As we indicated, the Sejm adopted the Act of May 20, 2021, on the Protection of the Rights of Purchasers of Residential Premises or Single-Family Homes and on the Developer Guarantee Fund (the " New Developer Act "), which is still awaiting the President of the Republic of Poland's signature. Today, we will discuss changes regarding the acceptance of the property.
Under the New Development Act, the transfer of rights under the development agreement and other agreements to which the New Development Act applies will still be preceded by the buyer's acceptance of the apartment or single-family home . This acceptance occurs after the occupancy permit decision final or after the deadline for filing an objection to the notification of completion of construction of the single-family home expires. Depending on the type of agreement, the developer's obligations will vary slightly.
For every contract stipulated in the New Development Act, the acceptance is conducted in the presence of the buyer. Furthermore, as before, a report is prepared after the acceptance, in which the buyer can report any defects in the apartment or single-family home. The New Development Act explicitly states that the report must record (i) refusal to accept the acceptance if a significant defect , (ii) the developer's recognition of a significant defect , or (iii) the developer's refusal to recognize a significant defect .
In turn, the provisions discussed below will apply only to development agreements ( #50 ) and preliminary agreements under the Development Act ( #51 ).
Furthermore, the developer is obligated to provide the buyer with information about the acknowledgement of defects or a statement of refusal to acknowledge defects and the reasons for such refusal within 14 days of signing the report. However, a requirement has been added that this must be done on paper or another durable medium . The new regulations clearly state that if the developer fails to inform the buyer about the acknowledgement of defects or the refusal to acknowledge defects and the reasons for such acknowledgement within 14 days, the developer is deemed to have acknowledged the defects . This principle also stems from the general provisions of the Civil Code.
The new provision – Article 41, Section 6 – states that the developer is obligated, not obligated, to remedy any recognized defects in a residential unit or single-family home within 30 days of signing the report. If the developer, despite exercising due diligence, fails to remedy the defects within 30 days, they must specify (instead of being able to specify, as previously) another deadline for remedying the defects, along with a justification for the delay. Both of these changes impose clear obligations on the developer. Furthermore, a stipulation has been added that this deadline must not cause "undue inconvenience to the purchaser." Undoubtedly, practice and case law will clarify what this term means.
It's important to remember that under the new regulations, if the developer fails to remedy the defects within 30 days or fails to specify an additional deadline, the buyer must set a new deadline for the developer to remedy the defects . The Act does not specify a minimum number of days, but it seems that such deadlines should be realistic, allowing for the defects to be remedied within the specified time. If this deadline expires without success, the buyer may remedy the defects at the developer's expense. As previously indicated, the buyer does not require any additional consent or court authorization for so-called substitute performance. We hope that this provision will not be abused, and we anticipate that these situations could lead to numerous potential legal disputes.
What is very important is that the New Development Act explicitly grants the buyer the right to refuse to accept the property if it is found during the acceptance that the residential premises or single-family house has a significant defect and at the same time the developer refuses to acknowledge it in the report .
Under the New Development Act, in the event of a refusal to accept the property due to a significant defect, the developer and the buyer agree on a new deadline to allow the developer to remedy the defect before the second acceptance. Refusal to accept the property due to a significant defect during the second acceptance requires the buyer to submit an expert opinion. The buyer should request such an opinion within one month of the repeated refusal to accept the property. If the expert opinion identifies a significant defect, the buyer may withdraw from the contract, and the developer is responsible for the entire cost of preparing the opinion. However, if the expert opinion indicates that the defect does not exist or is not a significant defect, the buyer is responsible for the entire cost of preparing the opinion. The costs of preparing the opinion should be settled no later than the date of conclusion of the agreement transferring the right to the property or house.
We also note that the New Development Act also regulates the consequences of failing to remedy defects reported in the acceptance protocol in the event of concluding only a reservation agreement . This means that if the buyer fails to sign the agreement transferring ownership of the property (i.e., one of the sales agreements we discussed in #52 ) due to unresolved defects, the developer will be obligated to refund double the reservation fee.
As before, the developer will have the right to withdraw from the development agreement and other agreements regulated by the provisions of the New Development Act in the event of the buyer's failure to appear to accept the premises or house, despite the developer having served a written notice twice with an interval of at least 60 days, unless the buyer's failure to appear is caused by force majeure.
In summary, the procedure for the acceptance of a residential unit or single-family home under the New Development Act takes on added significance, granting the buyer additional rights – potentially dangerous for developers. These rights include (i) the buyer's right to have defects removed at the developer's expense if the developer fails to make repairs within the deadlines specified in the Act; (ii) the buyer's right to withdraw from the development agreement or agreements binding under the Development Act in the event of a significant defect. Therefore, it will be important to verify the proper execution of the work by contractors prior to the buyer's acceptance.
Next week we will present to you what obligations, based on the New Development Act, banks maintaining escrow accounts for development investments will have.
This morning, we'd also like to thank the following authors who helped us regularly provide you with information from the world of construction law. We thank legal counsel Adrianna Kobylarczyk and senior lawyers Paulina Chołoniewska and Piotr Tobolski for their time and insightful analysis.
We also invite you to our upcoming webinar, " Implementing Investments on Agricultural Property, " during which we will review, among other things, what agricultural property is and when it loses its status. We will familiarize you with the procedure for de-agriculturalizing agricultural land and the fees associated with decommissioning agricultural land. Finally, we will also address the issue of developing a settlement plot.
We cordially invite you on Tuesday – June 15, 2021 – at 10:00 AM.
