Legal Highlights for Real Estate – August 2023

Further changes to Lex Developer

On 5 July 2023, work began in the Parliament on a committee draft of the Act on Reducing Bureaucracy and Legal Barriers (the “Act”) prepared by the Extraordinary Committee on Deregulation. Among other things, the Act assumes the extension of the Act of 5 July 2018 on facilitating the preparation and implementation of housing investments and accompanying investments, i.e. the so-called lex developer (“Lex Developer”) by 2 years, i.e. until the end of 2030. As can be read in the justification of the draft, such extension is supported primarily by the fact that it is only recently that local governments and investors, recognizing the mutual benefits of the Act, have actually begun to apply it.

What’s more, the proposed Act provides for a waiver of the obligation to provide 1.5 (1 in the case of the downtown zone) parking spaces for each apartment built under the Lex Developer mode. The purpose of these changes, according to the Act’s justification, is first to restore municipalities’ autonomy in determining the minimum number of parking spaces to be provided in residential developments. This is crucial, as the entry into force on 12 May 2023 of the regulations imposing the aforementioned obligation (as we mentioned in Real Estate Highlights – May 2023 https://publikacje-tpa.pl/publikacje/legal-highlights-for-real-estate-maj-2023/) has caused considerable controversy in the development industry and raised questions about the viability of residential developments under the Lex Developer mode.

Currently, the draft Law is at the stage of being reviewed by local government organizations.

The Integrated Investment Plan

On 24 July 2023 the President signed the Act of 7 July 2023 amending the Act on spatial planning and development and certain other acts (the “Amendment”), among many key changes for the spatial planning system, introduces a new planning instrument, the integrated investment plan (“ZPI” as in “Zintegrowany Plan Inwestycyjny”).

ZPI will constitute a special type of a local plan, adopted by the municipal council at the request of an investor. The application will be submitted to the municipal council via the head of the municipality, mayor or town mayor. The application will have to contain a draft ZPI, meeting the requirements for local plans. In the case of approval of the draft ZPI, the procedure of adopting the ZPI provides for negotiations with the investor on the contents of the draft ZPI and the urban planning agreement. It will not be possible for the municipality to amend the content of the ZPI singlehandedly. What is more, ZPI may also be adopted in an area already covered by a local spatial development plan, replacing it.

The Amendment introduces the requirement to conclude an urban planning agreement in each case of adopting ZPI. The urban planning agreement is to be in the form of a notarial deed and its content is to include mutual obligations between the investor and the municipality related to the adoption of the ZPI, such as the investor’s obligation to carry out a supplementary investment for the municipality. Such an obligation may be, for example, to cover part or all of the costs of adopting the ZPI incurred by the municipality, including planning claims.

The purpose of the ZPI is to improve cooperation between the investor and the municipality while ensuring the participation of the local community – although the amendment allows in this case for the form of public consultation to be limited to the collection of comments, and for consultations to be held for a period of at least 21 days. The ZPI is not limited to residential development only, and is therefore intended to supplement the Act of 5 July 2018 on facilitations in the preparation and implementation of housing investments and accompanying investments (so called “lex developer”) and, from 1 January 2026, to completely replace the resolution on determining the location of a housing development.
The Amendment will enter into force 30 days after its promulgation in the Journal of Laws. As of this moment, the Amendment has not yet been promulgated.

Conversion of perpetual usufruct of commercial real estate into ownership

The Act of 26 May 2023 amending the Act on municipal government, the Act on social forms of housing development, the Act on real estate management, the Act on tax on civil law activities and certain other acts, containing, inter alia, an amendment to the Act on Real Estate Management (hereinafter the “Amendment”), will, as of 31 August this year, introduce provisions under which the right of perpetual usufruct of commercial real estate can be converted into ownership. Unlike the transformation of the perpetual usufruct right into the ownership right concerning owners of houses and flats, the transformation of commercial real estate will not take place by operation of law, but at the request of an entrepreneur. Entrepreneurs will have one year from the entry into force of the Amendment to submit it.
If the application is submitted in time, the public authorities will be obliged to sell the land to the user. The claim is not entitled in statutorily defined cases, i.e. if the real estate was given in perpetual usufruct after 31 December 1997; if the perpetual usufructuary has not fulfilled the obligation specified in the agreement on the giving away of the real estate, or in the case of land located on the territory of ports and marinas, or in the case of land used for running a family allotment garden. With regard to undeveloped land property, acquisition will be possible with the consent of the provincial governor, the local government or the head of the district authority. A contract for the sale of real estate will also not be possible in the case where proceedings for the granting of perpetual usufruct of the real estate in question are pending.

According to government data, there are 405,796 pieces of land left in perpetual usufruct in Poland, and the projected revenue from the sale of this land is expected to reach between PLN 1.42bn and PLN 2.85bn for the State Treasury and between PLN 1.18bn and PLN 2.37bn for local government units.
For more information on the conversion of the perpetual usufruct of commercial property into ownership, please find the file we have compiled, available at: https://bakertilly.pl/legal/pl/alert-przeksztalcenie-uzytkowania-wieczystego-na-wlasnosc-na-rzecz-przedsiebiorcow-nowelizacja-ustawy-o-gospodarce-nieruchomosciami/