Peeling back the layers – the layer approach to the ownership of properties in Poland

Have you ever wondered who owns the space under the surface of the property? Or who owns the space above it? Unless you are a real estate investor or a lawyer, the answer is most likely no. However, those questions are often key from the perspective of the planned investments as well as planning issues in dense urban areas.

Attractive investment land is becoming increasingly scarce, so it is worth exploring the concepts related to the possibility of splitting the ownership title into particular ‘layers’ of the property. Proposals to regulate this issue tend to resurface every few years with varying levels of interest. There have not been, however, any changes in this respect, nor is the concept of ‘layers’ of ownership of properties directly permitted under Polish law. Should this be finally addressed by the Polish legal system? Or is it just a foreign concept that does not really fit into the Polish legal system?

In this short overview we intend to peel back the layers of this issue.

The concept of property ownership in the Polish legal system
Property ownership in Poland is generally based on the principle of superficies solo cedit (literally, the surface yields to the ground – or what is built on the ground belongs to the ground). Based on this rule, derived directly from the Roman law, all buildings and structures located on the land form part of a property and are the subject of the same ownership right.

Further, land ownership extends to the space above and below its surface. Therefore, real estate in Poland should be really treated as an inseparable whole. In a way, the owner’s rights to property do not only cover the land and buildings located thereon, but also the space above and under its surface.

However, it is worth noting that Polish law also provides for specific derogations from the principle of superficies solo cedit. In particular: a separate ownership of buildings in case of land held in perpetual usufruct, separate ownership of apartments or specific regulations related to allotment gardens (rodzinne ogródki działkowe). The separate ownership of infrastructure and connection points located on the land should be also noted as this is an example of a deviation from a general principle of the Polish legal system dictated by practical considerations and the need to facilitate property operation. Infrastructure and connection points are often owned by utility providers who are responsible for their maintenance and repairs.

Therefore, the principle of superficies solo cedit is not absolute and there are certain specific exceptions from this rule. It therefore seems that there is a space for new regulations related to the layer approach to property ownership.

There were several attempts to incorporate the concept of layered ownership into Polish law, and to tackle this issue, a Parliamentary Committee was even established in 2020. However, no law has been proposed thus far, despite the declarations of the deputy infrastructure minister that this was expected to happen in 2024.

How can particular layers of use of a property be currently secured in Poland?
The possibilities of legally securing the rights of investors who carry out construction projects above or below ground level are rather limited.

Such investments are usually carried out based on contractual relationships (such as a lease agreement, tenancy agreement, usufruct agreement) – that is the investor is granted the right to use the property for construction purposes by the land owner and thereby secures the right to use such property. Such agreements are not permanent, and the possibility of terminating contractual relationships cannot be entirely excluded. This can result in losing the legal title to the real estate on which the investment is being developed. Further, from the perspective of financial institutions financing these kind of projects, the material disadvantage of this set-up is the inability to secure the financing with a mortgage (as in principle a mortgage can only be established on real property owned / held in the perpetual usufruct by the investor).

Alternatively, establishing an easement to secure the possibility to use a part of the property (such as a tunnel, underground car park or viaduct) may be considered. An easement can make it possible to build on a third party’s land, specifically in the case of infrastructure projects or projects that require long-term use of space above or below ground. Despite its undeniably more permanent nature compared to contractual relationships, this is still not an ideal solution since easements still do not provide investors with what is most desirable from their perspective − full control over the land. It should also be emphasised that, as in the case of contractual relationships, easements cannot be the subject of a mortgage. Further – easements provide only for a specific scope of rights – therefore any potential future redevelopments, or changes in use may not be in line with its provisions, preventing the beneficiary from fully benefiting from the property.

How this issue is addressed in different jurisdictions?
The concept of splitting layers of ownership in property already exists in different legal systems, in particular, in economically developed countries and countries struggling with high population density, dense urban development and high property prices, such as the US or urban areas in Australia; this concept also exists to a limited extent in some European jurisdictions.

The US and Australian legal systems provide for complex, interwoven provisions regarding property law, which is also subject to differing state law provisions. Without going into too much detail, it can be observed that the concept of ‘layers’ of ownership exists in such legal systems.

This is particularly evident in the case of the institution of air rights. It is traditionally expressed in common law by the principle: cuius est solum, eius est usque ad coelum et ad inferos (“whoever owns the soil, it is theirs up to Heaven and down to Hell”), meaning in practice that the land owner has the exclusive development rights in the airspace above its land. This space constitutes a property itself and can be sold or transferred.

As a result, it is possible for example for a developer to purchase an air right over an adjacent plot which can be then used for development of a high-rise building. This is particularly common practice in Manhattan – as a noteworthy example we should indicate 53W53, a building located, as its name suggests, at 53 West 53rd Street in Midtown Manhattan. The development of this supertall skyscraper was only possible thanks to air rights. The developer of 53W53 purchased a combined 22,000 m² of air rights from MoMA and St. Thomas Church for $85.3m.

Similar regulations exist in Victoria, a state in Australia, where the law provides for ownership of a ‘three-dimensional property’, including portions of a parcel of land that are ‘in the air’. This allows for the division of a property in a three-dimensional space which in turn makes it possible to sell a piece of land located, for example, above ground (in the air). This law allows for creating separate property titles for such spaces.

As a European example, the concept of ‘3D property’ from the Swedish law could be indicated. In this case the property is delimited both horizontally and vertically, it may potentially extend over or under several ground parcels. Therefore it is not confined within the 2D limitations of the traditional approach to the ownership right. This may lead to facilitating the construction as well as financing process of a development.

This clearly shows that ‘splitting layers’ of ownership may lead to the possibility of further development in densely build-up areas, as well as for additional income for the property owners.

Conclusion – lessons for the Polish legal system
Considering the decreasing availability of undeveloped plots of land in cities, it is recommended to introduce the concept of ‘layers’ of ownership of properties into the Polish legal system. Urban areas that were considered to be fully built-up could be further developed due to freeing up new attractive investment areas.

In Poland, this is particularly the case with respect to spaces over railway tracks (for example, in the vicinity of Aleje Jerozolimskie in Warsaw). Abandoning the principle of superficies solo cedit would allow PKP PLK to sell such spaces over railway tracks which could lead to exciting investments. Warsaw could get its own Hudson Yards (a project in NYC which was developed on 28 acres over a working rail yard).

Considering the above, it is high time to allow greater flexibility in the Polish property ownership system and adapt it to market demands.