction site or making connections to the technical infrastructure network for the purposes of construction.
The conditions for the preparation and conduct of construction work are set out in the Regulation of the Minister of Infrastructure of February 6, 2003 on occupational safety and health during construction work.
During the implementation stage, key decisions must be made as to who will carry out the construction work, supervise the construction and conduct the construction work, and who will take on the role of construction manager or construction supervisor. In most cases, it is also necessary to maintain a construction log.
The construction manager has a number of responsibilities, such as maintaining the construction (demolition) logbook and other documentation, placing an information board, coordinating the implementation of tasks related to occupational safety and health, securing the construction site, among others. From the date the contractor and its manager take over the construction site, the investor’s responsibility in this regard ceases. This is extremely important, since it is not uncommon, unfortunately, for situations of harm to third parties on the construction site to occur. The liability of the contractor and the construction manager is broad and can be considered on both civil and criminal ground.
The investor may supervise the construction process on his own or establish supervision by a competent person. In cases justified by the high degree of complication of the project, the investor may also be required to appoint an investor’s supervisor in the construction permit decision. The investor’s supervisor, among other things, represents the investor at the construction site by exercising control over its implementation with the project or construction permit, regulations and principles of technical knowledge, may give orders to the work manager and demand corrections.
It is not permissible to combine the functions of construction manager and investor supervision inspector.
Relations between the investor and the works contractor are governed by the provisions of the contract and the provisions of civil law, in particular, Section IV Title XVI of the Civil Code – Construction Contract and Section IV Title XV of the Civil Code – Contract for Work.
The Civil Code indicates that the role of the contractor in a construction contract is to hand over the object provided for in the contract, while the role of the investor is to perform the preparatory activities necessary for this purpose (e.g., handing over the construction site and providing the design, acceptance of the object) and payment of remuneration. In a construction contract, the parties specify, among other things, which works the contractor will carry out personally and which will be carried out with the help of subcontractors, and the investor’s consent is required to conclude agreements with subcontractors. It is worth noting that the investor is jointly and severally liable with the general contractor for payment of the subcontractor’s remuneration.
In Poland, it is permissible to conclude design work and construction contracts based on FIDIC international contract templates.
Stage 4 – The phase of handing over the construction facility for operation
The last stage – commissioning of a building as a result of the completion of construction works – involves obtaining a occupancy permit, unless exempted by law, which is the case, for example, with the construction of a single-family house. In this case, it is only required to notify the competent authority of the completion of construction, if the authority, within 14 days from the date of delivery of the notice, does not object by decision, you can proceed to use the house. In other cases, it is necessary to obtain an occupancy permit for the facility (acceptance of the building), which is issued by the District Inspectorate of Construction Supervision.
The issuance of an occupancy permit is preceded by an inspection of the object by the Building Supervision Authority.
During the acceptance procedures, it is necessary to make additional arrangements with the State Fire Department or the State Sanitary Inspection. If within 14 days from the date of receipt of the notice the above-mentioned institutions do not take a position, it is treated as a failure to raise objections and thus permission on their part to use.
After obtaining a final occupancy permit, we can proceed to put the facility into operation.
Who is a participant in the construction process?
The following are considered participants in the construction process: the investor, the investor’s inspector, the designer, the construction manager, the contractor, and often subcontractors.
Can only the property owner carry out the construction process in Poland?
Although most often it is the property owners who proceed with the construction, it is also possible to carry out a construction project based on the entitlement arising from a bond relationship (e.g., the entitlement of a lessee, lessor or user, if the concluded contract provides for this).
What can be the consequences of violations of the law during the construction process?
Violations of the Construction Law can have varied consequences, ranging from the need to pay a fine to an order to demolish an illegally constructed building. There are also situations leading to the revocation of the construction permit decision or the issuance of an order to stop construction. Therefore, it is worthwhile to take legal advice during all stages of the process.
Can I submit the relevant applications during the investment process electronically?
In recent years we can observe the digitization of the construction process in Poland. New regulations have introduced a construction logbook in electronic form (EDB system), a book of the construction object in electronic form, an electronic Central Register of persons holding Construction Permits (eCRUB system) and the e-Construction Portal. In order to take advantage of online filing, an account must be created. This can be done by providing an email address or logging in with a trusted profile or e-card.
The list of currently available electronic applications at https://e-budownictwo.gunb.gov.pl/ is as follows:
- Application for determining the location of a public purpose investment or development conditions
- Application for construction permit (PB-1)
- Notification of construction works (PB-2)
- Notification of construction or reconstruction of a single-family house (PB-2a)
- Notification of construction of a single-family house (PB-2a) up to 70 m²
- Notification of completion of construction of a single-family house (PB-16a)
- Application for a construction permit for a temporary structure (PB-8)
- Application for a decision to amend a construction permit (PB-7)
- Application for a separate decision on project approval (PB-6)
- Application for simplified legalization (PB-15)
- Notice of completion of construction (PB-16)
- Application for occupancy permit – before completion of construction (PB-17a)
- Application for occupancy permit (PB-17)
- Application for legalization (PB-19)
- Application for exemption of certain duties of the construction manager (PB-13)
- Application for a demolition permit (PB-3)
- Notification of demolition (PB-4)
- Application for transfer of construction permit decision (PB-9)
- Application for transfer of decision on permission to resume construction works (PB-10)
- Application for transfer of rights and obligations arising from notification (PB-11)
- Notice of intended date of commencement of construction works (PB-12)
- Application to enter neighboring land (PB-14)
- Application for a local plan or for an amendment to a local plan
- Notification of change of use of the object (PB-18)
- Declaration of the right to use the real estate for construction purposes (PB-5)
- Supplement to the application submitted electronically
Of course, the current formula for submitting documentation to architectural and construction administration bodies, i.e. paper form, has been retained. It will be possible to choose whether participants in the construction process will contact the authority in electronic or paper form.
The investment process is dynamic and is a sequence of consecutive and highly interrelated activities. In the course of the investment process, there is a need to complete numerous documentation, conduct risk assessments, prepare and conclude a number of complex agreements with third parties, such as the architectural company, contractor, insurer, bank.
It is also not uncommon for disputes to be difficult to avoid during the course of the investment. Therefore, it is crucial to have well-prepared contracts at each stage of the investment, including contractual clauses on collateral and on the method and location of any dispute.
Our firm’s real estate and investment process practice combines in-depth knowledge and understanding of the principles of successful investment transactions by both Polish and global investors, developers, construction companies and manufacturers and suppliers of construction materials.