Last updated: 01.09.2026
Building on land leased from a perpetual usufructuary involves significant legal and financial risks. Learn who legally owns the resulting building under Polish law and how to secure your real estate investment.
For foreign developers, funds, and asset managers expanding into the Polish market, securing the appropriate legal title to land is critical.
A common structuring issue arises when an investor decides to lease land, often via a standard commercial lease (dzierżawa), rather than acquiring the land outright or obtaining the right of perpetual usufruct (użytkowanie wieczyste).
Constructing commercial, industrial, or logistics facilities on leased land introduces significant proprietary and financial risks. Under Polish law, the entity funding the construction does not automatically acquire legal ownership of the resulting building.
Perpetual Usufruct vs. Land Lease: Key Differences for Investors
To structure a secure transaction, investors must understand the strict separation of titles under the Polish Civil Code:
- Perpetual Usufruct: If an investor directly holds the perpetual usufruct right to public land and builds a facility on it, the investor legally owns that building as a separate, distinct property. This is the standard, secure route for commercial development.
- Commercial Lease: However, if an investor merely leases land from a perpetual usufructuary and builds on it, the general rule of Polish civil law applies. According to established Supreme Court jurisprudence, any building permanently attached to the ground by a lessee becomes the exclusive legal property of the perpetual usufructuary (the lessor), not the investor who financed it.
Landowner, Perpetual Usufructuary and Lessee: The Legal Structure of the Investment
For foreign developers and funds entering the Polish real estate market, securing the right legal title to land is the foundation of any project. A common, yet highly risky, scenario occurs when an investor decides to lease land not from the actual owner, but from an entity that holds the land under perpetual usufruct (użytkowanie wieczyste).
In this situation, a complex legal triangle is formed: the public entity (State Treasury or municipality) owns the land, the first company holds the perpetual usufruct right, and the foreign investor acts as a lessee (dzierżawca).
If the investor builds a commercial, industrial, or logistics facility on this land, a critical legal question arises: when the perpetual usufruct expires, who actually owns the building?
Who Owns a Building Constructed by a Lessee?
The general rule in the Polish Civil Code states that buildings erected by a perpetual usufructuary on public land constitute their exclusive, separate property. However, what happens if a third-party lessee builds the structure?
According to a landmark resolution of the Polish Supreme Court (III CZP 60/11), a building erected by a lessee (a third party) with the consent of the perpetual usufructuary belongs legally to the perpetual usufructuary, not the lessee. In the eyes of the law and court jurisprudence, the actions of the lessee are treated exactly as if the perpetual usufructuary had built the facility themselves.
Consequently, the foreign investor who financed and constructed the building does not hold the legal title to it. Furthermore, it is the perpetual usufructuary who is treated as the owner of the buildings for real estate tax purposes.
Despite some isolated past rulings, the widely accepted legal doctrine today is that any facility erected on such land, even by a third party, automatically becomes the property of the perpetual usufructuary.
Expiry of Perpetual Usufruct: Who Receives Compensation for the Building?
This proprietary separation creates a massive financial risk for the investor if the underlying perpetual usufruct right expires. Under Article 33 of the Real Estate Management Act, upon expiry of the perpetual usufruct, the building ownership transfers to the public landowner, and the perpetual usufructuary is entitled to statutory remuneration for the value of the erected structures.
Crucially, the investor (lessee) who built the facility has no legal basis to direct any claims for compensation against the public landowner (the State Treasury or municipality). The lessee’s only recourse is to seek reimbursement of outlays (zwrot nakładów) or make a claim based on unjust enrichment directly against the perpetual usufructuary. If the usufructuary becomes insolvent or uncooperative, the investor’s capital may be severely jeopardised.
Can a Lessee Demand the Purchase of the Land?
Foreign investors often wonder if they can secure their investment by forcing the sale of the land under Article 231 of the Polish Civil Code, which allows builders of high-value structures to claim land ownership.
Unfortunately, Polish courts clearly state that this claim is reserved exclusively for “independent possessors” (posiadacz samoistny) in good faith. Since a lessee operates under a lease agreement, they are classified as a “dependent possessor” (posiadacz zależny). Therefore, the investor-lessee has no legal right to demand the purchase of the land or the transfer of the perpetual usufruct right.
Consequences of Not Owning the Building
Failing to secure building ownership through the correct land title has direct consequences for the investment’s viability:
- Limitations on Financing: since the investor does not legally own the building, the facility cannot be used as standard collateral. Establishing a mortgage on the building to secure bank or project financing is not possible.
- Asset Expiry and Compensation: if the underlying perpetual usufruct right expires or the lease is terminated, the investor is left only with a contractual claim against the lessor for the reimbursement of construction outlays (zwrot nakładów).
- Counterparty Risk: because the investor holds a financial claim rather than a real property right, the recovery of invested capital heavily depends on the solvency and cooperation of the lessor.
How to Structure an Investment on Leased Land Safely
To ensure that newly developed commercial assets remain fully under the investor’s control and are bankable, investments should be properly structured during the initial planning phase.
As a general rule, significant capital expenditures should be executed on land where the investor acquires full freehold ownership or the direct right of perpetual usufruct. If constructing on leased land is unavoidable due to specific commercial circumstances, the transaction must be secured through advanced contractual mechanisms, customized joint-venture agreements, or specific indemnities drafted by a specialised legal team.
Secure Your Investment on Leased Land
Significant capital expenditure should generally be made on land to which the investor holds full ownership or a direct perpetual usufruct right. Where developing a project on land leased from a perpetual usufructuary is unavoidable, the transaction should be properly structured through precise contractual mechanisms, joint venture arrangements and appropriate indemnities.
At Dudkowiak Putyra, we support investors with legal due diligence, the identification of proprietary risks and the secure structuring of real estate investments in Poland.
Contact our team to protect your legal title to the land and reduce the risk of losing the invested capital.
