Legal and Procedural Issues Relating to the Purchase of an Apartment in Poland
This Briefing Note is a useful guide to those considering purchasing an apartment in Poland. Property in Poland is normally freely alienable, in that it may be bought, sold, inherited, and encumbered. Ownership under Polish law is synonymous with ownership as understood in Western, common-law countries and may be thought of as freehold. Every property in Poland, such as an apartment, should have assigned to it a so-called land and mortgage register [ksiega wieczysta], which will contain a synopsis of legal title to the property. Land and mortgage registers are maintained by district courts and are open to the public for inspection. A land and mortgage register court will issue up-to-date transcripts [odpis] of a land and mortgage register for a small fee. Fresh transcripts of a land and mortgage register may be relied upon to reflect the legal status of a property. The land and mortgage register is, in effect, the deed to the property, with the issued transcript showing legal title to the property. In most cases, you will also be purchasing a share in the common parts of the building and the land plot(s) under the building. The share in the common parts and the land is proportionate to the share of the apartment you will own in relation to all the other apartments in the building. For example, if your apartment is 100 m2 and the entire building has 10 apartments of 100 m2 each, your share in the common parts of the building and the land under the building would amount to 1/10th. Parking spaces and storage areas not appurtenant to the apartment may be handled in a number of ways. Developers most commonly designate such areas as common parts of the development and sell exclusive rights to apartment owners to use a particular parking place and/or storage area.
The number of contracts your transaction will require will depend on how the developer has structured the project and whether you will also be purchasing parking space(s) and storage space. This Note is prepared with the assumption that the transaction will include parking space and a storage area, which is normally the case. When parking space and a storage area are included in the transaction, there are normally four contracts concluded with the developer: 1.1. A reservation contract for the apartment, parking space, and storage area, Each of these is looked at in summary below.
The purpose of the reservation contract is to reserve a specific apartment at a defined price. Reservation contracts do not secure a transaction to a great extent and it would be rare for a party to enforce a reservation contract before a Polish court.
The purpose of the preliminary purchase contract is to legally formalise the details of the transaction, and to establish a payment schedule for the price. The preliminary purchase contract is normally subject to a number of conditions being fulfilled before the final purchase contract is concluded: for example, the developer undertakes to construct the building, whilst the purchaser undertakes to pay the price for the apartment in instalments. A preliminary purchase contract may be concluded in two “forms” under Polish law: simple written form, or the form of a notary deed. A preliminary purchase contract in the form of a notary deed provides greater protection for the purchaser. The legal significance of a notary deed contract is that should the developer refuse to transfer legal title to the apartment upon completion of the building, the purchaser can apply to the court for specific performance to have the legal title transferred to him\her. The court order, in effect, transfers the legal title to the property, dispensing with the need to involve the developer. Another advantage of a preliminary purchase contract in notary form is that it may contain the developer’s consent to enter a caution of your claim to the apartment under the preliminary purchase contract in the land and mortgage register. The court will charge a fee for entering such a caution, which is collected by the notary and remitted to the court. The caution puts third parties on notice of your rights, which makes it nearly impossible for a third party to purchase in good faith the apartment to which you have a claim. A preliminary purchase contract in simple written form is enforceable to the extent that a purchaser may only claim damages against the developer if the developer decides not to perform the preliminary purchase contract; specific performance would not be available.
Most transactions require two final purchase contracts: one for the apartment and one for the parking space. Once the building is completed, the developer will need to obtain an occupancy permit [pozwolenie na uzytkowanie] for the building. Once obtained, the developer must apply to the local architect’s department for issuance of a certificate [zaswiadczenie] and to the local land surveying department for issuance of a transcript from the premises register [wypis z kartoteki lokali]. If the development was financed by a bank with a mortgage secured upon the development, the developer will also need to obtain a declaration from that mortgage bank that the mortgage will be released on the apartment when the apartment is sold. Upon obtaining all of the aforementioned documents (and assuming that all purchase price instalments have been paid up to that point), the developer will issue a notification of the date and time to attend at a Polish notary to execute the final purchase contract in the form of a notary deed. Subject to registration in the land and mortgage register, you will acquire legal title to the apartment under the final purchase contract. This contract must be signed before a Polish notary, since any contract affecting legal title to real property in Poland must be executed before a notary. The notary will collect a fee for this service. Once the final purchase contract is signed, the Polish notary will apply to the land and mortgage register court to create a separate land and mortgage register for the apartment, and to enter your name as the new legal owner. The court will charge a fee for creating the new registration and a fee for the entry, which will be collected by the notary and remitted to the court. You will receive a notification from the court of the creation of the land and mortgage register,, which will take several months.
You will be incurring two main legal costs in addition to the purchase price, namely (i) our conveyancing fee, and (ii) transaction costs and disbursements.
Transaction costs connected with your apartment transaction will be calculated in accordance with Polish law. When the preliminary purchase contract is executed in the form of a notary deed, you will incur transaction costs at that stage. Transaction costs are, in most instances, set by statute. Some costs are fixed and have no relation to the value of the property. Some costs are calculated under formulae based on the value of the property. With the exception of the notary’s fee, these costs are all non-negotiable, as they are set by law. All of these costs must be paid; you are not able to request that a particular cost be avoided. The law sets maximum amounts that a notary may charge by way of a notary’s fee on any transactions; a notary may, however, accept a lower fee. The Polish notary will calculate the transaction costs upon the signing of each contract. For several reasons, the exact amount of the transaction costs which you are to pay will not be known until the contracts are concluded. We are able to provide estimated maximum transaction costs to include the following:
Polish law recognises two types of co-ownership, where at least two joint purchasers simultaneously participate in a transaction to acquire ownership title to real property. 1. The first type is co-ownership by spouses as marital property, where each spouse has an equal, non-transferable interest in the entire property. This is similar to a common law joint-tenancy. Non-spouse joint purchasers should specify their intended share in co-ownership for each joint purchaser in the property at the outset. With respect to married purchasers, under Polish private international law, a married person’s participation in this transaction is governed by the law of the country with jurisdiction over the marriage. This means that, if you are married, Polish law, local law and international law all apply to your transaction, which can complicate your transaction. Polish law assumes that spouses may own property in Poland as marital property under local law. If, under the local law, it is possible for one spouse to purchase property separately from the other spouse, it should, in turn, be possible for one spouse to purchase property separately from the other spouse under Polish law. However, you should be aware that the legal basis for a separate spousal purchase must ultimately be evidenced by documentation valid under local law (the law of the country with jurisdiction over the marriage).
In order to make sure that the full amount is received by the recipient bank, you should instruct your transferring bank that you will bear ALL bank fees for the transaction. Between PLN 25 and PLN 50 or more is deducted by banks in international currency transactions. In international money transfers the transferring bank fills in a SWIFT form. As part of that SWIFT form, the transferring bank needs to specify which party should bear the bank fees, or whether the bank fees shall be shared. You should instruct your transferring bank that you will bear ALL bank fees (of any intermediary banks and the recipient bank), so that the recipient bank receives the full amount expected in its account.
Poland is a statutory law jurisdiction. A statutory interest rate is published from time to time by the Polish government. You may contact our firm to find out the current statutory rate (currently 11.5% per annum). The developer may apply the statutory rate whether or not the preliminary purchase contract so provides in the case of late payments or insufficient payments due to the developer.
You may be considering raising a mortgage in Poland to finance your apartment purchase. If so, you may find that the mortgage bank you choose will require certain documentation to be signed in Poland. One aspect of a Polish mortgage that may not be familiar to you is the fact that a mortgage transaction in Poland usually proceeds in stages; not all documentation for your mortgage will be signed at one time, but rather over a period. To assist you with the execution of mortgage documentation, we offer a mortgage support service.
Whenever a power of attorney empowering someone to acquire title to real property in Poland is to be signed outside Poland, the power of attorney must be signed in the local language before a local notary public or its equivalent in that jurisdiction. If the law of your jurisdiction recognises what in Poland is called the form of a “notary deed,” your power of attorney should be executed in such form; the local notary should know whether the law of your jurisdiction recognises the “notary” form. If your power of attorney is to be executed in a jurisdiction where English is not the official language, you will need to have the power of attorney translated into, and executed in, the local language, and then have an English translation of the local-language document prepared by a sworn translator. Assuming that the jurisdiction in which you reside is a signatory to the Hague Convention Abolishing the Requirement of Legalisation of Foreign Public Documents – which should be the case for most European countries – all documentation signed before a notary, including the power of attorney and any other foreign document such as a marital property contract or a separation of matrimonial estate declaration, as well as any English translations of documentation executed in a local language other than English, will then need to be affixed with an apostil by the competent authority in the jurisdiction in which you reside. If your jurisdiction is not a signatory to the Hague Convention, you may need to consult your local lawyer on proper execution of your power of attorney. This usually means that you will need to take the power of attorney to the Polish consul who is qualified to certify it. Source: TGC Corporate Lawyers
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