Ruined buildings in great demand

One of the methods of maximizing profit is to develop historic real estate. Because of permanent value of such buildings, they (ironically) resist the passage of time. Investor interest in them is growing

Quality standards do change. Buildings which are considered modern today, in a few years will not meet all the technological standards and will simply go out of date. In the case of historic real estate, its value has little to do with modernity – with the passage of time they can rather gain than fall in value. In many instances, the historic character of real estate goes hand in hand with a perfect location, which is a permanent indicator of the value. Such structures also denote prestige. Therefore, they often find buyers among successful businesses, financial institutions and law firms. As a consequence, old tenement buildings are snapped up which after renovation and restoration work change into luxurious apartment buildings with state of the art infrastructure and a 24-hour a day concierge service. Also, historic buildings can house modern office complexes or shopping and entertainment centres, which combine modern forms of contemporary urban planning with historic architectural forms from previous centuries. Such forms of construction are becoming more and more attractive and in demand, and consequently, interest in the revitalization of historic real estate grows, and investors are prepared to pay a lot of money for it. However, prior to making a decision about the purchase of historic real estate, the developer or investor should be aware of the fact that the purchase of such real estate carries with it a lot of obligations and charges.

Valid entry into register

The definition of historic properties is set forth under Article 3 point 1 of an act dated 23rd November 2003 on the protection and care of historic properties. This definition stipulates that a historic property is fixed real estate or movable, the parts or units of which were created by, or related to, human activity, and being evidence of a past period or event – the preservation of which falls within the public interest because of its historic, artistic or scientific value.

The protection and care of historic properties act provides for various forms of protection depending on the individual features. One of the forms of protection is the listing of the structure in the register of historic buildings. Historic real estate is entered on to the register on the basis of the decision of regional conservator of monuments (wojewódzki konserwator zabytków). A decision may be issued either ex officio or upon the application of the owner or the holder of the perpetual usufruct right to the land on which the historic building is located. Also, sections of historic real estate may be listed on the register. In many instances, regulations provide for the obligation to obtain additional consents and opinions when the legal transaction involves historic property which is registered in the relevant register.

Looking for Regulations

Which legal acts govern the procedures dealing with historic buildings? The civil code sets forth general terms regarding trade in (any) real estate; however, the main legal acts governing trade in historic real estate are as follows: the real estate management act, the protection and care of historic properties act and the spatial planning and development act. Such acts introduce special requirements which often limit the ownership deeds with a view to support cultural development, notably taking into account the public interest.

Conservator’s hands

One of the basic requirements applicable to trade in historic real estate is formulated by Article 13 clause 4 of the real estate management act, which provides that: “the sale, exchange, donation or handing over real estate which is registered with the register of historic properties for perpetual usufruct, constituting property of the state treasury or an entity of local government, as well as contributing such real estate as in-kind contributions to companies, require a permit from the regional conservator of monuments.” If any of the above transactions are executed without a permit, they would be contrary to the act, and therefore invalid.

Investor (not) by choice

In the event, the historic structure is handed over for perpetual usufruct or for permanent management, with the manner in which such real estate can be used being subject to detailed conditions. The agreement for handing over land with real estate which is entered into the register of historic buildings for perpetual usufruct may impose an obligation on the buyer to restore or rebuild historic building structures within a specified time. If the holder of the perpetual usufruct rights or administrator uses real estate contrary to the agreement, the appropriate authority may demand that the agreement for handing over the real estate for perpetual usufruct or permanent management be terminated prior to the agreed period.

We count on no interest

In accordance with article 109 of the real estate management act, in the case of the sale of real estate which is registered with the register of historic buildings or its right of perpetual usufruct, the district authorities (gmina) are entitled to pre-emption rights. If the seller of the structure who is subject to such a right sells the property to a third party unconditionally or if that was a failure to notify the holder of the right of the sale transaction or informed it about material provisions of sale agreement which are not true, then the sale agreement – as contrary to law – shall be invalid. The district authorities may exercise their right only when the pre-emption right has been disclosed in the land and mortgage register kept for the real estate.

Desired information

Notwithstanding the obligation regarding the care of historic properties, the owner or holder of the property listed on the historic buildings register, or which is included in the regional records of historic structures, is under the obligation to notify the regional conservator of monuments over any changes regarding the legal status of the structure, and not later than one month from the date of their occurrence or becoming aware of such changes. Any breach of such an obligation will be penalized by a fine.

It is also more difficult

The subject of this article is trade in historic real estate; however, it is worthwhile recalling that the development of such real estate requires many additional obligations and restrictions that have to be taken into consideration at the investment stage. In addition to the obligation of obtaining a planning permit and a building permit, the investor also has to apply for additional consultations, opinions or decisions and to entrust the performance of construction work to those who are appropriately licensed (authorized).

However, one should hope that developers will not be driven away by additional requirements and that there will be more and more projects based on the revitalization of historic buildings. Benefits from this will be shared by both real estate market players as well as residents, users and clients of such buildings. In other words – by all of us.              

Andrzej Lulka,

head of Real Estate Department,

GLN law firm

Anna Łukasiewicz,

lawyer, GLN law firm