Legal Highlights for Real Estate – March 2023

March 2023

Act on housing cooperatives enters into force as of 1 March 2023

On 1 March 2023, the Act from 4 November 2022 on housing cooperatives and the rules for the disposal of real estate belonging to the municipal real estate stock aiming to support the realization of housing investments (the “Act”) entered into force. The Act sets forth cooperation rules for housing cooperatives, as well as rules for the disposal of real estate belonging to the municipal real estate stock in order to support housing investments carried out by housing cooperatives. The intent of the new regulations is to facilitate this form of investment and reduce the housing deficit in Poland. According to the Act, rules of cooperation between the members of the cooperative are to be set forth in a housing cooperative agreement or a Civil Code partnership agreement concluded in the form of a notarized deed. The cooperative is to consist of at least 3 members, who can only be natural persons, cooperating in order to carry out the construction process. The process should result in completion of a multi-family residential building as the future place of residence of members of the cooperative. Thus, the purpose of the investment is not to generate profits, but to meet the housing needs of the cooperative’s members, their children, and those living with them. The investment can proceed in three versions: through the acquisition of land property and construction of at least one multi-family residential building; through the acquisition of land property and construction of a complex of single-family residential buildings, if the total number of independent residential units, or single-family residential buildings in which no units have been separated exceeds two; by the acquisition of land property developed with at least one building and carrying out construction works in that building, after the completion of which the total number of residential units or single-family buildings will be greater than two. A significant facilitation for housing cooperatives is the preferential access to municipal land introduced by the Act. This is because local governments will be able to apply more favorable rules to cooperatives, such as, among others, instalment payments for the acquisition of real estate, or the application of discounts on the price of real estate in the event of the use of real estate, buildings and units included in the investment in accordance with the terms of the Act. In the justification of the draft Act it is predicted that the introduced solutions will allow to reduce the costs of the construction of residential buildings because of the cooperative members’ ability to single-handedly carry out part of the works, which means not paying profit margins to subcontractors and developers. The possible reduction in the cost of obtaining a residential unit using this form of investment, in comparison to its purchase on the developer’s market, can amount to about 20-30%.

The Ombudsman has submitted a legal question to the Supreme Administrative Court on rulings on re-privatization claims

On 13 February 2023 the Office of the Ombudsman published on its website the contents of a legal question which the Ombudsman addressed to the Supreme Administrative Court (“NSA“), in which he requested a ruling on whether purchasers of re-privatization claims are entitled to the status of a party in a case for the establishment of a perpetual usufruct right under the provisions of the Decree of 26 October 1945 on the Ownership and Use of Land in the Area of the Capital City of Warsaw (the “Bierut Decree“). The question is the aftermath of a new line of jurisprudence set forth by the Supreme Administrative Court in four rulings dated 29 August 2022 (ref. I OSK 2875/20; I OSK 2034/20; I OSK 707/20 and I OSK 1717/20), and then in two rulings dated 6 October 2022 (ref. OSK 999/21 and I OSK 1578/21). In these judgments, the NSA ruled that purchasers of re-privatization claims could not be parties to administrative proceedings for the establishment of perpetual usufruct rights conducted under Article 7(1) of the Bierut Decree. At the time, the NSA pointed out that according to the above-mentioned provision of the Bierut Decree, the perpetual usufruct right can only be established in favor of the previous owner of the land and his legal successors in possession of the land and persons representing the owner’s rights. Meanwhile, there are no provisions which could provide a legal basis for establishing perpetual usufruct rights in favor of persons presenting civil law contracts for the acquisition of rights and claims under the Bierut Decree. The above-mentioned last year’s judgments represent a radical amendment to the previous line of rulings by administrative courts and the Supreme Administrative Court, which did not exclude rights in the administrative procedure for purchasers of claims outside the group of inheritors. In his question, the Ombudsman pointed out that the previous legislation of recent decades also did not, in principle, question the turnover of claims, and noted that “if the legislator really wanted to definitively exclude the turnover of claims under the decree, he would have done so explicitly.” The ombudsman further pointed out that going beyond “the limits set by the law, even to eliminate wrongful phenomena, does not seem legitimate in this situation.” He added that a verification commission has been established to eliminate irregularities occurring in re-privatization cases, including regarding claims trading. The question, the full reasoning of which is posted on the Ombudsman’s Office website, went to the General Administrative Chamber of the NSA.

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March 2023

Tax Highlights for Real Estate – March 2023

Dividend exemption from withholding tax – status of beneficial owner necessary. According to the provisions of the Polish CIT Act, one of the conditions for the application of the dividend withholding tax exemption is the exercise of due diligence. Contrary to the requirements for the exemption of interest and royalties, in the case of the […]