Will the new Developers’ Act affect the housing market?

Poland: After a one-year vacatio-legis, a new development law comes into force.

On the initiative of the UOKiK (the Office for Competition and Consumer Protection), a new Developer’s Act was enacted last year with the aim of strengthening the protection of housing purchasers. Due to its importance, as much as a one-year vacatio legis period was provided for it.

As one might guess, increasing the level of security for purchasers entails additional obligations and costs for developers. As the geopolitical situation has changed dramatically over the past year, there have been parliamentary motions and demands to postpone the effective date of the new law by at least another year. This is because it will be an additional factor driving up the price of new flats. However, the machine was not stopped and the new developers’ act became effective on 1 July 2022.

What novelties does the Act introduce?

The Act now covers virtually all development projects and premises purchased in such developments, regardless of the state in which they are in. It will also cover «finished» premises. What is more, it extends the circle of entities to which it applies — not only developers, but also flippers will be subject to it. However, a developer will not be covered by the Act in the case of a sale of premises to entrepreneurs for purposes related to their business or professional activity, e.g. when selling a package of premises to a real estate fund. In contrast, a trader, including a flipper, who has bought premises from a developer and further sells them to an individual for their private purposes, will be subject to part of the provisions of the Act.

Importantly, the new Act introduces a Developer Guarantee Fund to which contributions will be made by developers. The funds of the Fund are to be used to satisfy purchasers in the event of bankruptcy, insolvency of developers and also, for example, failure to return the funds paid by them after the purchaser withdraws from the contract. It is anticipated that the introduction of a contribution to this Fund will result in an increase of housing prices by approximately 3-5%.

 

Source: Act of 20.05.2021 on the protection of the rights of the purchaser of a dwelling or a detached house and the Developer’s Guarantee Fund; Journal of Laws, item 1177

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