In today's edition of the article series entitled "Tuesday Mornings for the Construction Industry," we will summarize for you the key changes that took place in May and June of this year in the real estate industry.
End of the transitional period for the application of the old development act
It's happened! From today, all agreements concluded by buyers and developers regarding residential premises in ongoing development projects or investment projects must comply with the Act of May 20, 2021, on the protection of the rights of buyers of residential premises or single-family homes and the Developer Guarantee Fund.
Certainly, for the next few/several months, the market will still apply the Development Act of 2011 when executing development agreements concluded until July 1, 2024, but from now on, the legal basis for developers' actions is 100% the Development Act of 2021.
We invite you to read our articles analyzing the 2021 Development Act and to contact us directly.
Changes to the Real Estate Management Act – betterment fee
On 11 June 2024, the committee's draft bill amending the Real Estate Management Act (form no. 443) was submitted for first reading to the Infrastructure Committee and the Local Government and Regional Policy Committee.
It contains a key change regarding the regulation of the betterment fee established on the basis of Article 98a and Article 145 of the Act of 21 August 1997 on Real Estate Management ("AGM").
Let us recall that, pursuant to Article 98a of the Land and Mortgage Act, the betterment levy cannot exceed 30% of the difference in the property's value before and after the division. The municipality must first adopt a resolution establishing the betterment levy, as only on this basis can it subsequently impose an obligation on the person dividing the property to pay the amount to the municipal council. Of course, a necessary condition for this is the undisputed demonstration that the property's value will increase as a result of the division at the request of the owner or perpetual usufructuary. The difference in property value is determined based on an appraisal report, most often prepared by an expert commissioned by the municipal council, which is then compared with the appraisal report of the entity conducting the division.
Currently, proceedings to establish betterment levies can be initiated within three years of the date on which the decision approving the division of real estate becomes final or the division ruling becomes legally binding. However, under the proposed amendments, this period is to be shortened to 18 months .
In accordance with art. 145 sec. 1 of the Land Management Act, "The commune head, mayor or city president may, by way of a decision, establish an improved levy each time after creating conditions for connecting the property to individual facilities and technical infrastructure or after creating conditions for using the constructed road ." In the previous wording, pursuant to art. 145 sec. 2 of the Land Management Act, the deadline for initiating proceedings to establish such a fee was also 3 years, and here too the amendment provides for shortening this deadline to 18 months .
The bill's justification states that the current deadline for initiating proceedings is "too long ." It also notes that: " This situation creates significant uncertainty among property owners, limits their freedom to shape their household budgets, and fosters a sense of distrust in the state ."
In our opinion, both the proposed changes and the rationale for their introduction, as outlined in the project's justification, are sound. This is because investors implementing projects such as house construction have often had to grapple with the adverse consequences of property division, remaining uncertain for 36 months from the date of division approval as to whether such a fee would be charged or not.
Planning obligation under airport master plans
As a result of intensified efforts by local governments, primarily the Warsaw City Hall, an amendment was submitted to the Sejm (parliamentary document 430/468) in the last week of June, significantly changing the planning obligation under airport master plans. On the investors' side, the Polish Association of Developers was actively involved in this matter.
In the current wording of Article 55, paragraph 9 of the Act of 3 July 2002 – Aviation Law: For areas covered by a general plan, the preparation of a local spatial development plan – consistent with the approved general plan – is mandatory , taking into account the provisions regarding closed areas (...) .
With this in mind, the Architecture and Construction Departments of individual districts, the Architecture and Spatial Planning Office of the Capital City of Warsaw, and finally the Local Government Appeal Board in Warsaw have suspended proceedings for issuing development decisions. Of particular importance to the real estate industry, the master plan includes the mandatory preparation and adoption of a local spatial development plan for the area covered by the airport master plan. Due to difficulties encountered during the preparation of the local spatial development plan, this has significantly delayed the investment and construction process in Warsaw's southern districts.
Given this wording, amendments were proposed to eliminate this obligation and allow for the mandatory adoption of local spatial development plans in areas covered by airport master plans. Unfortunately, the amendment was withdrawn before the second reading in the Sejm. In this case, we are still waiting, and the proceedings for issuing a development plan in Warsaw will continue to be suspended.
Changes in property tax
In June, a draft amendment to the Act of January 12, 1991, on Local Taxes and Fees ("UPOL") was also published. Its adoption will constitute a significant change to the definition of "building" or "structure." This means that the scope of tax obligations for entities that own them is being redefined. We wrote about this change in another series from our Law Firm – Tax This and That ( #47 ). We encourage you to read it.
Postponement of the entry into force of new technical conditions
At its session on June 28, 2024, the Sejm adopted an amendment to the Act on Ensuring Accessibility for Persons with Special Needs. Pursuant to Article 66 of the Act, the following regulations are to be amended by September 20, 2024 (although this deadline has also been extended): the regulations on the technical conditions to be met by buildings and their location, the technical conditions for the use of buildings, and the detailed scope and form of construction design, including those relating to housing.
Through the amendment, the Sejm extended the deadline for adopting new implementing regulations by another two years, and the new regulations are intended to address the needs of people with disabilities. This extension, given the lack of a substantive draft that has been thoroughly consulted with the real estate industry, is certainly a good solution. We hope that this time, the ministry will begin work on the draft immediately, so that a draft that addresses the practical challenges of the real estate market is adopted within these two years.*
At this point, we invite you to read our next article in our ongoing series on pre-emption rights, which will be published next week as part of our Tuesday Mornings for Construction series. It will concern the pre-emption rights of the National Data Processing Center.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of July 2, 2024
*update from July 2, 2024 – 1:00 p.m.
