In today's issue of "Tuesday Mornings for Construction," we continue our series of articles devoted to the right of first refusal in real estate. This publication will discuss cases in which municipalities have the right of first refusal, as well as the effects, enforcement, property prices, and exclusions within this right of first refusal. We also invite you to read the first article in the series, in which we provided introductory information on the topic of first refusal.

As we have indicated, pre-emption is a privilege that gives a person (entity) the right to purchase an item or right (e.g., shares in a company) first if its owner intends to sell it to a third party. This right may be granted to both individuals and legal entities, as well as public entities. The legal basis for the statutory right of pre-emption for the municipality is Article 109 of the Real Estate Management Act of 21 August 1997 ("UGN"). It enumerates the instances in which it may exercise its right. The municipality has pre-emption in the event of a sale:

Art. 109 UGN section 1

1) undeveloped real estate previously acquired by the seller from the State Treasury or local government units;
2) the right of perpetual usufruct to undeveloped land, regardless of the form of acquisition of this right by the seller;
3) real estate and the right of perpetual usufruct to real estate located in an area designated in the local plan for public purposes or real estate for which a decision has been issued establishing the location of a public purpose investment;
4) real estate entered in the register of monuments or the right of perpetual usufruct to such real estate;
4a) real estate located in a revitalization area, if this is provided for in the resolution referred to in Art. 8 of the Act of 9 October 2015 on revitalization;
4b) real estate located within the Special Revitalization Zone referred to in Chapter 5 of the Act of 9 October 2015 on revitalization.

However, the legislator has provided exceptions to the application of the aforementioned provisions. Therefore, points 1 and 2 above will not apply if the property is designated for agricultural or forestry purposes in the local development plan ("MPZP"). This right is also excluded if:

Article 109 of the Act on the Protection of Personal Data, paragraph 3

1) the sale of the real estate or the right of perpetual usufruct is to persons close to the seller (pursuant to art. 109 sec. 3 item 1 of the Real Estate Management Act, the right of pre-emption does not apply in the case of the sale of the real estate/right of perpetual usufruct to a close person. In art. 4 item 13 of the Real Estate Management Act, the legislator indicated that the circle of close persons includes descendants, ascendants, siblings, siblings’ children, spouse, adoptive parents and adopted children, and a person who actually cohabits with the seller);
2) the sale of the real estate or the right of perpetual usufruct is between legal persons of the same church or religious association;
3) the right of ownership or the right of perpetual usufruct was established as compensation or damages for the loss of ownership of the real estate;
4) the right of ownership or the right of perpetual usufruct was established as a result of an exchange of ownership of the real estate;
5) in the cases referred to in sec. 1 items 3 and 4, the right of pre-emption was not disclosed in the land and mortgage register;
6) the real estate is sold for the purposes of the construction of national roads;
7) the right of pre-emption is granted to the private partner or the last private partner in the cases referred to in the Act of 19 December 2008 on public-private partnership;
8) the real estate is sold for the purposes of implementing an investment in the scope of a public-use airport within the meaning of the provisions of the Act of 12 February 2009 on special principles for the preparation and implementation of investments in the scope of public-use airports or investments within the meaning of art. 2 item 3 of the Act of 10 May 2018 on the Central Communication Port, or under special principles specified in art. 29b paragraph 1 of the Act of 10 May 2018 on the Central Communication Port;
9) the real estate is sold for the purposes of implementing an investment within the meaning of the provisions of the Act of 8 July 2010 on special principles for the preparation for the implementation of investments in the scope of flood protection structures and meteorological radar stations;
10) the right of pre-emption is granted to the National Real Estate Resource in the cases referred to in the Act of 20 July 2017 on the National Real Estate Resource.

Please pay particular attention to point 5 above. According to this provision, the right of pre-emption for real estate/perpetual usufruct entered in the register of historical monuments or located in an area designated in the local spatial development plan for public purposes or a public investment does not apply if it has not been previously disclosed in the land and mortgage register maintained for that real estate.

The right of pre-emption specified in Article 109 of the Real Estate Management Act is exercised by the locally competent executive authority, i.e., the commune head, mayor, or city president (hereinafter referred to as the "Authority"). If the real estate is granted the right of pre-emption referred to in paragraph 1, the real estate shall be sold subject to the condition that the Authority does not exercise its right within one month. The notary is obligated to inform the commune head, mayor, or city president of the circumstances surrounding the conclusion of the sales agreement. To exercise the right of pre-emption, the Authority must, within the aforementioned deadline, submit an appropriate declaration in the form of a notarial deed to the notary who notified the notary of the content of the sales agreement. In exceptional circumstances, if submitting the declaration to this notary is impossible or encounters significant difficulties, it may be submitted to another notary. Upon submitting the declaration of exercise of the right of pre-emption:

• the property becomes the property of the municipality;
• the right of perpetual usufruct expires if the exercise of the right of pre-emption concerned the sale of the right of perpetual usufruct of a land property owned by the municipality;
• a commune obtains the right of perpetual usufruct if the exercise of the right of pre-emption concerned the sale of the right of perpetual usufruct to a land property owned by the State Treasury, a district or a voivodeship.

The notary informs the seller of the fact that such a declaration has been submitted. It should be emphasized that the exercise of the right of first refusal does not result in a change in the price of the property being sold. Article 111 of the Real Estate Management Act (UGN) explicitly states that the price agreed upon by the parties to the sales agreement is also binding on the municipality. In practice, municipal budgets often do not include the necessary reserves to utilize Article 109 of the UGN. This means that if the property price is high, the municipality will likely be unable to exercise the right of first refusal.

In the next installment of this series, we'll present another topic related to pre-emption rights: "Pre-emption Rights for Real Estate in Revitalization or Degraded Areas." This topic is particularly relevant to investments in cities such as Warsaw and Łódź. We encourage you to follow our publications, which are available on our website .

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

Legal status as of April 22, 2024

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