Faster, but is it any easier?

The current act

The Act for the Acquisition of Real Estate by Foreigners, dated 1920, is one of Poland's longest-standing laws and is now eighty-four years old. According to its provisions, the agreements for the acquisition of real estate and the shares in companies, which own or have the right to perpetual usufruct of real estate, are legal in Poland if an appropriate permit has been obtained. In the period 1990 - 2002, the Minister of Internal Affairs issued approximately 20,000 permits, and slightly over 2,000 rejections. The need to amend the act came about because of Poland's impending membership of the European Union. In addition, the long period during which the act remained relatively unchanged, despite the changing free market conditions in Poland, meant that amending it was somewhat overdue. Below, are a few comments regarding the planned amendment.

The draft amendment

The draft amendment of the act has had its first reading in Parliament, which means that there will be a second one before it is sent to the Senate. After that, it will be passed on to the President to be signed, and then will be ready for publication. The present form of the draft amendment fulfils some of the provisions of the EU accession treaty by Poland. The government's justification states that the amendment is aimed at accelerating the procedure of issuing permits for the acquisition of real estate by foreigners. This is to be achieved by, among other things, removing the requirement to obtain decisions from the Minister of National Defence and the Minister of Agriculture (when obtaining a permit from the Minister of Internal Affairs) though giving these Ministries the right to object within 14 days or a maximum of two months. The draft also provides certain definitions: that of a commercial company, for example. Foreigners will only truly be free to acquire real estate in Poland after 2009, mainly because there is a fear that it will be gradually bought out in the country by non-nationals. However, no increased interest regarding real estate in Poland has been noted.

The most important amended issued

The amendment of the act provides for state control over the acquisition of stocks or shares in holding companies, which control the companies which own, or hold in perpetual usufruct, real estate in Poland. This structure of holdings, as it is known, is popular and is becoming more frequently used in Poland. The present act does not cover the acquisition by a foreign investor of stocks or shares in a parent company, which does not own real estate directly, but controls land-owning companies. Article 3a, as amended, states that the Minister of Internal Affairs is required to accept each legal transaction, which effectively means that a company, which owns (or holds in perpetual usufruct) real estate, becomes a controlled company. Consequently, it provides for the supervision of every movement in a capital structure which results in the acquisition, by whatever means, of controlling blocks of shares in holding companies, which possess shares in companies (that is, owners of real estate), by, for example, cancelling shares or changing the preference of shares in respect to the number of votes. The amendment introduces the term "second house", which means real estate devoted to housing or recreation, though is not a foreigner's permanent place of residence. The acquisition of a second house by a foreigner will require, in the light of the amended act, a permit from the Minister of Internal Affairs. There are, however, exceptions to this rule. The acquisition of a second house from May 1st 2004 until April 30th 2009 will not require a permit, if the foreigner is (a) a citizen of the EEA (i.e. the European Economic Area comprising member states of the European Union and Sweden, Norway, Iceland and Liechtenstein), and (b) has legally resided in Poland for at least 4 years. The second exception relates to the acquisition of real estate to run commercial activity in the tourist sector. Foreigners from outside the EAA who acquire real estate, will be required to obtain a permit. The amended act aims to make it easier to acquire real estate by persons of Polish origin or Polish nationality, spouses of Polish citizens and persons who possess a permit to reside in Poland for a limited time or to settle here. As a result of the liberalisation of the law, there is no longer a requirement to obtain a permit for the acquisition of independent garage quarters, or a share in it, if it involves satisfying housing needs. The Polish stance in Brussels resulted in one of the longest transitional periods - 12 years for the acquisition of agricultural and forest real estate, and 5 years in relation to a second house (see above). The draft amendment lists regions in which the acquisition of agricultural real estate will not require a permit. These exceptions are a result of the warning from EU representatives, that such a strict approach in relation to real estate transactions, would only delay economic integration between Poland and other European Union states. Obviously, persons who acquire agricultural real estate, Polish and foreign, are bound by the provisions of the act on the agricultural system, according to which every person who wants to acquire an farm, is required to have an agricultural education (secondary and higher education) or experience as a farmer, and to reside permanently on that farm. In addition, The Agency of Agricultural Real Estate has a pre-emptive right in relation to agricultural real estate. According to the draft amendment to the act, from the date of accession to the European Union, the presently binding article, which introduces preference to entrepreneurs from the European Union, will cease to be enforced.

Results of the amendment

The governmental draft carries the hope that the amendment will increase Poland's appeal as an open market. We can be sure that time will verify these opinions. As for now, no extra stimulation to investment in Poland has been noted, and there is a growing fear that an enacted amendment in its present form, will result in Poland becoming less attractive to foreign investors.

Anna Antczak

CMS Cameron McKenna