Legal Highlights for Real Estate – April 2024

1. Draft Amendment to the Act on Social Forms of Housing Development at the stage of agreements and consultations

The Draft Amendment to the Act  on Social Forms of Housing Development and Certain Other Acts (the “Draft Amendment“) was directed to inter-ministerial consultation, public consultation and opinion at the beginning of April. The Draft Amendment is intended to facilitate measures related to the implementation of local housing policy. The aim is to provide systemic support to individuals and families who are unable to independently satisfy their housing needs.

Proposed changes contained in the Draft Amendment concern, inter alia, premises built under the Social Rented Housing (“SBC“) program. In this respect, it is proposed to reinstate the provisions on the complete prohibition of separation into ownership of premises built under the SBC program, to increase the participation of the social factor in the supervision of Social Housing Societies (“TBS”) and Social Housing Initiatives (“SIM”) (to be achieved by introducing representatives of the commune in the area where the TBS/SIM operates into the composition of the supervisory board of the company), as well as to extend the existing SBC program by one year and to increase the budget of the program from PLN 4.5 billion to PLN 7 billion.

Changes would also take place with regard to the Act of 5 July 2018 on facilitations in the preparation and implementation of housing investments and accompanying investments, i.e. the housing special law. It is proposed to return to the non-regulation of the minimum ratio of the number of parking spaces to be provided as part of a housing development at the national level.

The Draft Amendment provides for the possibility to grant financial support from the Surcharge Fund for projects consisting in the construction, renovation or purchase of a building, as a result of which new premises are to be created or existing ones are to be modernized, to meet the housing needs of students. The premises financed this way are to be made available only to students who do not have legal title to any residential premises in the same town.

The result of the introduction of the Draft Amendment is expected to be an increase in the availability of flats for rent, social and communal housing, facilitation of migration for educational purposes and elimination of interpretation doubts related to the regulations currently in force. If the postulated changes are accepted and the Draft Amendment is adopted, its provisions would come into force as early as in the third quarter of 2024.

2. Another approach to REITs in Poland: preliminary assumptions of the draft law on the so-called Real Estate Investment Trusts have been made available

On April 3 this year, the Deputy Minister of Development and Technology, Jacek Tomczak, presented the concept of preliminary assumptions for a draft law introducing entities whose purpose would be to invest in real estate into the legal market in Poland. Such entities, called “REIT” (Real Estate Investment Trusts), are already known in other legal systems around the world and are very popular – for example in the United States.

The introduction of REITs has been planned in Poland for a long time. The first major bill concerning so-called “real estate rental market companies” (spółki rynku wynajmu nieruchomości) by the Ministry of Finance in 2016 was withdrawn. Another one, assuming the existence of so-called “real estate rental investment companies” (firmy inwestujące w najem nieruchomości), did not get beyond the stage of the first reading in the parliament. On the other hand, in the fall of 2018, the law on Polish REITs was not enacted, despite the fact that the relevant draft went to the Parliament.

Currently, the Ministry’s proposed assumptions include:

• the maintenance of the register of REITs by the Financial Supervision Authority (in Polish: Komisja Nadzoru Finansowego) in cooperation with the Warsaw Stock Exchange (“WSE“);
• a requirement for the legal form of a joint-stock company;
• an obligation to set the share capital at a minimum of PLN 100 million;
• obligation to be a company listed on the WSE;
• possibility to invest only in income generating assets;
• the need to entrust the management of REITs only to experienced asset managers;
• subjecting REITs to a 10% tax, payable at the time of dividend payment;
• exemption of REIT’s shareholders from taxation of dividends;
• REIT’s obligation to allocate to dividends a min. 90% of consolidated profit;
• making available the possibility to invest in both residential and commercial real estate;
• limiting the maximum level of REIT’s debt to 50% of the portfolio value.

The Ministry of Development and Technology does not yet give a date when the full bill is expected to be presented.