Precise law is good law

Six years after its introduction, the Real Estate Management Act has once again been amended. The first changes were introduced 1st January 1999 and concerned the public authorities' powers vis-a-vis the legal reforms. Subsequent "slight" amendments were introduced 15th February 2000. The latest were finally signed into law by the President on 7th June 2004. I have highlighted the latest amendments introduced by Parliament, which hopefully shall have a beneficial effect on the functioning of the real estate market.

A roof over your head

According to the new rules, there is no obligation to obtain permission from the voivodship to lease, rent, or let State Treasury real estate for a period of 3 years. Art. 34 of the Act provides for apartment tenants' pre-emption in acquisition of Treasury real estate (local government property). The previous situation referred to the occupied premises on the basis of lease agreement, so in practice there were cases of whole buildings being sold to third parties, without respecting the pre-emption rights of tenants. The new provisions of the Act should stop this practice and should do a better job of protecting tenants' rights.

Amended auctions

The authors of the amendments decided that the list of entity types that are entitled to acquire real estate without having to go through an auction should be extended. At the moment it includes those, which due to various reasons (legal or due to the local plan) may be the sole bidder. Therefore, we deal here with a situation in which organising an auction does not make any sense. These amendments also specify rules regarding further exemptions, in the case of sales of public real estate, from having to go through auctions. In the new Act, if the first auction fails to find a buyer, then within a minimum period of 2 weeks and a maximum 6 months, a second auction must be organized. In this case, the reserve price may be lowered, however, by not more than 50 per cent of the real estate value. If the second auction fails, then the real estate may be sold through negotiations but not for less than 40 per cent of its value. However, this must be completed within a minimum of 2 weeks and a maximum of 6 months.

Agricultural ground

The amendments to the Real Estate Management Act introduce changes aiming to restrict a loophole where agricultural real estate is divided into plots registered for use in agriculture, but in reality is to be built on. With the new rules, this procedure will become difficult. Dividing real estate classed as agricultural or for forestry (or real estate where no such plans exist), into plots smaller than 0.3 ha, will only be permitted to enlarge adjacent land or to regulate borders with neighbouring plots.

Joining and division of plots

A new important element for public investment regards blocks of real estate that fall outside of regulations and the ability to divide them. The solutions are aimed to help enable the development of projects such as new roads. New provisions indicate how fees ( opłaty adiacenckie) should be calculated when dividing real estate to enable the construction of new public roads or road enlargement. They also specify how the value of such land should be calculated. In addition, new rules allow for neighbouring real estate to be joined, and the resultant plot re-divided to fulfil the aims of the local plan. This does away with the complicated procedure where owners grant their consent. The necessary condition to use this option is the owner's obligation to convert his ownership rights to that of the new plots. This procedure will also be applicable to real estate subject to perpetual usufruct. The amendments signed by the President enhance the municipality's (Gmina) pre-emption rights. Now it will concern all changeover of land subject to perpetual usufruct, irrespective of how this was established. At the same time, new provisions shorten the time period for the pre-emption right decision from two months to one month.

Something for experts, something for managers

An essential new rule establishes the duration of validity of the real estate survey (operat szacunkowy) after its preparation date. Following the new provisions validity is 12 months, unless there have been material changes in the real estate market. The survey can be used afterwards but only subject to approval by a real estate expert. The new Act devotes a lot of space to real estate managers: defining real estate management and implementing stringent new measures governing management contracts. These should name the real estate manager, who is responsible for his professional behaviour, and give his license number. Contracts should also give the status of the manager's civil liability insurance cover, i.e. for damage claims resulting from his activities. These provisions are essential due to the common use of the definitions: management (manager) in addition to administration (administrator) in the context of the so-called separate activities performed in this field.

Małgorzata Kacperska

Partner in the law firm Drzewiecki,

Tomaszek & Partners