8 June 2021. The President signed the “Act on the Protection of Rights of Buyers of Residential Units or Single-Family Houses and the Developer Guarantee Fund”. As a result of its enactment, new solutions will be introduced, which in some areas will significantly change the position of not only developers but also purchasers of apartments and single-family houses.
Previous gaps and inaccuracies
One of the novelties that the new Act will introduce to the legal order will be the regulation of reservation agreements. Currently, even though reservation agreements are commonly used in market transactions, there were no detailed regulations regarding the rules and manner of concluding them. For example, the required form of a reservation agreement has not been specified. The maximum amount of the reservation fee that should be paid by the person making the reservation was not specified. There were also no conditions for refunding the deposit after the resignation from the purchase of the real estate.
The term reservation contract means a contract concluded between a developer and a person interested in the sale offer. The subject of the offer is the obligation to temporarily exclude the sale of a specific – chosen by the reserving person – residential unit or single-family house.
Specific rules
Under the New Development Act, the reservation agreement will have to be concluded in writing under pain of nullity.
Moreover, it will have to include such information as:
- parties, place, and date of agreeing,
- price of a dwelling unit or single-family house selected by the reserving party from the sale offer the amount of the reservation fee (if such a fee as stipulated by the parties) the period for which the dwelling unit or detached house selected by the reserving party will be excluded from the sales offer,
- the location of the dwelling unit in the building,
- the usable area of the dwelling unit or detached house, including the layout and size of rooms.
The law specifies also the maximum amount of the reservation fee. It may not exceed 1% of the target – residential unit or single-family house – specified in the information prospectus.
It also introduced the obligation to immediately return the reservation fee to the reserving party if:
- the reserving party has not obtained a positive credit decision or a promise to grant credit, regardless of the reasons for the refusal,
- the developer fails to perform its obligation under the reservation agreement (in this case the refund is to be paid in double amount of the paid fee, however, it has to be pointed out that the discussed Act does not specify the term “failure to perform the obligation under the reservation agreement”,
- the developer has made changes in the information prospectus or its attachments without informing the reserving party.
Another important regulation will be the requirement of reimbursement of the reservation fee in the double amount by the developer. It concerns the situation when after signing the reservation contract (and also after the payment of the reservation fee) the developer does not remove the defects reported to the acceptance protocol, and the purchaser does not proceed to sign the contract transferring the ownership of the real estate.
New obligations for the entrepreneur?
How will the above regulations affect the real estate market? Their clarification certainly makes it easier to create reservation agreements. Although some of them already regulated the above issues, because the average consumer expected such provisions.
On the other hand, specifying the reservation fee refund terms will be problematic for developers. Similarly, setting a maximum threshold for the reservation fee will certainly limit earning potential – especially in the situation when the property itself is very attractive. The introduced regulations are to a large extent aimed at protecting the consumer, however, the consent to reserve the property depends on the developer himself. Therefore, the changes may reduce the number of reservation agreements signed. Unless the above conditions will not cause entrepreneurs any major problems.