Legal Highlights for Real Estate – October 2023

Signing of the amendment to the Ordinance on technical conditions to be met by buildings and their location.

On 26 October 2023, the Minister of Development and Technology signed an amendment to the Ordinance on technical conditions to be met by buildings and their location (the ‘Ordinance’). The solutions provided in the content of the Ordinance are intended to respond to the problem of malpractices and irregularities occurring in the residential market, raised in the public debate, manifested through, among others, the shrinkage of publicly accessible common spaces, the creation of very small playgrounds next to multi-family buildings, or keeping short distances between residential buildings. The Polish Economic Institute’s report “Socio-economic consequences of spatial chaos” estimated the total annual cost of spatial chaos in Poland, to the aggravation of which housing developments that do not meet the needs of the population contribute, at PLN 84.3 billion.

The above problems are to be addressed by the introduction of such solutions as: requirement of keeping greater distances between residential buildings on neighbouring plots having more than 4 storeys above ground (not applicable when the neighbouring plot is a public square); adopting guidelines for the minimal area of playgrounds, dependent on the number of residential units; increasing the proportion of biologically active area in public squares to 20%. Another major change is the increase of the minimum area of commercial premises, which upon the new provisions of the Ordinance coming into force are to amount to 25 m2 – becoming equal to the minimum value foreseen for residential premises. The above requirement will not apply to premises accessible on the ground and first floors of buildings, with direct access from the street.

The changes provided for in the Ordinance, after concerns raised by, among others, the Polish Association of Property Developers (“Polski Związek Firm Deweloperskich” also “PZFD”), will come into force on 1 April 2024, instead of the originally proposed date of 1 January 2024. The longer deadline is intended to allow for the compliance of planned investments with a range of new regulations. However, this timeframe is still considerably shorter than the 18 months for the implementation of the legislation advocated by the PZFD.

Entry into force of the Act of 13 July 2023 amending the Act on the Provision of Information on the Environment and its Protection, Public Participation in the Environmental Protection and Environmental Impact Assessments and Certain Other Acts – change in the law for contractors.

As of 16 October 2023, the Act of 13 July 2023 amending the Act on Provision of Information on the Environment and its Protection, Public Participation in Environmental Protection and Environmental Impact Assessments and Certain Other Acts ( the “Act”) entered into force. The Act introduces an exception to the principle established in Article 6491 §1 of the Civil Code of a guarantee of payment for construction works (the “Guarantee”), granted to the contractor (general contractor) by the investor in order to secure the timely payment of the agreed remuneration for the performance of construction works. The Act extends the above article by §11, excluding the application of the provision of §1 in the event that the investor is the State Treasury.

Therefore, in the case where the State Treasury is the investor, Articles 6491 – 6495 of the Civil Code will not apply, including the contractor will not be entitled to the right under Article 6494 §1 of the Civil Code, allowing the contractor to withdraw from the contract if the investor does not provide payment Guarantee.
The purpose of the Guarantee is primarily to protect the contractor against late payment of remuneration for the construction works performed and to protect the contractor against the insolvency of the investor. The introduction of the exemption provided for in the Act was justified in the explanatory memorandum to the draft Act by the factual non-existence of the risk of non-receipt of remuneration from the State Treasury as a reliable and solvent investor that cannot go into bankruptcy. Moreover, the provision of a Guarantee to the contractor by an entity representing the State Treasury generates additional costs for the State Treasury, which is disadvantageous for the state budget.

However, the amendment introduced by the Act raises a number of doubts, mainly through the inability to enforce timely payment of remuneration, the application of the amendment to construction contracts concluded before 16 October 2023, in respect of which the contractor has not applied for a payment guarantee by that date. There are also concerns about possible price increases in bids submitted in tenders where the State Treasury would be the investor, due to the risk of the investor failing to meet payment deadlines.