Favourable law for entrepreneurs

In the December issue of "Eurobuild Poland", we outlined the most important changes to real estate sector law in 2002. We now present the projects and drafts still under discussion in parliament that will most probably become law in 2003

Among the planned changes, particular attention should be given to the new Act on Spatial Planning and Development as well as an extensive amendment to building law. Both have been drafted under the government's "Business First" package.

Spatial Development

Master Plan Content and Form
According to lawmakers' assumptions, the quality of master plans should be improved by including more details, standardizing their form and a more precise definition of mandatory elements (e.g. the master plan will have to designate all the land subject to division or mergers). An important introduction is also the requirement that, simultaneously with the adoption of a local master plan, the authorities should decide on how the guidelines concerning the construction of the technical infrastructure facilities included in the master plan will be implemented, when they will be constructed and how they will be financed.

Master Plan Adoption
Lawmakers further intend to simplify and accelerate the master plan approval procedure. In particular, it will be possible to appeal against a master plan only once to the Supreme Administrative Court (current regulations make it possible to appeal against such plans twice) and then only by a person who can prove its legal interest.

Public Function Investments
The recognition of a "public function investment" category constitutes another important material change. Such category includes, for example, roads, waste purification plants, drinking water reservoirs, etc. With respect to this type of investment, decisions on establishing the location of an investment (corresponding to a decision on the terms of building and land development) will be issued. The lawmakers' intention is to restrict the plague of protests which block investments that are important to society by liberalizing the administrative procedure. For instance, parties will be notified about a decision by way of an announcement (rather than the delivery of a copy of such a decision), and it will be impossible to file a motion to declare a decision invalid or demand proceedings be re-convened after one year from the announcement thereof.

Lack of Master Plan
Should there be no master plan, it will be possible to grant a decision on the terms of building and land development upon the satisfaction of certain conditions, and in particular upon establishing that at least one of the neighbouring plots (accessible from the same public road) is developed in a way similar to the planned investment. Critics of this concept claim that this procedure will restrict the number of large green field investments as those are usually on land outside big cities, typically for which no master plan has been developed yet.
Upon the act coming into force, local master plans adopted after 1 January 1995 will remain in force and those which were adopted earlier will become invalid after 1 January, 2004.

Building Law
1. Obtaining a Building Permit

Broadening the Type of Investments which Do Not Require a Permit
The proposed amendment to the law extends the list of facilities which may be constructed without having to obtain a building permit to include, among others, detached telephone booths, parking metres, parking lots with up to 10 parking spaces, etc.

Title to Use a Property for Construction Purposes
Under the laws currently in force, a motion for a building permit must be accompanied by a document confirming the investor's title to use the property for construction purposes. Upon the amendment coming into force, it will be sufficient for the applicant only to make a representation confirming the existence of such a title (under the penalty of criminal liability if a false statement is made).

Announcement Instead of Delivery with respect to Linear Investments
With respect to linear investments (e.g., road investments) included in a local master plan, the delivery of a permit will be made by an announcement. The objective of this regulation is to accelerate the procedure to obtain such a decision and to limit the number of potential appeals.

Cash Deposit in Proceedings before the Supreme Administrative Court
In the amendment to the act, it is proposed to introduce a new instrument taking investor's interests into account in proceedings before the Supreme Administrative Court. Namely, the Court will be able to condition the suspension of a building permit on the person filing a complaint paying a cash deposit as security against future claims, if any, for redress of damages resulting from such suspension of the investment process.

Restriction of the Number of Participants in Proceedings
Another objective of the proposed amendment is to restrict the number of entities which are authorised to participate in the process of obtaining a building permit; the status of an "interested party" will be held exclusively by the investor, owners, perpetual usufractuaries and managers of neighbouring real properties. Furthermore, an innovation is that the ability to interfere on the part of social organisations authorized to participate in the proceedings on the basis of the Code of Administrative Procedure shall be excluded. It is not clear, however, if this exclusion will also apply to the most active environmental organisations (since such entities are granted a different entitlement by environmental protection regulations).

Penalties for Delays
Lawmakers also wish to discipline authorities that are lacklustre in issuing permits. Therefore, it proposes a radical solution in the form of a fine of PLN 500 for each day of delay in issuing such a decision.

2. Change of Building Design

An amendment that will be unquestionably favourable to investors is the ability to obtain an official confirmation of whether or not a planned change of building design (made after the issuance of a building permit) is "material" for the purposes of law and if such change requires that a decision on the amendment of the building permit must be issued. If such confirmation is not issued within 14 days after the request is made, it will be understood that the proposed change does not require an amendment to the given permit.

3. Implementation of Works and the Delivery of Completed Facilities

Illegal Execution of Works
Another innovation is the principle that when works are suspended because of the absence of the required permit or notification, the competent authority shall only permit the recommencement of works after the investor has performed certain "repair" actions, e.g. presented a substitute design.

Sanctioning Illegal Construction
A revolutionary change is the introduction of a potential possibility to sanction buildings constructed without a required permit. Contrary to the exceptionally restrictive regulations which are currently in force, under the new law occupancy permits will be issued for such buildings provided that investors pay high sanctioning fees, provided, however, that the facility complies with the master plan and technical requirements.

Obligatory Inspection prior to Occupation
A less favourable change is the rule providing that every building, prior to being admitted to occupation, will be inspected by the building supervision authorities at the investor's expense.

Other Projects

Parliament is also working on other laws which will be of material importance to the real estate market. One such law is the draft of the new Bankruptcy Law, which, if promulgated, will radically improve the position of creditors that hold collateral in the form of a mortgage. Other projects include the amendment to the Act on the Protection of Tenants' Rights as well as to the Act on Housing Cooperatives, and the proposed Act on Construction Payment Guarantees. All of these acts are at various stages of development and at present it is not possible to clearly establish which of these will become law and what their final form will be.

Artur Kulawski and Rafał Zboch
Weil, Gotshal & Manges