We would like to remind you that on April 20, 2021, the Sejm adopted the Act on the Protection of the Rights of Purchasers of Residential Units or Single-Family Homes and on the Developer Guarantee Fund ("New Developer Act"). The next step is for the Senate to consider the New Developer Act. According to the latest information, the final stage of the legislative process, i.e., the signing of the Act by the President of the Republic of Poland, is expected in June 2021. The new regulations are scheduled to enter into force 12 months after their publication in the Journal of Laws, with the exception of certain articles, which will take effect on different dates.
Due to the advanced legislative work, in today's alert we will once again address the proposed changes – this time concerning the information prospectus. At this stage, it seems inevitable that the New Development Act will be a legal act that developers will have to deal with next year.
Information prospectus – current status
Under current regulations, a developer commencing the sale of a development project is required to prepare an information prospectus and, upon request, deliver the prospectus and its attachments to the person interested in entering into a development agreement. Delivery is free of charge and on a durable medium. The information prospectus constitutes an integral part of the development agreement. Furthermore, it must comply with the template specified in the annex to the current Development Act (see the Act of September 16, 2011, on the Protection of the Rights of Purchasers of Residential Units or Single-Family Homes).
In this template, the information prospectus consists of two parts: general and individual.
In the general section, the developer is required to provide information about their legal and financial situation. This includes, among other things, (i) the developer's identification data, (ii) a description of the developer's experience in implementing construction projects, (iii) information on enforcement and administrative proceedings conducted against the developer in which the amount of the enforced debt exceeds PLN 100,000.00, (iv) information regarding the land and building, and (v) the conditions for withdrawing from the development agreement.
The individual part is devoted to detailed information about the premises, such as the area, the location of the premises, and the layout of its rooms.
Prospectus – proposed changes
The fundamental change in the proposed New Development Act regarding the information prospectus is the change in the rules for its delivery. It is proposed that the developer – regardless of the request of the person interested in concluding the agreement – must deliver the information prospectus to them before concluding a reservation agreement , a development agreement, or one of the other agreements specified in the draft. This means that project preparation will be required at the stage of concluding reservation agreements, as we also wrote about last week in Alert #47 .
Changes will also be made to the information prospectus itself. Overall, this document will undoubtedly increase significantly in size , as numerous new sections have been added, requiring information about the investment and its surroundings. It has been proposed that the information prospectus template be supplemented, including information on the uniform guarantee limit applicable in the event of the bankruptcy of the bank where the housing escrow account is maintained, the usable floor area of the apartment or single-family home, and the price per square meter of usable floor area of the apartment or single-family home.
It's worth emphasizing that the New Development Act refers directly to usable floor area , while the current one simply refers to square footage. In practice, under the current regulations, the parties could modify the method of calculating square footage for the purposes of a development agreement, a process that will be significantly more difficult once the New Development Act comes into force.
Indicating new elements, due to the fact that an agreement with a developer may be concluded at various stages of a construction project, and each time before its conclusion, the developer is obligated to submit an information prospectus to the client, the following fields have been added: (i) the date of the decision granting an occupancy permit or the completion of construction of a single-family home becoming final, (ii) the date of issuance of a certificate of independent ownership of the dwelling, and (iii) the date of establishing separate ownership of the dwelling. In this context, we would like to point out that at the time of preparing the prospectus, the developer will not always be able to specify the specific date of these events . According to the project initiator's assumption, these fields should only be completed if the documents have already been issued. Therefore, at the time of project commencement, these fields should be left blank. They will only require completion as implementation progresses, and consequently, special attention will be required to inform clients who have not yet signed development agreements of such changes.
Additionally, the information provided in the prospectus regarding land and spatial development has been clarified by providing specific information not only about the plot of land associated with the development project, but also about adjacent plots . One type of information that the developer will be required to include in the prospectus will be data contained in publicly available documents regarding investments planned within a 1-kilometer radius of the property on which the development project is being conducted. In this respect, a catalogue of documents has been introduced that may constitute a source of the above information for the developer – including: (i) local spatial development plan, (ii) study of the directions and spatial development of the commune, (iii) decisions on environmental conditions, (iv) decisions on limited use areas, (v) local reconstruction plans, (vi) floodplain maps and decisions resulting from specific provisions, such as: (vii) decision on permitting the implementation of a road investment, (viii) decision on determining the location of a railway line, (ix) decision on permitting the implementation of an investment in the scope of a public airport, (x) decision on permitting the implementation of an investment in the scope of flood protection structures, (xi) decision on determining the location of an investment in the scope of the construction of a nuclear power facility.
In the information prospectus, the developer will also be obliged to indicate the method of calculating the amount of the contribution paid to the Developer Guarantee Fund.
An additional appendix has also been added to the prospectus – "a draft development concept for the investment site and its surroundings, indicating the building and significant investment location conditions resulting from separate regulations and the existing and planned use of adjacent areas (e.g., land use, protection zones, nuisances)." This means that the existing land development plan will need to be expanded to include information regarding the areas adjacent to the property where the investment is being implemented.
We cordially invite you to continue following our articles – next week we will continue to discuss issues related to the information prospectus, but this time we would like to draw your attention to the consequences of errors or failure to update it.
This alert is for informational purposes only and does not constitute legal advice.
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