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Real estate transfers in Poland | Common mistakes and Invitation to a webinar

  • Poland
  • Real estate


Purchase of real estate is a transaction burdened by numerous limitations under the laws applicable. There are various aspects that shall be taken into consideration not only at the stage of the sole transaction, but also when choosing the proper one to buy and establishing whether we have a chance of becoming its owner at all. Most unexpected issues may arise where they are least expected, such as the pre-emption right of the State Forests in the middle of the city or necessity to distinguish the date of the administrative decision being issued and being final many years ago – in order to learn that the seller is not an owner.

1. Do not violate the pre-emption rights

The Polish law provides for various pre-emption rights with respect to the real property that can be enjoyed by the commune, special economic zones or the National Centre for Support of Agriculture. The most common pre-emption right is the commune pre-emption right. It appears e.g. in the case of sale of undeveloped real estate previously acquired by the seller from the State Treasury or local government units, sale of the right of perpetual usufruct of undeveloped land, real estate designated in the local plan for public purposes or entered in the register of monuments, as well as with regard to real estate located in the area of revitalisation. Moreover, there are many additional exceptions that make the above right even more complicated, including the sale to the seller's relatives, between legal persons of the same church or religious association, as well as for road or airport purposes.

As the violation of the pre-emption right causes invalidity of the sale, the ambiguities, e.g. regarding the notion of “undeveloped land”, bring the utmost risk. In our practice, we encountered a discussion whether the land - built up with stationary (or container) power transformer station and/or a paved internal road that remained unused for 50 years - shall be deemed developed or not. In cases of doubt, we usually recommend to conclude the conditional agreement and inform the commune about the possible pre-emption right. These regulations, however cause additional costs (more notarial deeds), extend the process (waiting for the answer of the commune) and in some cases cause the investor to withdraw from transaction, especially if a similar plot without such obstacles is available.

2. Acquisition of agricultural real estate – only for specific persons

Acquisition of agricultural land in Poland is extremely complicated and associated with many risks at various stages. As a general rule, the agricultural land that is not designated for non-agricultural purposes in spatial development plans (local zoning plans) of the area more than 1 ha, can be only acquired by an individual farmer (who in general is the person with relevant qualifications). However, the law provides for numerous exceptions, including purchase by a person relative to the seller, by a local authority or the State Treasury, as a result of an inheritance, by the church etc.

Any other person shall obtain the approval of the relevant state authority under numerous conditions including: proving that it was not possible for an individual farmer to acquire given agricultural real estate, the acquirer of the agricultural real estate undertakes to conduct agricultural activity for 5 years and cannot sell the property within such timeframe.

The law provides also for many other obstacles, as there are pre-emption rights of the leaseholders, pre-emption right of the state agency in case of sale of the shares of the company being owner of real estate with an area of at least 5 ha, restrictions of ownership of more than 300 ha of land, ambiguities with confirming the farmer status of a person, as well as inconsistencies between the different acts regulating this issue. As most of the violations of the rules are sanctioned with invalidity of the sale, there’s always much uncertainty in such transactions.

An example of how complicated the interpretation of the law in this scope might be: the provisions on the pre-emption right shall not apply to agricultural real estate which by 30 April 2016 was designated for non-agricultural purposes in the final zoning decisions (which are not a zoning plan). In practice we’ve seen an invalid notarial deed regarding the acquisition of such real estate, where the zoning decision was issued before the said date, but it became final after that date.

3. Acquisition of real estate by foreigners – not all need special permits

A foreigner is obliged to obtain a permit for the purchase of real estate from the minister competent for internal affairs. The definition of a foreigner is very broad, as it is any non-Polish citizen or company established abroad. However, what is important, it is not required to obtain a permit by foreigners from Switzerland and who are citizens or entrepreneurs of states - parties to the Agreement on the European Economic Area (EEA), e.g. German, Austrian, French, Czech or Slovak ones. Also a company based in Poland is an EEA entrepreneur. This means that all legal persons and commercial companies based in Poland, also a one-shareholder limited liability company based in Poland, whose sole shareholder is a citizen of China, the USA or Australia, is an EEA entrepreneur and does not need to obtain a permit to purchase real estate in Poland.

Problems arise with share deals, since save for exclusions for companies from the regulated market or the purchase of premises, the acquisition or subscription of shares or stocks by a foreigner requires a permit, if in result the company that is the owner of real estate becomes a controlled company. It does not matter on which "level" the transaction takes place.

Thus – only for example – a permit is required for acquisition of:

a) 100% shares in a Polish limited liability company by an American company.

b) 10% of shares in a Polish limited liability company by an American company from a Polish citizen, if shareholders of that Polish company are: (i) a Polish citizen 55%, (ii) a German company 45%.

c) 1% of shares in a Polish limited liability company from a German company by a Chinese company, where the shareholders of the Polish company are: (i) a Polish citizen 30%, (ii) a German company 70%.

d) 100% of shares in the Polish company XZY sp. z o.o., which holds 100% of shares in another Polish company ABC sp. z o.o., which is the owner of the property, by an Australian company.

After leaving the EEA by Great Britain this topic became an issue again and requires deep analysis in ongoing transactions, due to the fact that after Brexit British companies became “foreigners” under the discussed law.

4. VAT Taxation – even experts hesitate

The VAT taxation of the sale of the real estate leads to many mistakes and disputes.

As a rule, the sale of real property is subject to VAT, but the provisions of the VAT Act provide for exemptions in certain situations. In particular the supply of buildings, structures or parts thereof is exempt from tax, save when: the delivery is made within or before the first settlement, a period of less than 2 years has elapsed between the first settlement and the delivery of the building, structure or parts thereof, or the seller incurred the expenses for their improvement in the aggregated amount of more than 30% of the initial value of these objects.

The practical problems with defining the proper taxation are so complex, that even tax advisors are not always sure whether the chosen taxation method is applicable and accurate. If the parties do not apply for a binding interpretation of tax authorities beforehand, the outcome of the sale agreement in this regard is always at risk and may lead to disputes.

5. Forest or revitalisation areas – not only where you would expect them to be

a) forest

In the case of sale of a forest so marked in the records of land and buildings – or land designated for afforestation in the local spatial development plan or in the decision on building conditions and land development – the State Treasury, represented by the State Forests, has the pre-emption right with respect to it.

The problem with this regulation stems from the fact that not the factual state (actual existence of the real forest on the plot) triggers the pre-emption right, but the formal description of the property in the register or, what is even more important, the plans of the afforestation prepared by the relevant authorities. In practical terms – the information regarding the afforestation is available on-line, but the parties of the sale agreement should always obtain the dedicated information from the relevant authorities anyway, specifically for the plots of land to be sold. Such plans may even encompass areas, in which nobody would expect it. In our practice we’ve seen an invalid sale agreement in the densely urbanised part of Warsaw, which was formally designated for forestry purposes.

b) revitalisation

Similarly to the afforestation, the problem exists with respect to the revitalisation areas. As above, one should always obtain the specific information from the authorities in order to exclude the possible pre-emption right. Verification of the designation of the land for revitalisation purposes by notaries and attorneys based only on the public records causes unnecessary risks.

As you may see from this brief summary of the most ambiguous issues, purchasing real estate in Poland may be tricky. In case of the need to seek professional assistance or any questions on the above matters, do not hesitate to contact our expert in Eversheds Sutherland Poland, dr. Piotr Michał Kosmęda.