Today's article from the series "Tuesday Mornings for the Construction Industry" will be devoted to the issue of vacatio legis, i.e. the date of entry into force and transitional provisions of the Act of 20 May 2021 on the protection of the rights of purchasers of residential premises or single-family houses and on the Developers' Guarantee Fund ("New Developers' Act").
The legislator has specified that the New Development Act will generally enter into force 12 months after its publication in the Journal of Laws . This publication has not yet occurred, so we cannot specify a specific date. However, as is usually the case, the New Development Act provides for exceptions. For example, Article 46, Article 47, Article 48, Section 6, and Article 72, Section 1, i.e., the provisions regarding the establishment of the Developer Guarantee Fund, will enter into force after a shorter period of thirty days.
On the date of entry into force of the New Development Act, the current Act – i.e. the Act of 16 September 2011 on the protection of the rights of purchasers of residential premises or single-family houses ("Old Development Act") – will cease to apply. However, the legislator has provided for transitional provisions.
The most important provision from the investment implementation perspective is that for development projects where sales commenced before the entry into force of the New Development Act and at least one development agreement was concluded before that date, the provisions of the Old Development Act may apply for the next two years. Importantly, if such a project is not completed after these two years, the New Development Act will automatically apply. It should be remembered that even when applying the Old Development Act, likely from the turn of June and July 2021, every developer will have to apply selected provisions of the New Development Act, i.e., Article 10, sections 1-3 (concerning termination of an escrow account and the obligation to immediately conclude a new agreement to maintain such an account), Article 11 (notifying the buyer), and Article 43, section 1, items 7 and 9 (right of withdrawal in the event of the developer's failure to conclude an escrow account agreement). This third circumstance, in particular, should be included in the content of concluded development agreements.
However, if a developer has divided a development project into investment tasks – stages – and the subsequent project begins after the New Development Act comes into force, the New Act should apply. Consequently, it may turn out that if, for example, Phase I begins in May 2022, it will be conducted under the Old Development Act, while Phase II begins in August 2022, it will be conducted under the New Development Act. Therefore, it is worth planning the start of sales in advance, particularly the date of signing the first development agreement, not only for the entire development project but also for the individual tasks within them.
With respect to development agreements under which the rights to the premises or house are not transferred within two years of the entry into force of the New Development Act, the current provisions and the above-mentioned Article 10, paragraphs 1-3, Article 11, and Article 43, paragraph 1, points 7 and 9 of the New Development Act should apply. This means that concluding a development agreement under the Old Development Act establishes the rights and obligations of the parties regarding its performance, and regardless of the expiry of the indicated two years, the developer will not be obligated to apply the New Development Act.
Another transitional provision states that if a developer is conducting a development project and has not entered into an escrow account agreement, they are obligated to do so within 30 days of the entry into force of the New Development Act – even if the provisions of the Old Development Act will still apply to the entire project. In other respects, as a rule, the application of the provisions regarding escrow account management depends on the application of either the Old or New Development Act to the given development project.
The legislator also indicated that the existing provisions should apply to claims of purchasers entered in the land and mortgage register under the Old Development Act. Importantly, under the New Development Act, not only claims arising from development agreements but also all types of agreements regulated by the new Act will be subject to entry in Section III of the land and mortgage register.
In summary, understanding the introductory and transitional provisions introduced by the New Development Act will allow you to prepare and plan your investments in the context of applying the new or old regulations. Therefore, if you have any questions, please contact us and we will be happy to assist you in adapting them to your individual circumstances.
Today's alert concludes our series on the New Development Act, though we'll certainly be revisiting the act itself. Starting next Tuesday, we'll be analyzing regulations related to agricultural real estate, including both its acquisition and investment.
Finally, we would like to remind you that as of July 1, 2021, further regulations related to the digitization of the investment and construction process will come into force, including those allowing for the submission of building permit applications along with the construction design electronically . Furthermore, regulations regarding the obligation to report heat sources/fuels in buildings, including single-family and multi-family buildings, as well as non-residential buildings, will come into effect on the same day. All owners or managers will be required to submit a complete declaration (electronically or on paper) to the Central Building Emissions Register , which will be maintained by each municipality. For existing buildings, the legislator has allowed 12 months for reporting; for buildings commissioned after July 1, 2021, the owner will be required to submit the declaration within 14 days of the building's occupancy approval date.
This alert is for informational purposes only and does not constitute legal advice.
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