On November 17, 2022. Polish Ministry of Development and Technology has announced that it is finalizing a bill to amend the Law on Real Estate Management and Certain Other Laws. The new regulations will address how to convert perpetual usufruct into ownership. The bill will affect entrepreneurs in particular.
On January 1, 2019, the right of perpetual usufruct of land developed for residential purposes changed into ownership. The Ministry is taking further steps to systemically eliminate perpetual usufruct. What else will the announced amendment change? It will allow perpetual users of land that has not been enfranchised by law so far to acquire ownership of the property. It should also be mentioned that the principle of freedom of contract between the public entity – that is, the owner of the land – and the existing perpetual user will be preserved at the same time.
According to information posted on the portal of the Government Legislation Center, the bill is currently at the opinion stage. From the latest available version of the draft, we can read that the main change is to concern Article 69 of the Act of August 21, 1997 on Real Estate Management, which regulates the price of real estate sold to a perpetual usufructuary through a civil law contract. The draft assumes, two ways to determine the price of such real estate.
In the case of real estate not intended for business, the price of the real estate shall be determined as twenty times the amount constituting the product of the existing percentage rate of the annual fee, for perpetual usufruct, and the value of the land as determined on the date of conclusion of the sale. If the annual fee has not been updated in the two years prior to the submission of the application for acquisition of the property, the value of the property will be determined on the basis of an appraisal report (a more formalized version of the appraiser’s opinion), the cost of which will be charged to the perpetual usufructuary. At the request of the purchaser, the price of the property will be spread in installments – for a period not more than 20 years.
However, if we are talking about a property that is intended for business – the price shall be set at an amount not less than 20 times the amount mentioned above. We must remember that this price, however, must not be higher than the value of the landed property determined as of the date of the sales contract. The value of this real estate may also be determined by preparing an appraisal report.
Within the framework of this bill, issues of state aid will also be regulated. The European Commission has repeatedly raised its doubts on this matter. An entrepreneur will be able to use public aid within the available limit of de minimis aid (public aid from the state, which does not have to be notified to the European Commission). Once this limit is exceeded, a surcharge will be required on the market value of the property, determined as of the date of sale. It is also worth mentioning that, according to the bill, in the case of real estate used for business, the staggered price of the property will be subject to interest at a reference rate determined in accordance with the European Commission’s Communication.
How will these reforms be felt as entrepreneurs? The proposed regulations will make it possible to stabilize the legal situation of entrepreneurs by changing perpetual usufruct to ownership, which entails many benefits, including the elimination of concerns about the amount of the increase in annual fees. Importantly, the draft assumes freedom in the timing of the decision to acquire real estate so you can depend on your own financial capabilities. Due to the early legislative stage, we still have to wait for the final version of the draft.