Today we return to topics related to the "premises for land" act and, as promised, we want to familiarize you with the process of purchasing real estate under this act.

The first step in disposing of real estate is for the municipal council to adopt a resolution to dispose of real estate from the municipal property. The draft resolution must be accompanied by an appraisal report specifying the property's value, prepared by a real estate appraiser no earlier than three months prior to the submission date.

The resolution on the sale of real estate must specify basic information about the premises or buildings to be transferred by the investor to the municipality as part of the "premises for land" settlement, including: (i) the minimum and maximum number and usable area, (ii) their intended use, (iii) the minimum standard, location requirements, price per square meter of ^usable area and (iv) the date of their transfer to the municipality, which will be counted from the date of transfer of ownership of the real estate being transferred to the investor.

For premises or buildings intended to be transferred to the municipality's ownership, originating from a project other than an investment, the resolution may specify additional requirements regarding their location (in particular the distance from public buildings, including buildings used for education, upbringing or health care purposes, and access to public transport).

At this point, it is worth recalling that, pursuant to the Act of 8 March 1990 on Local Government, the right to initiate legislation rests with: (i) the head of a commune (mayor, city president), (ii) a club of councilors, (iii) councilors, or (iv) a group of residents (the number depends on the size of the commune). Therefore, any of the above-mentioned entities may initiate such a resolution.

The price of 1 m² ^of usable floor area of ​​a premises or building intended for transfer by the investor to the municipality may not exceed the average conversion rate of the replacement cost of 1 m² ^of usable floor area of ​​residential buildings. For example, this rate for the fourth quarter of 2020 and the first quarter of 2021 was (data based on information published by voivodeship offices):

• For the Masovian Voivodeship*, excluding the capital city of Warsaw – PLN 4,354.45,
• For the capital city of Warsaw – 7,197.41,
• For the Małopolska Voivodeship**, excluding Kraków – PLN 4,273,
• For Krakow – PLN 5,672,
• For the Silesian Voivodeship*** – PLN 4,532,
• For Katowice – PLN 5,121.

Such a price structure per square meter ^of usable area of ​​a premises may make it more profitable for investors to purchase real estate under the "premises for land" law in smaller towns, outside large agglomerations.

The price per square meter ^of usable floor space of a property or building designated for transfer by an investor to the municipality may be increased in a resolution on the sale of real estate. However, the legislature has introduced limits on such increases. In particular, the total price of the property or buildings designated for transfer by an investor to the municipality cannot exceed the value of the property covered by the resolution, as specified in the appraisal report attached to the draft resolution.

The property will be sold by open tender . The tender will be announced and conducted by the commune head, mayor, or city president.

In the absence of a local development plan, only real estate for which a decision on development conditions has been issued to the commune may be sold under the "premises for land" act.

Detailed terms and conditions for announcing the tender and the investor's offer can be found in Articles 6 and 7 of the "Premises for Land" Act. We would like to point out that the starting price for the property cannot be lower than the property's value as specified in the appraisal report attached to the draft resolution on the sale of the property. Only if the property being sold is listed in the register of historical monuments, located in an area listed in the register of historical monuments, or located in a revitalization zone can the starting price be set at no less than 90% of the property's value.

When submitting an investor's offer , in addition to the investor's data, such as their company name, form of business, contact details or KRS number, the investor will be obliged to provide information about the investment (including the number and usable area of ​​the premises or buildings planned for this investment, divided into residential premises, premises for other purposes, single-family residential buildings in which no premises have been separated, or buildings for other purposes in which no premises have been separated), the offered price of the property, and an indication of the premises or buildings offered for transfer to the municipality.

If the first tender is unsuccessful, the authority will hold a second tender within a period of no less than 30 days and no more than 6 months (counted from the closing date of the first tender). If the second tender is also unsuccessful, the competent authority may organize subsequent tenders, announcing them one after another no sooner than 30 days and no later than 6 months from the closing date of the previous tender.

If the tender is successful, a contract is concluded . The contract (in addition to standard elements such as property identification) will also include information about the investment, including its completion date (if the premises or buildings planned for transfer to the municipality under the "premises for land" settlement will come from the investment), the investor's commitment to transfer ownership of the premises or buildings to the municipality , the price of the premises or buildings, the municipality's commitment to transfer the development decision issued for the property to the investor, and the deadline for this transfer (if the investor intends to implement the investment in accordance with the terms set out in that decision), the form of security for the performance of the obligation, and contractual penalties, if applicable.

The difference between the price of the real estate obtained as a result of the tender and the price of the premises or buildings which the investor agreed to transfer to the municipality in the contract as part of the "premises for land" settlement is subject to monetary payment.

The investor must approach the obligations assumed in the agreement with caution, because in the event of failure to transfer ownership of the premises or buildings to the municipality, he will be obliged to pay the municipality a sum of money representing 150% of the price of the premises or buildings that he has undertaken to transfer ownership of to the municipality as part of the settlement.

The municipality's receivable is subject to security by establishing a mortgage or pledge.

It should be noted that the "premises for land" law significantly modifies the rules for the sale of municipal real estate, as defined in the Regulation of the Council of Ministers of 14 September 2004 on the method and procedure for conducting tenders and negotiations for the sale of real estate. This law de facto eliminates the negotiation procedure after the second tender in favor of multiple tenders for the same property. Consequently, this could significantly prolong the real estate acquisition process.

In summary, the property acquisition procedure under the "premises for land" law requires the cooperation of several entities: investors, municipal councils, and municipal executive bodies. It's also important to remember that the primary goal of local government units should be to benefit the local community, and local government bodies will likely also consider their voices when making decisions.

Referring to our last alert regarding the government's draft bill on the protection of the rights of purchasers of residential premises or single-family homes and on the Developer Guarantee Fund, we would like to point out that it has been assigned the number 985. Therefore, you can follow the further course of legislative work under this number, as the bill has been submitted for first reading at the Sejm session.

Next week, we will return to the topic of local development plans, analysing for you the possibilities of challenging the plans and having them reviewed by administrative courts.

This alert is for informational purposes only and does not constitute legal advice.

* Announcement of the Mazovian Voivode on the establishment of the conversion rate : https://www.gov.pl/web/uw-mazowiecki/wskaznik-p…
** Announcement of the Małopolska Voivode on the establishment of the conversion rate: https://bip.malopolska.pl/muw,a,31879,ustalenie…
*** Announcement of the Silesian Voivode on the establishment of the conversion rate: https://www.katowice.uw.gov.pl/usluga/obwieszcz…

At the same time, we would like to point out that the patron of the series related to the "premises for land" act is the Polish Association of Developer Companies.

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Aleksandra Jastrzębska

Legal Counsel
+48 514 585 772 | a.jastrzebska@kglegal.pl

Dr. Joanna Barzykowska

Attorney, partner
+48 502 677 504 | j.barzykowska@kglegal.pl