In today's Morning for Construction, we will discuss in detail one of the most significant legal changes passed this year for the real estate market and the entire construction industry. It addresses the issue of the gradual elimination of perpetual usufruct, a specific form of ownership that has been advocated for many years. Despite the entry into force of the Act of July 20, 2018, on the Transformation of the Right of Perpetual Usufruct of Land Developed for Residential Purposes into Ownership , which, as of January 1, 2019, transformed the right of perpetual usufruct of land developed for residential purposes into ownership, many properties in Poland remain unoccupied by perpetual usufructuaries.
For this reason, at the end of August 2023, another act aimed at eliminating perpetual usufruct entered into force . Among other things, and in particular, the possibility of acquiring ownership was expanded to include land used for non-commercial purposes (e.g., garages, those providing communication and technical services to properties), as well as land designated for business purposes (micro-, small-, medium-, and large-sized enterprises). All of the above is to be made possible by the act amending the act on local government, the act on social forms of housing development, the act on real estate management, the act on tax on civil law transactions, and certain other acts (the "Amendment"), which—with the exception of a few highlighted provisions—entered into force on August 31, 2023.
Real Estate Management Act of August 21, 1997 ("AGM") introduced solutions enabling perpetual usufructuaries to acquire ownership rights to land that has not yet been enfranchised by operation of law or administrative decision. The primary legal instrument introduced by the Act is a temporary claim for the acquisition of land , granted to a perpetual usufructuary who has fulfilled the purpose of the agreement establishing the right of perpetual usufruct and, moreover, obtained this right during a period when it was a surrogate for ownership rights and essentially the only form of permanent use of real estate from the public resource. Pursuant to the adopted regulations, the claim in question— a demand to sell the property—may be filed within 12 months of the Act's effective date, i.e., by August 31, 2024.
At the same time, the adopted regulations clarify that the demand for sale will not be valid if:
- the property was transferred for perpetual usufruct after 31 December 1997,
- the perpetual usufructuary failed to fulfil the obligation specified in the agreement on granting perpetual usufruct of the land property,
- the subject of sale would be land located in the area of sea ports and harbors within the meaning of Article 2, point 2 of the Act of 20 December 1996 on sea ports and harbors,
- the land is used to run a family allotment garden within the meaning of Article 2, point 5 of the Act of 13 December 2013 on family allotment gardens,
- in relation to undeveloped land.
Moreover, a sales agreement cannot be concluded if proceedings are pending to terminate the agreement on granting perpetual usufruct of the real estate.
Of course, the sale of ownership rights will be for a fee (as permitted by current regulations). With respect to land owned by the State Treasury, the property price will be determined as follows:
- in the case of a one-off payment of the price – as twenty times the amount constituting the product of the current percentage rate of the annual fee for perpetual usufruct and the value of the land property determined on the date of conclusion of the sales agreement ,
- in the case of payment by instalments – as twenty-five times the amount constituting the product of the current percentage rate of the annual fee for perpetual usufruct and the value of the land property determined on the date of conclusion of the sales agreement.
In relation to real estate owned by local government units, the price of the real estate will be determined at an amount not lower than twenty times the amount constituting the product of the current percentage rate of the annual fee for perpetual usufruct and the value of the land property determined on the date of conclusion of the sales agreement, but not higher than the value of the land property determined on the date of conclusion of the sales agreement.
Under the mechanism in question, a mandatory discount on the price of land owned by the State Treasury in the amount of 90% of the price of land sold to a natural person was included:
- in relation to whom a disability was assessed:
a) to a moderate or significant degree or
b) before reaching the age of 16 or - residing on the day of submitting the request for sale with the persons referred to in point 1 above, being the legal guardian or statutory representative of these persons, or
- being a member of a large family within the meaning of Article 4, paragraph 1 of the Act of 5 December 2014 on the Large Family Card and entitled to have the Large Family Card.
With respect to real estate owned by local government units, the decision to grant the right to a discount and the terms for granting the discounts are left to the discretion of the relevant councils and regional assemblies . When adopting resolutions on the terms for granting the discount, the authorities may be guided by the criteria specified in the Act, including, among others, the specific social and economic situation of the beneficiaries, the actions of the perpetual usufructuary undertaken in the interest of the local community, the pursuit of public or socially beneficial purposes, the period of time that has elapsed since the conclusion of the perpetual usufruct agreement, and the timely fulfillment of obligations arising from that agreement. This means that meeting the criteria specified in the resolution will obligate the relevant authority to grant the discount also when selling land previously owned by local government units.
As the above indicates, the amendment doesn't actually change much compared to the previously applicable regulations allowing for the purchase of land by perpetual usufructuaries. The method of calculating the price is changing, and depending on the case, the price may be higher than under the current regulations. We certainly won't be seeing widespread purchases of land granted for perpetual usufruct for purposes other than residential.
In summary, the Amendment introduced a new, albeit time-limited, instrument in the form of a land sale claim. This can be used by those perpetual usufructuaries who wanted to purchase ownership rights but were unable to due to official refusals – but only if they meet the statutory requirements for exercising the claim. However, for most perpetual usufructuaries, the Amendment will not contribute to changing the form of real estate ownership, as it will still depend on incurring additional costs associated with land purchase.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of November 14, 2023
The above article was originally published in Vademecum Dewelopera no. 38, 3/2023.
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