BUYING A PROPERTY IN POLAND

Buying property in Poland presents an exciting opportunity for international investors and homebuyers alike. This blog offers a comprehensive guide to navigating the Polish real estate market, covering essential aspects such as property types, legal requirements, and the buying process. Whether you're looking to purchase a residential apartment, commercial property, or land, you'll find valuable insights to help make your investment in Poland smooth and successful.

What to consider before buying a property in Poland?

Before buying a property in Poland, you should consider the following:

1. Analyze the property’s legal status by checking land and mortgage registers. These public electronic records provide information about the property’s size, ownership title, and any mortgages. The data in these registers are considered accurate and reflect the property's legal status.
2. Conduct a due diligence process, which involves a thorough assessment of the property’s legal and formal aspects. This is especially important for properties with significant investment value.
3. Review the local spatial development plan. This local legal document outlines current and future land use within a municipality, including urban areas, and serves as the basis for issuing building permits. It helps verify the property’s location and the future investment plans for the area.

Buying Property in Poland – Key facts for foreigners:

EU legal entities and citizens can buy property in Poland (including land, houses, and apartments) just like Polish citizens. Non-EU legal entities and citizens might need a permit from the Ministry of Internal Affairs, although purchasing an apartment usually does not require one.

Property search websites:

• Otodom
• Morizon

Medium property prices in Poland (as of March 2024):

Apartment:

• Warsaw: PLN 18,000 per m²
• Krakow: PLN 16,000 per m²

House:

• Warsaw: PLN 10,000 per m²
• Krakow: PLN 9,000 per m²

Land:

• Mazovia: PLN 50,000 per ha
• Greater Poland: PLN 85,000 per ha Standard broker commission in Poland: Most brokers charge 2.0% to 3.0%, but rates of 4.0% to 6.0% can also be found.

Property purchase taxes:

• VAT: 23% (mainly for new properties and undeveloped real estate)
• Transaction Tax: 2%

Notary fees:

Fees vary based on the property value:

• For properties valued between PLN 1,000,000 and PLN 2,000,000: PLN 4,770 + 0.2% of the amount exceeding PLN 1,000,000
• For properties valued above PLN 2,000,000: PLN 6,770 + 0.25% of the amount exceeding PLN 2,000,000 (maximum PLN 10,000)

Land and Mortgage Register – registration fee: 200 PLN

Real Estate and residency in Poland: Owning real estate does not automatically grant residency, but it may be considered when evaluating applications for temporary or permanent residence.

Purchase price: The purchase price should reflect the market value and can be agreed upon in any official currency (PLN, EUR, USD, etc.). Usual payment methods: Checks are commonly used in Poland. Payments are usually made via bank transfer, notarial deposit, or escrow account.

Electronic land registry: [Electronic Land Registry](https://ekw.ms.gov.pl/eukw_ogol/menu.do)

Documents required for purchasing a property in Poland:

To purchase real estate in Poland, the notary will need the following documents from both the buyer and seller:

• A valid ID
• Company documentation (if applicable)
• Power of attorney (if applicable)
• Land Registry excerpts
• Previous purchase documents (if available)
• Confirmation of no outstanding tax liabilities
• Certificates of no pre-emption rights

Types of Property Transactions:

The most common types of property transactions in Poland include:

• Purchasing an apartment
• Purchasing a house
• Acquiring land, including agricultural land
• Buying commercial property
• Engaging in a sale and leaseback arrangement
• Buying a real estate company

Property Purchase Process in Poland: Stages

Stage 1: Researching Property Legal Status
Before buying a property, check its legal status. This includes verifying the seller’s ownership, checking for any encumbrances or third-party claims, confirming compliance with planning regulations and construction laws, and determining if the property is under historic conservation. Foreign buyers might need special permits.

Stage 2: Preliminary and Final Agreements
Typically, a preliminary sale agreement is signed first, outlining key terms like property description and price, and conditions for the final sale. After meeting these conditions, the final sale agreement is executed.

Stage 3: Post-Closing Actions

• Handover of Property: The seller transfers the property to the buyer, including necessary documents and a handover certificate.
• Land and Mortgage Register: The buyer must apply to be entered as the new owner in the land and mortgage register.
• Real Estate Tax Reporting: The buyer must report the purchase to local authorities within 14 days.
• Utility Contracts: New utility contracts must be signed, or existing ones transferred if possible.
• Leaseholder Notification: If the property is leased, inform leaseholders of the new owner.
• Housing Community Notification: Report the sale to any housing community or cooperative if applicable.
• Property Insurance: While not mandatory, it is recommended to get insurance for the property and third-party liability.

Additional obligations may arise depending on the transaction's specifics.

Buying Property in Poland - Agreements

When buying property in Poland, you will need to execute a sale agreement in the form of a notarial deed by a Polish civil-law notary. You may also need additional contracts based on the property type and negotiation stage:

1. Property Reservation Agreement: Typically used when buying through a real estate agent. This agreement commits the seller not to sell the property to anyone else for a specified time and includes details like the property description, sale price, reservation period, and fee. It can be a simple written contract, not necessarily a notarial deed.
2. Development Agreement: Used for residential properties. This agreement involves a developer constructing a building and transferring ownership to the buyer. It must be a notarial deed and includes detailed terms about the property, construction schedule, payment terms, and penalties. Payments are usually held in an escrow account, released upon completion of project stages or final transfer. Once construction is finished and approvals are obtained, a final notarial deed is executed to transfer ownership.
3. Preliminary Property Purchase Agreement:
   • Purpose: Used when the transaction cannot be completed immediately, ensuring the sale occurs at a future date.
   • Contents: Must include the property details, sale price, and a deadline for the final agreement. If no date is specified, the agreement must be finalized within a reasonable time set by the party seeking it.
   • Conditions: Often includes conditions like obtaining financing or permits, specifying who bears the risk if conditions are unmet, and how claims can be addressed.
   • Earnest Money: Typically 5-20% of the sale price, paid to the seller. If the agreement is not notarized, the buyer's recourse is limited to claiming damages. Notarized agreements offer stronger protection, including the ability to enforce the final agreement in court or claim title in the land register if the seller tries to sell to someone else.
   • Enforcement: Notarial acts are recommended for stronger legal standing and protection. Without notarization, only damages can be claimed if the final agreement is not executed.
4. Final Property Purchase Agreement:
   • Form: Must be executed as a notarial deed.
   • Contents: Includes detailed property description, sale price, payment terms, and any earnest money adjustments. Specifies the handover date.
   • Language: Must be in Polish, but a sworn translator will be provided if needed.
   • Ownership Transfer: Title transfers upon signing unless stated otherwise. If title transfer is deferred, a separate contract will be needed.

Types of Property Entitlements:

1. Ownership: This is the most comprehensive form of property entitlement, including the rights to possess, use, and dispose of the property.
2. Perpetual Usufruct: Similar to ownership but the land remains formally owned by the Polish State or state entities. The usufructor (individual or entity) has extensive rights to possess, use, and dispose of the property, and owns any buildings erected on the land. This right is granted for 99 years, or exceptionally, 40 years, with possible extensions. A key drawback is the obligation to pay an annual usufruct fee.
3. Share in Building with Assigned Apartment: In rare cases, foreigners can acquire a share in a property that includes an apartment. This share usually reflects the size of the apartment and indicates entitlement to that specific unit. This form of ownership is complex and less common, as it represents co-ownership of the entire building rather than individual ownership of the apartment. Foreigners typically need a permit for this type of purchase.
4. Cooperative Member’s Ownership Right: Similar to full ownership, this right includes possession, use, and disposal. However, the cooperative technically owns the property, and this right is transferable, inheritable, and enforceable.
5. Cooperative Housing Tenancy Right: Resembling a lease, this right includes possession and usage but not disposal. It is non-transferable, non-inheritable, and unenforceable.