Foreigners and real estate in Poland
With Poland's accession to the European Union the regulations concerning the purchase of real estate in Poland by foreigners who are citizens of the member countries of the European Economic Area were considerably liberalized. Consequently, foreign investors are now looking for attractive locations and treat real estate purchases in Poland as a future investment. Unfortunately, in order to buy the so-called "second residence" foreign nationals will still require a permit from the Ministry of Interior Affairs and Administration (MSWiA). This restriction will remain in force until 2009. If a foreign national has already made a purchase of, for instance, a tenement house as a form of investment, without the required permit, the transaction is null and void. Why?
Under the provisions of the Accession Treaty, which specified the terms on which Poland entered the European Union, the act of March 24, 1920 concerning the purchase of real estate by foreigners still stipulates the need for the MSWiA permit for the purchase of the "second residence" by a foreigner from the European Economic Area. This regulation will be in force for five years from the moment of Poland's accession to the EU, i.e. until April 30, 2009. The purchase of a "second residence" without the required permit is invalid.
So what is a "second residence"? An apartment that is a so-called separate property, i.e. entered separately into the land registry, is not a second home. The permit is also not required for purchases made by a foreign citizen of the EEA who has resided legally and continuously in Poland for at least four years. Without the permit one can also purchase a second home if one intends to start a tourism-related business. However, the most typical transaction foreign investors from abroad are interested in is the acquisition of a tenement house in a Polish city as a form of investment. Unfortunately, Polish legislation defines the term "second residence" so broadly that it encompasses these types of investments as well.
According to the regulations the second home is any real estate meant for residential development that will not be the foreigner's permanent place of residence, i.e. one that will not be his "first residence".
Legislators wanted to impose transitional protection of residential areas, yet there are problems with the imprecise formulation of the regulations and the fact that many areas in Poland still lack spatial plans that specify the precise use of the land. The term 'residential development' includes both single-family houses and apartment buildings. Theoretically speaking, any empty plot, as well as an already developed area, can be classified as real estate intended for residential development. Therefore, it is of key importance to establish the criterion according to which one could consider whether a given plot is "intended for residential development" in light of the law. This role is fulfilled by the local spatial plans. However, what to do in the frequent cases when the area which the investor is interested in does not have such a plan? With regard to already developed plots, the character of the buildings is key. For instance, if on the plot one is planning to purchase, the buildings are of the residential, commercial or mixed character, this entails the necessity to obtain the MSWiA permit for this purchase by a private foreign investor, irrespective of the planned target use of the plot.
Paradoxically then, despite the terminology used in the act, the "second residence" is not just the estate that the foreigner intends to use as his second residence. In light of Polish regulations the deciding factor is whether from the point of view of the administrative law the estate in question serves or can serve anyone's residential needs.
The "second residence" can then also be a tenement house with many apartments in which a foreign natural person will never live, but which he or she will lease to other persons or will turn it into a commercial-use building. What does this imply? Regulations that are badly constructed may encourage purchasers to shape the legal structure of the transaction in such a way that in the case of a purchase of real estate intended for residential development and not for personal use, the costly and time-consuming obligation to obtain the MSWiA permit can be avoided.
By Marek Puwalski
Trainee solicitor
Consultant at Kraków-based Kuczek and Maruta law-firm
Under the provisions of the Accession Treaty, which specified the terms on which Poland entered the European Union, the act of March 24, 1920 concerning the purchase of real estate by foreigners still stipulates the need for the MSWiA permit for the purchase of the "second residence" by a foreigner from the European Economic Area. This regulation will be in force for five years from the moment of Poland's accession to the EU, i.e. until April 30, 2009. The purchase of a "second residence" without the required permit is invalid.
So what is a "second residence"? An apartment that is a so-called separate property, i.e. entered separately into the land registry, is not a second home. The permit is also not required for purchases made by a foreign citizen of the EEA who has resided legally and continuously in Poland for at least four years. Without the permit one can also purchase a second home if one intends to start a tourism-related business. However, the most typical transaction foreign investors from abroad are interested in is the acquisition of a tenement house in a Polish city as a form of investment. Unfortunately, Polish legislation defines the term "second residence" so broadly that it encompasses these types of investments as well.
According to the regulations the second home is any real estate meant for residential development that will not be the foreigner's permanent place of residence, i.e. one that will not be his "first residence".
Legislators wanted to impose transitional protection of residential areas, yet there are problems with the imprecise formulation of the regulations and the fact that many areas in Poland still lack spatial plans that specify the precise use of the land. The term 'residential development' includes both single-family houses and apartment buildings. Theoretically speaking, any empty plot, as well as an already developed area, can be classified as real estate intended for residential development. Therefore, it is of key importance to establish the criterion according to which one could consider whether a given plot is "intended for residential development" in light of the law. This role is fulfilled by the local spatial plans. However, what to do in the frequent cases when the area which the investor is interested in does not have such a plan? With regard to already developed plots, the character of the buildings is key. For instance, if on the plot one is planning to purchase, the buildings are of the residential, commercial or mixed character, this entails the necessity to obtain the MSWiA permit for this purchase by a private foreign investor, irrespective of the planned target use of the plot.
Paradoxically then, despite the terminology used in the act, the "second residence" is not just the estate that the foreigner intends to use as his second residence. In light of Polish regulations the deciding factor is whether from the point of view of the administrative law the estate in question serves or can serve anyone's residential needs.
The "second residence" can then also be a tenement house with many apartments in which a foreign natural person will never live, but which he or she will lease to other persons or will turn it into a commercial-use building. What does this imply? Regulations that are badly constructed may encourage purchasers to shape the legal structure of the transaction in such a way that in the case of a purchase of real estate intended for residential development and not for personal use, the costly and time-consuming obligation to obtain the MSWiA permit can be avoided.
By Marek Puwalski
Trainee solicitor
Consultant at Kraków-based Kuczek and Maruta law-firm
