How not to get lost in the legal maze

Those planning to invest in the redevelopment of historic properties or in shopping centre projects  are still at risk due to the ambiguities of current  legal regulations

It often happens that an investor or developer is interested in purchasing a run-down or even a ruined property, hoping for a commercial opportunity following its restoration. However, practice shows that investment in historic buildings requires special attention to the analysis of the legal aspects of the investment – and its implementation is not easy because the law in this matter is particularly vague and imprecise.
Between fiction and reality
The Act of July 23rd 2003 on the Protection and Maintenance of Historic Monuments at some length defines what is and what is not a historic site. According to the act, monuments are real or movable property, their parts or assemblies are man-made or made in connection with human activity and which constitute a testimony of past times or events. Particular emphasis is laid on the fact that the preservation of such things is in the public interest because of their historical, artistic or scientific value. In practice, these categories are often dependent on the knowledge, sensitivity and beliefs of the evaluator. Moreover, according to Polish law, a monument is not only an item entered into a relevant register, but also applies to properties not listed on the register but meeting the criteria provided for in the definition quoted. Therefore, as can be presumed, the capacity of the definition and its application can carry a serious risk of a variety of interpretations and so expose the investor to additional costs.
Investment process on a historic site
At the initial stage of an investment, the investor must assess whether the object of their interest is a monument subject to protection. The situation is clear if the site is entered in the register of monuments maintained by the Voivodship Heritage Conservator. The law specifies the responsibilities of the owner of such a property in connection with the planned investment. These primarily include obtaining a permit for the construction work on a historic site by persons authorised to carry out conservation work and under the supervision of authorised persons. If the property is registered in the record of monuments, it is not formally protected, but the conservator may nevertheless decide to place it under a protection order. The most risky situation for an investor is when the site is not listed in the monuments register or in the record of monuments, but according to the conservator still meets the conditions for registration in the monuments register. In such a case, the investor is not required to obtain any other permit for construction work on the site, but the conservator has the right to suspend any work already in progress and start a property-registration procedure within 14 days.
Clear and transparent
The law is not sufficiently clear for participants in the real property market, who face the risk of acquiring a property which is not registered in the monuments register or monuments record, but may still be considered to be of historical value by the conservator, thus leading to the investment being suspended for a long time. In this case, the cost of drawing up the required project documentation and the cost of the work may be considerably higher than projected. The investor can, therefore, at no fault of its own, find itself in a situation where significantly higher costs are incurred or the investment has to be abandoned. The sale of a historic property may also result in losses because the market price may be lower than the cost of acquisition. In the event of losses incurred due to a decision by a public authority, the investor can claim compensation only if such a decision was issued unlawfully. From the practical legal perspective, it seems that for the sake of historic properties and in order to increase the interest of investors consciously investing in historic monuments, the law should be amended so that clear and transparent rules of conduct for historic monuments are institued.
Controversy at the shopping centre
Under the currently applicable regulations, the location of shopping centres with sales areas of over 2,000 sqm requires the previous inclusion of the investment in both the study of conditions and the directions of spatial development, as well as in the zoning plan. One of the remaining contentious issues under the law is the possibility of building such a facility in an area for which no zoning plan has been enacted. The root of the dispute is the ambiguous nature of the provisions of Article 15 and Article 10 of the Act of March 27th 2003 on spatial planning and development. If we assumed a strict interpretation of the provisions, it would turn out that the law does not allow for the construction of a shopping centre with a sales area exceeding 2,000 sqm on the basis of the zoning permit (despite the fact that the general conditions for issuing such a decision referred to in Article 61 of the Act have been met). The reason for this is the statutory obligation to adopt the study and the local plan for areas on which the location of shopping centres has been planned. In connection with this obligation, no zoning permit which allows for the construction of a shopping centre with an area exceeding 2,000 sqm could be issued if a study was adopted after the enactment of the Act (i.e. after July 10th 2003).
However, there is an interpretation which entails that such an understanding of the regulations is contrary to the constitutional principle of protection of property rights. According to this concept, where the law does not contain a clear and unambiguous prohibition, one should allow the opportunity to build shopping centres in areas for which local plans have not been adopted, that is, on the basis of individual zoning permits (of course, subject to the fulfilment of the general conditions for issuing such a permit defined in Article 61 of the Act). Additionally, one could indirectly use the wording of Article 64 point 2 of the Act requiring that the planned retail space be included in the application for the zoning permit. If the construction of shopping centres on the basis of zoning permits was impossible, the provision should highlight the prohibition as regards such investments and not the obligation to include the planned retail space.
A different situation occurs if the municipality has adopted a study of the conditions and directions of spatial development taking into account the location of shopping centres with an area exceeding 2,000 sqm. According to a recent judgement by the Supreme Administrative Court on the law on spatial development, there is a rule requiring that the zoning permits be issued in accordance with the provisions of the study. According to the argument expressed in that verdict, one should support the view that if a given area was not designated for the construction of shopping centres in the study, the construction of such a facility under the zoning permit will not be possible. On the other hand, there are still relevant arguments demonstrating that the study, as a document other than an act of local law, may not be the basis for an individual decision, such as a zoning permit.
The conclusions that investors can draw from the judgements of the Supreme Administrative Court are interesting, as they help assess the investment risk in areas not covered by zoning plans, under zoning permits or in situations where a study has not been adopted at all.
Tomasz Kurek, partner, head of Real Estate & Construction Department of CMS Cameron McKenna’s Warsaw office
Lidia Dziurzyńska-Leipert, Wojciech Szybkowski, Wojciech Koczara, partners in the Real Estate & Construction Department of CMS Cameron  McKenna’s Warsaw office