REAL ESTATE

IN POLAND CONTENTS

Introduction 4 VI. Investment and construction process 47

I. The market in Poland 7 Our services 51

II. Basic legal issues relatd to Real Estate 15 Contact details 57

III. Mechanisms of investing in Real Estate 25 Disclaimer 60 Due diligence as a stage proceding real IV. 31 estate acquisition

V. Real estate acquisition 39

2 3 Investing in real estate is a common and attractive prices when compared with the popular capital investment method. Many countries of Western Europe, as well as investors perceive real estate as a source a continuing low level of interest rates. The of permanent income – a fact which residential and office real estate markets contributes to the rapid development of the also reached record levels, which will be developer sector (already well-established discussed further below. in Poland). To meet residential needs, numerous multifamily buildings are springing The diversification of the real estate sector up in Poland’s largest cities, next to exclusive in Poland and detailed legislative solutions apartment houses. An increased demand for may, however, present a number of problems hotel and recreational leisure-dedicated real for foreign investors. Hence, we have the estate is also clearly visible, with luxurious pleasure of presenting a short brochure condo hotels and equally comfortable outlining the most essential information aparthotels playing an ever increasing role. regarding the real estate market in Poland and the legal provisions which regulate it. Simultaneously, increasing numbers of Polish and foreign corporations require substantial office spaces to meet their constantly growing needs. This contributes to development of commercial real INTRODUCTION estate. The situation is similar in terms of commercial warehouse real estate with the demand generated by the consistently developing e-commerce market. In turn, the dynamic growth of the goods and services market results in the creation of large size commercial real estate (shopping malls) which have already become well-inscribed in the landscape of Polish cities.

The Polish real estate market enjoys investors’ appreciation, a fact attested to by Poland’s creditable rank of the leader in the region of Central and Southern Europe (CSE) in terms of the value of real estate market transactions. The year 2016 brought a record volume in investment transactions, exceeding the value of EUR 4.5 billion. So good a result stemmed from, among others,

4 5 THE REAL ESTATE I MARKET IN POLAND despite such factors as banks’ stricter rent apartments or conclude other to estimates, approximately 160 to 180 credit policies in terms of the buyer’s obligational permitting the contracts of sale of the most expensive RESIDENTIAL own contribution or a general increase use thereof. It is worth noting that the apartments with prices starting from REAL ESTATE in credit costs, developer operations nationwide Mieszkanie Plus (Apartment PLN 17 thousand/m2 are concluded in Poland suffered no setbacks – to Plus) program addressed mainly at annually. the contrary – the market continues to young Poles may be a combination of The term residential real estate means flourish. It suffices to mention that in holding real estate initially in the capacity real estate mainly oriented at meeting 2016 178,409 mortgage loans were of a tenant and next as an owner. residential needs. This is a very broad granted with the joint value reaching The program assumes that premises OFFICE category as it includes both houses, almost PLN 40 billion. This data shows previously rented from the National REAL ESTATE multifamily residential buildings, and that when the interest rates on bank Real Estate Resources [Krajowy Zasób also apartments located within them. deposits are low, purchasing real estate Nieruchomości] can be later bought at Residential real estate is traded on the is considered to be the best form of attractive (i.e. lower than market) prices The demand for office real estate primary and secondary market. capital investment. (the so-called lease with an option). is constantly increasing. This is The National Real Estate Resources is a result of the presence of large The years 2014-2015 were marked by The largest residential real estate comprised of the real estate owned by foreign companies, including financial new sales records being established market exists in Warsaw comprising the State Treasury. institutions, consulting companies, and on the market of existing real estate more than 10% of the general market in other enterprises in Poland. This trend and in terms of transactions in new Poland. It is also where the highest sale Another interesting phenomenon to be can be expected to continue into the investments. and rental prices are recorded. Small noted in Poland for several years is the future. With 900 thousand m2 of office one-room flats (studio apartments; PL: trend among developers to purchase space commissioned for use, the record kawalerki) with the total area up to 40 areas developed with old historical year of 2016 was a response to that. For instance, in 2015 approximately 147.7 2 m and multi-room flats with the total townhouses or complexes of buildings Added to the previously existing space, thousand new flats were commissioned 2 area exceeding 80 m are relatively (e.g. post-factory) in order to carry out it gives an impressive result of more than for use (an increase by 3.0% compared most expensive. The average sale thorough renovation works and finally sell 9 million m2. Offering more than 5 million to 2014), 168.4 thousand new residential 2 price in Warsaw is PLN 7,600/ m . In them as separate premises. This trend m2, Warsaw remains an uncontested investment projects were commenced turn, according to the information of the has been observed in the biggest cities leader in this area, whereby it is worth (an increase by 13.7% compared to National Bank of Poland from 2015, at of Poland. It allows a new subcategory noting that as much as 400 thousand 2014), 188.8 thousand building permits the rent levels applicable then, entities of residential real estate offered by m2 commissioned for use in regional for construction of residential buildings investing in flats for rent achieved higher developers to be distinguished. urban centers amounts to the best were issued (an increase by 20.5% rates of return than those yielded by result of such cities since the beginning compared to 2014). This trend continued bonds or bank deposits and similar to Another developing sector in Poland is of the commercial real estate market in into the year 2016 and, according to the returns from commercial real estate. the market of luxury apartment houses. Poland. Kraków, Wrocław, The Tri-City statistical data, developers sold 20% In the biggest cities, luxury apartments (Gdańsk-Gdynia-Sopot), and Łódź are more flats than in 2015. A decisive majority (approx. 75%) of on average constitute approx. 4-6% of worth mentioning in this regard. the residential real estate is used by all finished residential facilities. Prices its owners. A different correlation can of builder’s finish standard luxury Companies look for high quality modern The number of issued building permits be noticed in other countries of the apartments oscillate between PLN office buildings in good locations not also reached a record level. Hence, European Union where more people 1 million to PLN 10 million. According only to highlight their reputation and

8 9 image, but also to attract the best development and transformation of spas). Despite that, also an increase employees. Similarly as in 2015, the this market, a need to obtain large area in popularity of smaller commercial And so the record 1.25 million m2 of new year 2016 may be labeled to have been commercial real estate has arisen. Such facilities has been recorded – in warehouse area was commissioned for the year of the tenant. In the situation of real estate was generally developed particular shopping parks with the total use, this way beating the record from a wide choice of modern office spaces with malls with a wide array of shops area ranging from 6-10 thousand m2 2015 by almost 30%. In turn, warehouse offered at competitive prices, investors and outlets offering a variety of services, enabling customers to quickly purchase area in Poland totals more than 11 2 must proffer not only a high quality, but this way pushing smaller enterprises out essential goods. They enjoy particular million m . The value of transactions on first and foremost a perfect localization of the market and in effect changing popularity in smaller towns. the warehouse real estate investment to convince the tenant to choose Poles’ shopping behaviors. market in 2016 also amounted to an impressive EUR 770 million (compared their offer. According to the statistics, Typical commercial space lease to more than EUR 470 million in averaged rents for the best-located high Currently, modern commercial spaces in conditions are in principle similar to 2015). quality office buildings oscillate between Poland occupy an area of approx. 13.4 those applicable to office spaces. EUR 18-23/m2 monthly. Yet, already on million m2. The dominant position goes Nevertheless, as a rule the lease the outskirts of Poland’s big cities the to shopping centers (shopping malls) period is slightly longer: 5-10 years with rent rates oscillate within the limits of with the total lease area exceeding 9.5 a possibility of prolonging. Longer lease The quoted results undoubtedly serve 2 2 EUR 11-15 /m monthly. million m . periods in particular apply to the largest to convince about the high potential of and most essential tenants (anchor this market. Meanwhile, approximately Office real estate lease contracts are tenants) who prefer lease contracts for further 1.5 million m2 of warehouse area usually concluded for the periods from There were 406 such facilities in 2016. 10 years or more. It is estimated that is under construction, 75% of which has 2 3 to 10 years, whereby the typical lease By mid-2017, almost 0.5 million m of the rates of return yielded by the best already been leased. period is 5 years. However, in the case commercial space was commissioned commercial real estate are at the level of for use, as much as 72% of which was of large tenants and new investments approx. 5%. Warehouse real estate is generally constituted by the above-mentioned a trend to conclude lease contracts located on the outskirts of major urban shopping centers dominant in Poland. for longer terms can be noticed. It is centers or in their close vicinity. Important estimated that rates of return from the The remaining share goes to shopping parks (6%), detached facilities (21%) and factors playing a decisive role in the best office real estate reach the level of outlet centers (1%). WAREHOUSE potential investor’s decision-making approx. 5.25%. REAL ESTATE process include good communication access to motorways and express roads. With the total of more than 3.1 Modern shopping centers are million m2 (approx. 28% of the entire COMMERCIAL multifunctional facilities where Along with the dynamically developing warehouse area in Poland), the Warsaw REAL ESTATE (RETAIL) customers can not only do their e-commerce market, the demand for agglomeration remains an uncontested shopping and use a variety of services warehouse real estate is also increasing. leader on this market. The regular high but next to these functions, they can Additionally, located in the center of level of investments in warehouse real take advantage of the fact that such Europe, Poland is a logistically perfect estate also continue in other regions The commerce and services market facilities house restaurants and cafes, location for branches of international of Poland, including Poznań, Wrocław, in Poland in the 1990s consisted of entertainment areas (cinemas, bowling companies from Central and Eastern Upper Silesia, and Central Poland mainly state-owned entities and small galleries, etc.), and sports facilities Europe. This explanes the fantastic (especially Łódź) in particular. private entrepreneurs. Following the (gyms, fitness clubs, swimming pools, results achieved in this sector in 2016.

10 11 The observation of this market leads to sporadically, ownership). are collected by the investor – the owner a conclusion that, in a significant part, of a condohotel. the investments are carried out in the HOTEL Hotel occupancy is also increasing build to suit (BTS) formula, which means REAL ESTATE from year to year. According to the that the investment is fully tailored Central Statistical Office (GUS) data in to the needs of a specific tenant. 2015, hotel occupancy reached almost The decisive majority of warehouse The hotel industry is booming. For many 50%, which is a satisfactory result. areas are leased to companies in the years the Polish hotel market has been Hotel occupancy in Warsaw, hosting logistics sector which sublet these recording an incessant growth. This mostly business clients, is significantly areas further, simultaneously providing is above all else due to an intensive higher exceeding 75% in four and five their subtenants with comprehensive development in tourism as well as star hotels. The fact that the Warsaw services in the scope of packing, a decreasing popularity of foreign hotel market offers the highest number loading, customs, and transport of destinations previously preferred by of hotel rooms does not come as goods. Another frequently employed tourists, e.g. Egypt, Greece or Turkey. a surprise. The highest number of formula is the sale&lease back option. The combination of these factors results hotels, however, is located in Kraków. In its frames, the seller sells the real in an increased use of both Poles and estate to a leasing company to later foreign tourists of hotels in Poland. The Polish market also records conclude a real estate leasehold In consequence, the Polish market is a growing trend and an increasing contract (leasing) with such a company enjoying an increasing interest of foreign interest in the so-called ‘aparthotels’ and and in consequence become a tenant companies from the hotel industry. ‘condohotels’. An aparthotel is a service (tenant). This operation enables freeing consisting in the rental of apartments in the previously invested funds while The number of hotels is gradually the hotel system charged per day. The providing an option to use them for growing. According to the data of the feature that sets this service apart from further investments. Central Statistical Office (GUS) for 2016, the regular apartment rental is its short- the number of hotels exceeded 2,450 term nature (e.g. rental for one day The typical period of the lease in the and has been increasing each year. only). Entities operating in this relatively case of warehouse real estate is 3 to Guests have access to a pool of more young business sector are flexible to 5 years. Longer lease periods (7-10 than 250 thousand beds offered in such a degree that an aparthotel may years) are most frequently encountered almost 130 thousand rooms. even be rented for several hours. In in the case of BTS type projects. It is Interestingly, only 14% hotels are turn, condohotels (condoapartaments) estimated that the rates of return from operated by hotel chains (e.g. Accor/ provide services based on the rental the best real estate reach the level of Orbis), whereby more than half of of hotel rooms or apartments. In this approx. 6.5%. the most exclusive five star hotels is case, however, they constitute the managed by the largest hotel chains separate property of (private as a rule) in Europe. In their case, the dynamic an investor in the frames of a functioning development in principle occurs on hotel facility and are only transferred to the basis of franchising agreements a tour operator (hotel) for management or hotel facility management contracts and rental. Finally, the profits from (hardly ever is it a lease and, entirely rental (after deducting the operator’s consideration from the prices of service)

12 13 BASIC LEGAL ISSUES II RELATED TO REAL ESTATE not exist. mortgage register court for a copy or shall additionally include the so-called PUBLIC an extract from the selected sections cadastral value established as a result of the land and mortgage register is of the general real estate taxation and REGISTERS also possible. Upon the payment of an subsequently constituting the basis of RELATED applicable fee, the required document, the real estate value tax. depending on the applicant’s choice, TO REAL ESTATE The presumption of the right arising from may be delivered by mail or as a digital possession may not be invoked against file to be printed by the applicant. LEGAL TITLE LAND AND MORTGAGE the presumption of the right arising from Each land and mortgage register is TO REAL ESTATE REGISTER an entry in the land and mortgage. This means that the Polish legislator settled accompanied by a land and mortgage Land and Mortgage Registers are real the conflict of values between the trust register file. This file contains documents estate registers kept for the purpose in a public register (land and mortgage and letters related to the real estate THE RIGHT OF of establishing the legal status of real register) and trust in the factual status (e.g. documents constituting the OWNERSHIP OF REAL ESTATE estate. Making an entry in a land and arising out of possession in favor of the basis of transfer of ownership such as mortgage register entails specific legal entry in the land and mortgage register. agreements, decisions on acquisition The legal title to real estate with consequences. of the right of ownership by acquisitive the broadest scope is the right of Moreover, land and mortgage registers prescription, decisions on acquisition of ownership. The right of ownership may enjoy the so-called public credibility. inheritance, etc.). Land and mortgage apply to three types of real estate – land This principle consists in the fact register files are kept by the district court. real estate, building real estate, and that the ownership of real estate is They can be viewed in the presence of premises. transferred onto a buyer acting in good a court officer only by, save for a notary, Sometimes making an entry in the faith although in reality the seller is not a person with a legal interest which must The right of real estate ownership is register is a condition necessary for the owner of the real estate, but they be duly demonstrated beforehand. connected to the right to the so-called an act in to be effective (e.g. are merely disclosed in the land and integral land components, that is in establishing a mortgage, transferring mortgage register as the owner. This REGISTER OF LAND AND particular buildings and other structures BUILDINGS the right of perpetual , which principle does not, however, apply to permanently fixed to the land. What is will be described below in detail – see gratuitous dispositions (e.g. a donation) important, an integral part of an object This is an information system serving page 18). and where the buyer acts in bad faith, may not constitute a separate object of to collect, update, and grant access i.e. they knew or they could have easily ownership. to information on land, buildings, and found out that the land and mortgage premises, their owners as well as other register entry was not compliant with An exception from the above-mentioned entities holding or administrating such the actual status. principle is the separation of building land, buildings, or premises in a manner and presmises. Building real estate may uniform for the entire country. One of the Under the Act on Land and Mortgage Land and mortgage registers are be established only by virtue of specific main goals of the register of land and Registers and Mortgage it is presumed public and they may be accessed in an provisions and only as a right related to buildings is to keep the records of the that the right disclosed in the land and electronic format (https://ekw.ms.gov. another right to the land on which the legal and factual status of real estate. mortgage register has been entered in pl) by entering a number of the specific building is erected. Simultaneously, the Ultimately, the register is to be replaced compliance with the actual legal status land and mortgage register. Filing an right of ownership to building real estate with the real estate cadaster which and the right deleted from it does electronic application with the land and does not constitute an independent

16 17 disposed of or transferred only jointly poviat, province), or associations a constitutive nature which means that exchange for which the tenant commits with the right to the land. In practice, thereof. if it is not made no perpetual usufruct to pay the landlord rent that has been one deals with a building real estate will arise. agreed on. first and foremost in a situation where The essence of the right of perpetual the perpetual usufructuary of the land usufruct is the fact that the perpetual Similarly as the right of ownership, A lease agreement may be concluded erects a building or another structure usufructuary obtains an extensive scope the right of perpetual usufruct may for a definite or indefinite time in any thereon. Then, they acquire the right of of rights (approximate to ownership) be transferred onto another person, form, even oral. However, in the case of ownership to the building only. towards the real estate, whereas the encumbered with a mortgage, or real estate lease for a period longer than right of ownership remains in the hands acquired by prescriptive acquisition. a year the written form should be adhered A separate object of ownership of the State Treasury or a territorial self- The transfer of the right of perpetual to. Otherwise such an agreement is (premises) may also be constituted by government unit. On those grounds usufruct onto another person does not deemed to have been concluded for an residential and non-residential premises the perpetual usufructuary pays the require a consent of the land’s owner, indefinite time. In practice the majority of separated within the building after so-called initial fee and, subsequently, however to be effective a constitutive lease agreements are executed at least applicable conditions are met and the annual fees. Annual fees are paid entry in the land and mortgage register in written form. separate ownership is established throughout the entire term of perpetual should be made. by way of an applicable procedure usufruct. Taking advantage of the freedom of provided for in the Act on the Ownership Perpetual usufruct expires as a result of contract, parties may freely determine of Premises. The manner of use of real estate let in the lapse of the time period which it was the period of lease with certain perpetual usufruct is strictly defined in established for or by way of termination limitations. Firstly, a lease agreement It is worth noting that after the lapse of an agreement concluded as a notary of an agreement before the lapse of concluded for more than ten years the prescribed time period (20 years in . This renders the right of perpetual such a time period. An agreement upon the lapse of this period is deemed the case of good faith or 30 years in usufruct a special purpose right. The may be terminated by the court where to have been concluded for an indefinite the case of bad faith) the autonomous holder thereof may use the real estate a perpetual usufructuary makes use of time. Secondly, a lease agreement holder of real estate who is not its only in the manner consistent with the the real estate in the manner obviously concluded between entrepreneurs for owner acquires ownership thereof by provisions of the agreement. contradictory to the purpose set forth in more than thirty years, upon the lapse prescriptive acquisition. In practice the the agreement, and in particular if the of this period is deemed to have been fact that the State Treasury may also The right of perpetual usufruct is real estate was not developed by the concluded for an indefinite time. It is also acquire the right of ownership to real a temporary right and as a principle agreed time. important that when upon the lapse of estate this way is also very important. is established for the period of 99 the period determined in the agreement years. In exceptional cases where the Along with the expiry of perpetual or in the notice of termination, the RIGHT OF PERPETUAL economic objective of this right does usufruct any encumbrances established tenant continues to use the object at the USUFRUCT TO REAL ESTATE not require such a long period of the thereon, i.e. all limited property rights landlord’s consent, it is assumed in case right’s existence, letting real estate in (mortgage in particular) expire as well. of doubt that the lease agreement has The right of perpetual usufruct to real perpetual usufruct for a shorter time been prolonged for an indefinite time. estate is a property right in-between period is admissible, however at least LEASE OF REAL ESTATE a right of ownership and limited limited for 40 years. Making timely payments of the agreed rights. Only the following items may be Lease is an obligational right to real rent is the fundamental obligation of an object of such a right: lands being the For perpetual usufruct to arise an estate. On the grounds of a lease the tenant. Parties usually provide for property of the State Treasury, territorial entry in the land and mortgage agreement, the landlord commits to the securing of rent payments by the self-government units (municipality, register is required. Such an entry is of give the tenant real estate into use, in tenant and repairing potential damages

18 19 caused thereby to the object of the seller, whereby it may terminate the hold respectively, save for the provisions financing party (most often a bank or lease agreement. Types of security lease agreement observing the statutory specific for the leasehold only. a leasing company) within the scope of frequently encountered in practice are: periods of notice. The acquirer is not its operations commits to purchase real cash deposits, bank guarantees, bills entitled to terminate the agreement if it A leasehold agreement may be estate from a specific seller and give it to of exchange issued by the tenant, or was concluded in writing for a definite concluded for a definite or indefinite the user to use and collect benefits for a transfer of title for securing the time with a fixed date and the object of time, whereby a leasehold agreement a definite time. In turn, the user commits payment. the agreement was handed over to the for more than thirty years upon the to pay the financing party a monetary tenant. A possibility of terminating the lapse of that period is deemed to have consideration in installments equal at It is a principle that the tenant may agreement by the acquirer is, however, been concluded for an indefinite time. least to the price or consideration on the sublet the whole or a part of real estate in principle ruled out in the case of the Similarly as in the case of lease, a real grounds of the purchase of the thing by to a third party if the agreement does lease of a premises used to satisfy estate leasehold agreement for more the financing party. not prohibit that. In the case of the lease residential needs. than one year should be concluded in of premises (residential or commercial) writing. Otherwise such an agreement is A leasing agreement must be concluded the rule is reversed. The tenant may not Generally, lease agreements of premises deemed to have been concluded for an in writing to be valid. sublet the premises or a part thereof used to satisfy residential needs are indefinite time. to be used free of charge or against safeguarded with numerous specific remuneration without the landlord’s provisions of the Act on the Protection of The date and manner of payment of rent consent, with one exception regarding Tenants’ Rights, the Municipal Housing is most often regulated in detail in the LIMITED a person towards whom the tenant has Reserve and the Amendment of the Civil leasehold agreement. However, where PROPERTY RIGHTS a maintenance obligation. Code. The goal of this regulation is to no contractual provisions have been ensure the protection of tenants’ rights made, the leasehold rent is payable in A lease agreement concluded for an at a level significantly higher than in the arrears at customary deadlines, and There is a certain number of the kinds indefinite time may be terminated by case of lease of commercial premises or where no such customary deadlines of limited property rights in Poland. This both the landlord and the tenant. In other real estate. exits – for six months payable in arrears. overview presents the most important this scope provisions of the agreement issues related to mortgages and concerning the period of notice (they LEASEHOLD OF REAL ESTATE Similarly as in the case of lease of as limited property rights which may be different for each party) have premises, without the landlord’s consent appear most often and are of the most the priority. Only where agreements A leasehold is another obligational the tenant may not give the real estate significance in transactions. do not specify periods of notice do right to real estate. The substance of to a third party to use free-of-charge or the statutory regulations apply, under a leasehold consists in giving real estate sublet it. The violation of this obligation MORTGAGE which the length of the period of notice by the landlord to the tenant to use gives the landlord the title to terminate is dependent on the rent payment and collect benefit in exchange for the the leasehold agreement without the A mortgage is a right encumbering real frequency. payment of the agreed rent. The factor period of notice. estate (as well as perpetual usufruct) which differentiates leasehold from and established to secure a specific It is important from a practical perspective lease is the possibility for the tenant to LEASING OF REAL ESTATE monetary liability (including a future one) that the disposal of leased real estate collect benefits which is not present in arising out of a specific legal relationship. during the term of the lease agreement the case of lease agreements. Due to Leasing of real estate in Poland is By its virtue, a mortgage creditor may does not result in the expiration thereof. the significant similarity of these two growing in popularity compared against seek satisfaction from real estate by In such a case, the acquirer enters in legal titles to real estate, provisions a bank loan. The essence of a leasing way of court enforcement proceedings the lease relationship in place of the applicable to lease apply to the lease agreement consists in the fact that the

20 21 regardless of whose property the real An important reinforcement of the including mortgages, also expire. It, For such a pledge to arise, an entry estate has become and before personal securing function of the mortgage however, is not equivalent with the in the pledge register is required. The creditors (i.e. not property creditors) of comes as a circumstance that lack of protection of perpetual usufruct pledge register is public. The pledge the real estate’s owner. Encumbering a prescription of a claim secured with mortgage creditors. This is because register is kept by district courts the real estate (the right of perpetual a mortgage does not violate the right of they are entitled to the statutory right to (commercial courts), whereby the court usufruct) with a mortgage does not a mortgage creditor to obtain satisfaction a on perpetual usufructuary’s claims competent to make the entry is the prevent a disposal thereof. from the encumbered real estate. This for consideration for the buildings court competent for the district where means that despite the prescription contributed or purchased thereby as the place of residence (registered office) In principle, the establishment of of the secured claim, the creditor may own or for other facilities existing on the of the pledger (the entity establishing a mortgage is contingent on making conduct an enforcement from the real date of return of the used real estate. the security) is located. It is possible to an entry into the land and mortgage estate. obtain a copy from the pledge register register. PLEDGE (constituting a proof of the pledge entry) Generally speaking, the mortgage against a fee, as well as a certificate For a mortgage creditor the place of expires when the claim secured therewith Limited property rights also include on the lack of the entry of the pledger entry of their mortgage in the land and expires, save for situations where a a pledge (lien). There are two types of or the pledger and the object of the mortgage register is of significance given legal relationship may be the basis pledges: ordinary and registered. In pledge. These documents are issued to since where several mortgages are for subsequent securable claims in the practice, the registered pledge plays the an application of any party to demand established on the same real estate, future. Similarly, a mortgage securing most significant role. It may be used to them. Two significant presumptions are a higher position gives a possibility of the several claims expires when the last secure a monetary claim expressed in connected with the pledge register. possibly fullest satisfaction of the claim. claim expires if no other claim may arise Polish or foreign currency. The registered from the legal relationships constituting pledge may have movable goods and the source of the originally secured disposable pecuniary rights for its For example, if there are three creditors claims. Where a mortgage is deleted object, with the significant exception As of the day of making an entry each of whom has a claim in the value of from the land and mortgage register pertaining to the rights which may be an nobody can claim ignorance of the data PLN 100,000, and the amount obtained without a valid legal basis (e.g. deletion object of a mortgage (right of ownership disclosed in the register unless, despite from enforcement from the real estate is of an existing mortgage without an and right of perpetual usufruct of the application of due diligence they could PLN 150,000, the one whose mortgage appropriate application), the mortgage real estate). not have had the knowledge thereof. is in the first position will be satisfied in expires after the lapse of ten years. An full, the second one in half, whereas the expiry of the mortgage may occur also last one will receive nothing. when a claim secured with a mortgage As the most popular examples, it is is mature and the creditor is in default possible to indicate: shares in a limited The pledger or the pledgee may not liability company, machines (movable or the satisfaction thereof is hindered claim, towards third parties acting in assets of the enterprise) and vehicles, an The Polish law allows a mortgage to be while the owner of the real estate good faith, that the data disclosed in enterprise or an organized part thereof, established by way of an act in law on deposits the secured amount in a court the pledge register is not true unless rights on non-material goods (e.g. rights more than one real estate in order to deposit, waiving the right to recollect it. from patents, rights from registered the entry made in the register was non- secure the same claim. In such a case trademarks). compliant with the application and the one is dealing with a joint contractual As indicated above, along with the expiry pledger or the pledgee immediately mortgage. of perpetual usufruct on real estate, motioned for rectifying, supplementing, encumbrances established thereon, or deleting the entry.

22 23 MECHANISMS OF III INVESTING IN REAL ESTATE a joint stock company) and personal Foreign investors may form and register a separate structure, therefore each GENERAL REMARKS companies, i.e. partnerships (a general an SPV themselves or they may acquire entity remains a separate taxpayer both partnership, a professional partnership, an already existing and registered in terms of the tax on goods and services ON VARIOUS a limited partnership, a limited joint- company not conducting any operations (VAT) and the income tax. The situation is INVESTMENT stock partnership) regulated in the (the so-called shelf-company). different in the case of a cooperative joint Commercial Companies Code. Foreign venture, whereby depending on the legal METHODS investors most often take advantage form of SPV’s operation, the taxation of three legal forms: a limited liability rules will be different. company, a limited partnership, or The Polish law does not provide for a limited joint-stock partnership. JOINT VENTURE a single model of investing, in particular E.g. if entities cooperating in the frames in relation to the real estate market, An SPV may take a loan to carry out an of a cooperative joint venture complete thus leaving potential investors a rather investment project financed by a bank the venture by means of a corporation it substantial liberty in terms of deciding in the project finance formula, which The second model of investing in the real will be a separate taxpayer both of the not only what they want to invest in, means that the credit rating is assessed estate market is based on joint venture Corporate Income Tax (CIT) and the tax but also how and with the use of which on the basis of a forecast of the SPV’s agreements allowing for the completion on goods and services (VAT). mechanisms and structures they want future revenues and incomes generated of large commercial ventures which as to achieve their goals. In practice, by the real estate being the subject of a rule would be impossible to accomplish however, using special purpose vehicles the investment. Further advantages of by a single investor acting on their own. It should be remembered, however, (SPV) is a rule. Investing via closed-end SPVs include their flexibility and the fact Joint venture agreements are concluded that independently of the taxation of investment funds or on the basis of that in structural and institutional terms by two or more entrepreneurs who operations of the SPV itself, parties to joint venture deals can be indicated as they are units which are separate from decide to jointly engage in some a joint venture deal may be obligated to alternatives for SPVs. the investor itself. From the investor’s operations aimed at accomplishing a pay the tax on the grounds of income perspective, a loan taken by an SPV shared economic objective, sharing from money capital, e.g. a dividend paid significantly increases the investment both the and the risk related to the by an SPV. capacity and, simultaneously, as the planned investment between themselves. CORPORATIONS investor proper does not directly take In principle, there are two types of such AND PERSONAL a loan (since it is done by an SPV), it agreements – cooperative joint ventures is not disclosed in their balance sheet. (where participants of the deal form COMPANIES Moreover, SPVs have a good credit a separate organizational unit – an SPV rating and provide the lender with which autonomously carries out the broader possibilities in terms of securing planned venture) and contractual joint SPVs are always formed for a specific claims. For a potential investor, an SPV ventures (where the economic objective purpose, such as the construction of constitutes a practical convenience in is to be accomplished through the deal a facility or acquisition of real estate the process of applying for a commercial participants’ own actions without the with the view of subsequently selling loan which in the case of multimillion need to form a new organizational unit). it further or obtaining revenues from investments on the real estate market a short- or long-term lease. SPVs may may prove indispensable to finance the From the tax law perspective, operate as commercial companies – whole or part of a project. cooperation in the frames of a contractual corporations (a limited liability company, joint venture does not constitute

26 27 CIFs may be divided into growth and revenue closed-end investment funds. CLOSED-END Revenue CIFs are based on permanent INVESTMENT profit obtained from lease of office or commercial spaces. As a rule they FUNDS invest into office- or services-dedicated buildings and premises which are subsequently rented to corporations The third model of investing in the real or shopping mall owners. The lease of estate market is based on closed- such spaces generates a permanent, end investment funds (CIF) operating although small profit amounting to under the Act on Investment Funds and several percent per year. Growth CIFs Management of Alternative Investment are based on investment in land real Funds. CIFs may invest in, among estate and developer projects. The others, ownership and co-ownership forecasted rate of return in this case is of land real estate, buildings, premises, significantly higher since the CIFs of this and perpetual usufruct. Importantly, type invest in new construction ventures CIFs may exclusively acquire rights to generating profit from the developer’s real estate with a regulated legal status, margin. It is obvious, however, that not being an object of an injunction investments of growth CIFs entail much or enforcement. Whereas in terms higher risks. of potential encumbrances on real estate, CIFs may acquire real estate CIFs are in future predicted to be encumbered with only such third party replaced by a new means of collective rights, the materialization of which will investment into real estate – Real Estate not cause a risk of loss of ownership of Investment Trusts (REITs). Legislative the real estate. It is worth emphasizing works on a nact introducing REITs are that a CIF may not allocate more than still at an initial stage and it is difficult 25% of its assets value to purchasing to assess whether and if so – when – one of the investment objects and on REITs will become a commonly used investments (construction, renovation) mechanism for investing on the real into such an object, e.g. real estate. estate market in Poland. In practice it means that CIFs may not invest all its assets in only one real estate, but must divide them into at least four different objects (e.g. four pieces of real estate).

Due to the manner of investment,

28 29 DUE DILIGENCE AS A STAGE IV PRECEDING REAL ESTATE ACQUISITION may lead to contractual liability. be detected. Moreover, the investor will obtain information whether there GENERAL are any rights related to the real estate REMARKS LEGAL DUE (e.g. of right of way through 2 another plot) or encumbrances in the DILIGENCE form of rights, claims, and limitations. The investor can determine designation Due diligence is an extremely important OF REAL ESTATE Encumbrances may have the form of real estate, configuration, total area, element in the procedure of real estate of limited property rights, personal types of use, as well as the class, (right of perpetual usufruct) acquisition. Depending on the type of real estate rights (e.g. lease or leasehold, right buildings, and structures located on Most simply speaking this stage may and the intended investment goal, the of redemption or right of first refusal, the real estate on the basis of data be defined as a comprehensive analysis scope of legal due diligence will vary. It rights) and claims (e.g. and map extract from the land and of a technical, planning, and legal will certainly be more extensive in the a claim for the transfer of ownership building register. Upon analysis of this situation of real estate before acquiring case of the acquisition of a commercial of real estate or perpetual usufruct or documentation it may turn out that also it, oriented at the possibly fullest law company holding the real estate for establishment of a limited property administrative decisions on land division identification of any and all risks related in its portfolio than in the case of the rights). In the situation of the existence or consolidation should be examined. therewith. The knowledge obtained in acquisition of the real estate only. of obligational agreements on the basis On this occasion it is also necessary the frames of due diligence is to assist Nevertheless, the fundamental issues of which real estate is held by a third to make sure if the real estate has to be examined by the investor may be the potential investor in engaging in party (e.g. lease, leasehold, access to a public road because it is an listed. activities necessary to minimize the (gratuitous lease), etc.) an analysis of indispensable condition for carrying out identified risks. As a result, an informed such content is required, especially in a construction venture on real estate. decision on acquisition of real estate the scope of possibilities and conditions can be made. This is why due diligence of the termination of such agreements. is usually carried out before transaction 1 If a mortgage is entered in the land and price negotiations. mortgage register it is necessary to In the first order the contents of the land examine if the claim secured thereby 3 At the beginning of negotiations, parties and mortgage register kept for the real did not expire, since in such a case it frequently conclude a non-disclosure estate should be analyzed. The analysis may be deleted. Also warnings entered In the context of the already mentioned agreement which prohibits disclosing should also include the land and in the land and mortgage register issues, it is important for the investor to and taking advantage of the information mortgage register reference file, therefore are important because they may, for obtain a schedule of court, administrative, obtained during negotiations or in the documents constituting the basis of example, pertain to the commencement and enforcement proceedings along course of due diligence to third parties. entries in this book. On their basis, the of enforcement from the real estate or with applicable documentation from the Such an agreement is to guarantee the investor will be able to establish if the inform about pending court proceedings seller so that in future the acquirer is not security of both parties and contribute seller is entitled to ownership or the right related to the real estate. For the reasons surprised by decisions in cases related to building a mutual trust. However, of perpetual usufruct to the real estate presented above, a detailed analysis of to the real estate which he has had no regardless of the conclusion of such subject to a transaction. An analysis the land and mortgage register content knowledge about. an agreement, Polish law provides for of earlier agreements transferring the is very important. the protection of information disclosed right of ownership or perpetual usufruct in the course of negotiations subject to will allow the risks related to potential confidentiality, the breaching of which irregularities in these agreements to

32 33 Therefore, the investor must establish whether any administrative proceedings for the declaration of the invalidity of 4 5 7 expropriation decisions are pending as well as if any civil proceedings for Next, the investor should focus their If real estate is developed with In examining the manner of real estate the delivery of real estate following the attention on the intended use of the real buildings or structures, it is important development, the investor should pay declaration of invalidity of such decisions estate determined in the local zoning for the investor to analyze the entire attention to the fact whether the real are pending. development plan. An analysis of this technical documentation, including estate being acquired or buildings act of local law will allow the future the building project and the course of erected thereon are not covered by acquirer to provide an answer to the the proceedings for the granting of the preservation maintenance as historic question whether the completion of the building permit and the decision on buildings. Qualification as a historic intended construction project on the building occupancy. This is an important building entails a range of numerous 9 real estate to be purchased is possible. element because it allows the investor to obligations imposed onto the owner If a given area is not covered by a local establish if there are any future risks of which may significantly jeopardize or Finally, it is worth noting that transactions zoning development plan, the investor initiating proceedings for the declaration prolong the completion of the intended in agricultural real estate have been should verify if the real estate was an of the invalidity of decisions rendered in investment on a given piece of real limited as a result of the adoption of object of an administrative decision the described proceedings. estate. restrictive legal provisions applicable on land and building development as of 30 April 2016. According to the conditions. Such a decision determines amended Act on Shaping the Agricultural area development conditions. If no such System by principle real estate with decision was issued and there is no a area surface exceeding 0.3 ha may zoning development plan, the investor 6 8 only be purchased by an individual should analyze the study of conditions farmer. For this reason, in the course and trends of zoning development in The future buyer should also make sure Another point to be verified by a future of a due diligence analysis, it is also the municipality. This document is not whether the real estate to be acquired acquirer is the issue of existence of necessary to establish whether the real an act of local law (and therefore – is not subject to limitation arising out of potential reprivatization claims of former estate which is to be an object of a sale a source of generally applicable law), environmental protection provisions. It owners of real estate or their heirs who agreement is agricultural real estate. but it determines zoning development may turn out that it is necessary to obtain by virtue of a range of expropriation rules applicable to the areas covered an environmental conditions decision decrees (dependent on the type and thereby, including the intended use of defining the environmental conditions location of real estate) issued after the specific real estate. Therefore, it may for the realization of the venture in the World War II were deprived of their be a valuable source of information. All scope of the intended investment. property. No single legal act regulating the more so that the study is binding reprivatization issues exists in Poland, for the municipality authorities for the therefore on the grounds of different purpose of creating the local zoning decrees former owners or their heirs are development plan. currently seeking to reclaim ownership of properties taken from them or to obtain the payment of damages.

34 35 and operating costs). This operation takes into account all assets in the FINANCIAL investor’s portfolio and is capable of AND TAX DUE demonstrating the degree of profitability DILIGENCE of the future asset component with high probability. Moreover, in the case of OF REAL ESTATE commercial real estate, due diligence comes down to analyzing the existing rental agreements at the angle of The significance of financial and their provisions potentially impacting tax due diligence of real estate is the investor’s income, e.g. predicting frequently underestimated, especially decreases in rent for a specific period in the case of smaller transactions. of time. Financial due diligence allows Such an examination, however, plays an investor to become familiar with an important role and its significance a simulation presenting their income in becomes visible in large transactions. a situation where a part of tenants do not pay rent or delay rent payments. Finally, The financial due diligence is most often in the case of share deal transactions it carried out by auditors or chartered will be possible to become familiar with accountants, experts in the area of the company’s current accounting mode enterprise economy and economics. and compare it with the one operating Its goal is to, most simply speaking, at the investor’s enterprise with the view indicate whether the acquisition of real of making potential future corrections. estate or a company with real estate in its assets is advisable and profitable In turn, the main goal of tax due from the investor’s perspective. This is diligence is to minimize broadly outlined particularly recommended in situations tax risks connected to the acquisition where an investment in given real estate of real estate. Depending on whether will generate high costs or a necessity of the acquired object is real estate (asset obtaining substantial external financing deal) or a company which owns the (mortgages, loans, issue of bonds, real estate (share deal), the scope of etc.), as well as in the case of long-term tax due diligence will be different. The investments. significance of this stage preceding the conclusion of a final agreement cannot The financial due diligence enables be overestimated, considering that one to determine how the real frequently its outcome may be decisive estate to be acquired will impact the for profitability or non-profitability of acquirer’s Net Operating Income (the investing in specific real estate. difference between operating revenue

36 37 REAL ESTATE V ACQUISITION estate), constituting its property before 16), this consists of the fact that an the subject of the most difficult and the share deal type transaction, remain non-entitled person, but disclosed oftentimes time-consuming negotiations ASSET DEAL its property after the transaction. In as entitled in the land and mortgage between parties. It is also important to AND SHARE DEAL the case of acquisition of this type, register may effectively transfer the right precisely and exhaustively indicate legal in order to secure their interests, the of ownership to the real estate which consequences related to violation of investor should carry out a thorough they are not entitled to onto the buyer. representations and warranties (non- due diligence examination of all the The condition for the application of this compliance with the actual status). In Among the various methods of the broadly understood company-related legal construction is the acquirer’s good the future it will facilitate the pursuit of acquisition of ownership of real issues (e.g. shareholders’ contributions, faith. Such a statutory guarantee of legal claims for parties. estate, asset deal and share deal type company’s corporate structure, effectiveness of transfer of ownership transactions are the most popular. company’s liabilities, etc.), regardless of shares (stocks) does not occur in In the case of asset deal transactions, No clear-cut rule prejudging when of the due diligence analysis of the real share deal type transactions. For this the part of the contract in question a given type of transaction should be estate. This is meant to safeguard the reason, agreements transferring the contains seller’s representations and applied exists. It is always decided by investor against, among others, the right of ownership of shares (stocks) warranties concerning, among others, the circumstances of the case, among emergence of company’s previously nowadays include more numerous and their legal title to the real estate being which a particular role is played by undisclosed obligations or tax arrears. In more extensive representations and disposed of, information regarding any parties’ interests. the case of asset deal type transactions warranties concerning the legal status and all encumbrances and third party due diligence is usually shorter and of the object of an agreement than in rights to the real estate, an inventory of In the most simple terms asset deal should focus on a thorough analysis of the case of asset deal type agreements. court, administrative, or enforcement type transactions can be defined as the legal status of the sold real estate proceedings related to the real estate, transactions on assets, whereas share (see, p. 32-35). declarations on development of deal type transactions as transactions buildings and structures in compliance on shares. The main role in this The advantage of the share deal type with provisions of the law, along with an differentiation is played by the object REPRESENTATIONS transactions lies in the fact that in the invocation of applicable administrative of the agreement which in the case of AND WARRANTIES case the target company conducts decisions. Generally speaking, asset deal transactions is a specific regulated operations, there is no need representations and warranties in component of a company’s assets to re-apply for concessions, , agreements of this type apply mainly (e.g. real estate or enterprise), whereas and administrative permits (it is to Currently, an important part of asset to the real estate being the object of in the case of share deal transactions, the contrary in the case of asset deal deal and share deal type agreements transaction. this object is the entirety or part of transactions). are the so-called representations and membership interests (shares or stocks) warranties submitted by the seller In the case of share deal transactions the in the company’s share capital. A significant difference between the concerning the factual and legal status situation is different. These agreements, discussed transaction types arising from of the object of the agreement. This part next to representations and warranties In the case of this latter transaction, their different objects is the fact that in of the agreement is first and foremost typical for asset deal transactions, the acquirer becomes the owner of the case of an asset deal transaction meant to secure the buyer’s interests. contain extensive representations membership interests in the target related to real estate, the acquirer takes Hence, it is mainly the acquirer who and warranties concerning almost company, however, they do not obtain advantage of the institution of the public should seek the most favorable all aspects of company’s operations direct property rights to the assets of credibility of the land and mortgage wording possible for them. In practice, whose shares (stocks) are traded. the acquired company. Therefore, all registers. As indicated above (see: p. contractual agreements including the company’s assets (including real representations and warranties are

40 41 The Polish law stipulates that a transfer of the ownership of real estate or and most frequently encountered in It is possible to list such issues as: ownership of real estate or membership membership rights in a company in the practice an obligational-dispositive employment in the company, issues of rights in a company being an owner of future. In such a situation, a preliminary agreement (with a two-fold effect). a corporate nature (company bodies, real estate occurs on the basis of an agreement must specify the material A preliminary agreement does not ownership issues, shares in the company, agreement concluded in a prescribed provisions of the final agreement, in require to be executed as a notary etc.), accounting, tax issues, agreements form. Therefore, both an obligation to particular its object and price of sale. deed. However, this form enables the with company counterparties, and many transfer ownership and a disposal of the Parties make use of a preliminary entitled party to seek conclusion of others. right occur within one single agreement. agreement when for a variety of reasons a final agreement by recourse to court. An exception in this scope is the transfer they do not want to conclude the final If the preliminary agreement is not of the right of perpetual usufruct which agreement. made in the form of a notary deed, in additionally requires an entry in a land such a situation, the entitled party is and mortgage register to be valid. left only with a compensatory claim. TRANSFER OF REAL For example, they are waiting for the ESTATE OWNERSHIP There are, however, situations where issuance of administrative decisions or In turn, an agreement on transfer fulfillment of additional conditions, etc.). two separate agreements must be of ownership of shares in a limited concluded. liability company being the owner of Before the real estate ownership (asset the real estate (share deal) does not deal) or shares or stocks in a target In a situation in which a party obligated need to be executed as a notary deed, company (share deal) are definitively This will be the case, for example, in to conclude a final agreement evades and the written form with signatures transferred, parties frequently conclude a situation in which the conclusion of meeting their obligation, they may be certified by notary is sufficient. In the so-called letter of intent. It is first a final agreement is safeguarded with liable for damages, the scope of which turn, in a joint-stock company, the and foremost an expression of parties’ the fulfillment of specific conditions (e.g. may be established in the preliminary form applicable to the disposal of intent to conclude a specific definitive obtaining a building permit, exclusion of agreement. Moreover, if a preliminary shares depends on whether these are agreement in future, as a rule after an real estate from agricultural production, agreement is concluded in a form registered shares or bearer shares. etc.). applicable period of negotiations. It lists prescribed for a final agreement, the In the first case, the written form and the goals of the parties as well as key entitled party may seek conclusion the transfer of the document certifying points of negotiations. Signing a letter of thereof by recourse to court. the ownership of the share suffice, intent is a desirable solution, in particular Then, parties first conclude an whereas in the second case, adherence in the case of larger transactions where obligational agreement on the transfer to any form is not required, since it is a priori known that the duration of of real estate ownership and then AGREEMENT ON a disposal of bearer shares occurs by negotiations will be longer and their another one transferring this right. This TRANSFER OF transferring possession of these shares. object will be complex. As a rule, a letter is because the transfer of ownership of intent does not create an obligational of a real estate made under condition OWNERSHIP It is worth mentioning that in certain relationship between parties of the or with a reservation of the time limit is situations obtaining administrative permits is required, which may result agreement from which specific claims inadmissible. An agreement on the transfer of real in a prolonged agreement conclusion might arise in future. However, this issue estate ownership (asset deal) should process. requires an in concreto examination of Parties may also conclude a preliminary be concluded in the form of a notary each letter of intent. agreement under which they will commit deed. It pertains to an obligational to conclude an agreement transferring agreement, a dispositive agreement,

42 43 more than 50% of votes at the meeting A potential investor should also bear For example, in the case of share deal of shareholders or the general meeting). ACQUISITION OF in mind that in the event of a sale of transactions if parties to the transaction This rule is not applicable in case of REAL ESTATE FROM non-developed real estate previously on the Polish or global market reached the public companies and certain types of acquired from the State Treasury or turnover level indicated in the provisions, real estate (e.g. apartments). A PUBLIC ENTITY a territorial self-government unit and the intent of concentration must be real estate entered in the historical The abovementioned permit is valid reported to the President of the Office of monuments register or a right of for two years as of the date of issue. Real estate is frequently purchased Competition and Consumer Protection perpetual usufruct to such real estate, who grants the consent for concentration Regardless of that, a foreigner intending from the State Treasury or territorial self- municipalities, in principle, enjoy the by way of an administrative decision. to acquire real estate may apply for government units which hold a decisive a promise of granting the permit. Such majority of real estate in Poland. The right of first refusal. This means that a promise, in Polish referred to as acquisition of real estate from public the municipality may express the a promesa is valid for one year as of entities entails multiple additional intent to purchase such real estate, thus rendering the acquisition thereof RESTRICTIONS the date of issue and within the term of requirements and differences. The most its validity a permit may not be denied important among them is holding a public by an investor impossible. In turn, an IN REAL ESTATE unless the factual status of material tender (in oral or written form), aimed unconditional sale of such real estate significance for the settlement in the at selecting an acquirer with whom with the violation of the municipality’s ACQUISITION case has changed. the final agreement will be concluded. right of first refusal is invalid. Provisions of the law, however, provide Firstly it is necessary to point to Obtaining the above-mentioned exceptions from the form of the tender restrictions on the acquisition of permit is of key significance since the enabling acquisition of real estate in the real estate by foreigners (and Polish acquisition of real estate by a foreigner non-tender mode. Such an exception companies controlled by foreigners) with the violation of the Act’s provisions DEVELOPER ACT provided for in the Act on Acquisition of of substantial practical significance is invalid. Real Estate by Foreigners. In principle, is the disposal of real estate to its acquisition of the right of ownership of perpetual usufructuary. Save for these The Act does not apply to acquisitions real estate or perpetual usufruct on the situations, an investor interested in the A potential investor willing to engage in by foreigners who are citizens or basis of each act of law requires a permit acquisition of real estate owned by developer operations in Poland should entrepreneurs of countries – parties granted by way of an administrative the State Treasury or a territorial self- be aware of the existence of separate decision by a minister applicable for to the European Economic Area government unit must participate in legal provisions set forth in Act on the internal affairs. Similarly, the acquisition Agreement (all EU member states and a tender procedure the outcome of Protection of the Rights of the Acquirer or taking up by a foreigner shares or Iceland, Norway, and Lichtenstein) or which is always unknown. The possibility of Residential Premises or a Single- stocks in a commercial company with of the Swiss Confederation. The permit of negotiating the provisions of such family House. The said Act imposes the registered office in Poland, as well is not necessary for the acquisition an agreement is a rare occurrence. In multiple additional obligations on as any other act in law in connection of certain types of real estate (e.g. particular, public entities frequently do persons completing developer ventures. with shares or stocks requires a permit apartments). of the minister applicable for internal not consent to introducing numerous Becoming familiar with provisions of this affairs if as a result of such acts in warranties, contractual penalties, Act is therefore of key importance from Substantial restrictions on transactions law a company being an owner or etc. into agreements. In other words, the point of view of an investor willing in agricultural real estate are also perpetual usufructuary of real estate the freedom of shaping contents of to engage in developer operations in set forth in the Act on Shaping the in the territory of Poland becomes a contract may be limited. Poland. a controlled company (i.e. a foreigner or Agricultural System in force as of 30 foreigners will directly or indirectly hold April 2016 (see: p. 35).

44 45 INVESTMENT AND VI CONSTRUCTION PROCESS Planning issues related to the manner After the completed investment of real estate development are of process, depending on the type fundamental significance for real estate of the building, the investor must development as well as for the investor notify an applicable authority of the to decide whether to invest or not. completion of construction or obtain an occupancy permit. The notification In the situation where the local zoning in principle pertains to the construction development plan was adopted by the of less complicated facilities, e.g. single municipality, the investor interested family houses. Within 14 days after in carrying out a construction project notification, the authority may raise files an application for the issuance an objection by way of a decision. If of a building permit along with the no objection is raised within this time, attachments required by the Building the investor is permitted to use the Law. In principle, obtaining such building. In turn an occupancy permit a decision allows the investor to decision is, in principle, required in commence construction works. the case of buildings with a larger Frequently, however, especially in large area and larger degree of complexity, cities, local zoning development plans e.g. office and conference facilities. In are not adopted. In such a situation, such proceedings the bodies of such a future investor in first order must file an institutions as Państwowa Inspekcja application for the issuance of a decision Sanitarna (the State Sanitary Inspection) on land and building development and Państwowa Straż Pożarna (the conditions. Filing an application for State Fire Service) present their opinions, a building permit is only another step stating whether the constructed facility following the obtaining of the above- complies with fire-safety, hygiene, and mentioned decision. In both cases, it is health requirements. of key importance for the building project to be compliant with arrangements REAL ESTATE MANAGEMENT made in the decision on land and building development conditions or Real estate management is the local zoning development plan if a professional activity regulated by the applicable. applicable provisions of law. On their basis, an owner of real estate may In the case of ventures capable of conclude a management contract with impacting the environment, obtaining a real estate administrator. A real estate a decision on environmental conditions administrator is subject to obligatory is a stage which precedes the obtaining civil liability insurance for damages of a land development conditions or arising in connection with real estate a building permit decision. administration.

48 49 OUR SERVICES as business owners. Our agreement DISPUTE templates and legal solutions find RESTRUCTURING / RESOLUTION REAL ESTATE their applications in products worth hundreds of millions of zloty. We INSOLVENCY & ARBITRATION possess extensive experience in dealing with legal issues related to internal bank operations, and We represent clients in proceedings By carrying out thorough analyses, particularly bank outsourcing. Our We support business owners in before the Supreme Court, the we present investors with adequate involvement and professionalism negotiations, the preparation of Constitutional Court, courts of first and optimal solutions for them that in conducting court proceedings documentation on restructuring and second instance as well as helps reduce the risk associated is recognized by our clients, as agreements, bankruptcy proceedings administrative courts. We also act with the purchase and sale of real especially reflected in our long-term with their participation (as the debtor or as proxies for our clients before estate properties to a minimum. cooperation with one of the leading creditor) as well as at stages prior to the arbitration courts and cooperate with We successfully represent our banks in Poland. declaration of bankruptcy – ensuring foreign law firms on trans-border clients in proceedings aimed at the that our clients take the right steps. arbitration cases, which allows us recovery of real estate and other We possess a wealth of experience to exchange experiences and join assets unlawfully seized by the State in the preparation and execution of forces with our foreign counterparts in Treasury under the previous regime. restructuring processes, which we the client’s best interest. We prepare We also provide comprehensive CORPORATE / M&A have gained by effectively advising each lawsuit with utmost care and it support to entrepreneurs in their entrepreneurs in difficult financial is of fundamental importance to us to investment processes, especially situations – usually brought about not develop a long-term lawsuit strategy related to construction investments. through their own fault. This enables in consultation with the client that will Our employees are experienced and us to help our clients fulfil their plans We support our business partners yield the best results. Nonetheless, continually further their knowledge, while providing the management with in complicated projects that require a lawsuit spanning many years is which enables us to tackle almost maximum security. Our Partners Rafał expert knowledge. We provide advice not always the best solution and any legal issue concerning real estate. Kos, PhD, and Dominik Gałkowski, at all project stages, starting from for this reason, we negotiate and Their involvement and passion assure attorney-at-law, participated in the the conception of the project’s legal prepare conciliation scenarios for the our clients that no case is viewed by works of the Minister of Justice’s structure and strategy through to its termination of disputes in cases when us as a lost cause. team for the amendment of the circumstances allow and clients expect final implementation. We guarantee Bankruptcy and Rehabilitation Law it. We find the fight for conciliation on comprehensive legal services based which prepared recommendations favourable terms just as exciting as on an individual and interdisciplinary inerms of specific changes in the a court battle for victory, with the approach to tasks carried out within Bankruptcy and Rehabilitation Law in former often entailing significantly BANKING & the framework of our business Poland: legislative, IT, and Institutional lower costs for the client. FINANCE relations with clients. The high level solutions. skills and dedication of our lawyers combined with our experience enable us to provide top quality legal services We support our clients in complicated while adhering to the rule of: high projects that require expert knowledge. quality at a reasonable price. We prepare comprehensive legal documentation for bank products that are aimed at consumers as well

52 53 guarantee the legal compliance of operations both on the level of the national and international law. We carry CLASS ACTION out compliance audits, we provide advice at each stage of business development as well as support in the scope of risk management with the Kubas Kos Gałkowski was view of reducing it to an acceptable materially involved in the process level. We take into account the of implementing the possibility of specificity of the sector and we assist pursuing claims in group proceedings clients in managing crisis situations. into the Polish legal system, modelled after the American class action since the very beginning of the legislative process of the Act of December 17, 2009 on Pursuing Claims in Group Proceedings. Professor Andrzej Kubas and Rafał Kos, PhD prepared a legal opinion on the drafted bill at the commission of the Bureau of Research Chancellery of the Sejm. Furthermore, Rafał Kos, PhD participated in the sessions of the Sejm Justice and Human Rights Committee in the capacity of an expert. Moreover, Kubas Kos Gałkowski is also present in all major domestic initiatives aimed at class action assessment and an owner of ClassAction.pl portal.

COMPLIANCE

On the basis of our many years of experience, also in the scope of crisis situations, we proactively assist our clients in implementing compliance and internal audit programs which

54 55 CONTACT DETAILS Prof. Andrzej Kubas WARSAW PL 00-609 senior partner Budynek „Focus” [email protected] ul. Lecha Kaczyńskiego 26 Tel: +48 22 206 83 00 Rafał Kos, PhD, LL.M. Fax: +48 22 206 83 02 managing partner [email protected] [email protected]

Dominik Gałkowski KRAKOW PL 31-511 co-managing partner Nowa Kamienica [email protected] ul. Rakowicka 7 Tel: +48 12 619 40 40 Kamil Zawicki Fax: +48 12 619 40 52 co-managing partner [email protected] [email protected]

Barbara Jelonek-Jarco, PhD www.kkg.pl co-managing partner [email protected]

Mirosław Cejmer, PhD partner [email protected]

Grzegorz Pobożniak partner [email protected]

Paweł Sikora partner [email protected]

Agnieszka Trzaska partner [email protected]

Wojciech Wandzel partner [email protected]

Julita Zawadzka, PhD partner [email protected]

58 59 DISCLAIMER

The study presented in this brochure is solely of an educational nature and due to its general nature must not be used in making detailed litigation decisions. Detailed litigation decisions and therefore the choice of the best legal solutions depend on the party’s individual situation. Kubas, Kos, Gałkowski bears no liability for any actions engaged in or refrained from on the basis of the information contained in the present brochure. If you have any specific questions about any legal matter, you should consult an attorney or other professional legal services provider. 62 63 64