In this next article on the Act of December 16, 2020, on the settlement of the price of premises or buildings in the price of properties sold from municipal real estate resources, known as the "premises for land" act, we would like to present to you the potential benefits of applying the regulations for both investors and municipalities. Undoubtedly, applying the provisions of the "premises for land" act will raise problems, but we have decided to focus on its positive aspects.

Benefits for investors

Firstly, the potential expansion of access to investment-grade properties – those within municipal property resources – is certainly beneficial from an investor's perspective. These properties are often located in attractive locations and have good transport connections.

Secondly, by settling part of the price with the premises or buildings they have constructed, the investor can reduce the value of the capital required to complete the investment. This is due to the possibility of postponing the final settlement of the price for the property acquired from the municipality.

Potentially, the act could accelerate investment implementation due to the fact that the tender (unfortunately, a no-bid procedure was not chosen here) can be for real estate for which a development decision has been issued to the municipality or for which a local development plan is in force. This means that the investor will be aware of the development conditions for such a property at the time of purchase (the municipality is obligated to transfer the development decision to the investor), and the next step will be obtaining a building permit. However, this does not limit the investor's right to apply for a new development decision for the property purchased in this procedure.

Furthermore, under the Act, for the purpose of transferring ownership to the municipality as part of the price settlement, the investor may transfer premises or buildings originating (i) solely from the investment, (ii) from an investment or a project other than the investment, or (iii) solely from a project other than the investment. Therefore, the investor will have a degree of freedom in choosing the premises transferred to the municipality. If the investor decides to transfer the premises from the investment, the investment completion date will be part of the sales agreement. However, if these are premises unrelated to the investment, the investor will independently decide what and when to build on the land.

Benefits for municipalities

A benefit for municipalities is the opportunity to acquire premises or buildings that can be used to fulfill their own tasks – this applies to both residential premises and premises designated for other purposes. Currently, municipalities are experiencing reduced activity in the field of municipal construction, so the act may help increase their housing resources.

For municipalities, the construction of municipal housing involves lengthy procedures due to the obligation to comply with public procurement law and the Act on Public Finance Discipline. Therefore, acquiring premises or buildings under the "premises for land" law will require less effort and resources than preparing and implementing the entire investment independently.

For municipalities, the "premises for land" law also allows for the development of previously undeveloped plots that generated maintenance costs. This means that such sales can contribute not only to the acquisition of premises but also to reducing the costs of maintaining municipal real estate resources.

The act aims to stimulate local development and provide financial support to municipalities, including technical and social infrastructure. Increasingly, housing projects should be accompanied by the construction of necessary infrastructure, which, however, is not developing as rapidly. Given the possibility of using developer-provided premises for purposes related to their own tasks, municipalities will be able to allocate them, for example, for the operation of a preschool or nursery, including in areas where new housing estates are being built.

The Act also includes provisions that allow local governments to apply for grants for infrastructure projects involving the creation of essential technical or social infrastructure, if these projects are combined with investments made on land sold under the "premises for land" Act or other housing-oriented investments specified in the Act. Municipalities will be able to obtain financial support equal to 10% of the costs of a given infrastructure project if the infrastructure project is linked to investments under the "premises for land" Act or social housing initiatives.

Next week, we will be introducing you to the procedure that precedes the investor's purchase of real estate under the "premises for land" act.

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

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