Perpetual usufruct of commercial land will be able to be converted into ownership

Poland: In 2023, companies are to finally gain the opportunity to convert land in perpetual usufruct into full ownership.

Until now, only individuals have had this possibility. The change is very important. This is because not everyone knows that:

  • A very large part of the land within the city limits is in perpetual usufruct and it is very difficult to find a plot of land for business (commercial buildings e.g. shopping centres, office buildings) that is fully owned, so often perpetual usufruct has to be purchased out of necessity.
  • The purchase price of land in perpetual usufruct and in full ownership is basically the same.
  • Although you have to pay the same price for buying land with perpetual usufruct as for a plot of land with full ownership, every year you have to pay an additional fee for perpetual usufruct, usually 3% of the value of the land. What is more, every three years this fee can be updated (as in: increased) depending on the rise in the market value of the property. In recent years of the real estate boom, the scale of increases reached up to one thousand per cent.

In the case of entrepreneurs, the transformation will not take place by operation of law, but on application.

Each perpetual usufructuary should first check whether his/her plot belongs to the State Treasury or to local government units (most often to municipalities).

This is because the rules of “buyout” from these 2 groups of owners will be different. And so:

State Treasury land will be buyable, upon payment:

a) in a one-off transaction: of the equivalent of 20 existing annual fees.

b) in instalments: of the equivalent of 25 existing annual fees.

Municipal land will not have statutory rules of buyout. Municipalities will be free to determine the conditions (after all, this is municipal revenue and municipal treasuries are starting to shine empty). Only boundary conditions will be set, e.g. a preference for a one-off payment.

Conversion for companies is expected to be possible in the course of 2023. This is what the Ministry of Development and Technology has announced. To date, however, there is no official bill… We will follow the topic.

 

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