Author: Karolina Olszewska

Changes in the means of management of real estate in the public sphere and more – Implications of the legislative Act of 13 June 2019 regarding amendment of the Act regarding the National Properties Resources and certain other acts

National Properties Resources – A brief introduction

The legislation first establishing the National Properties Resources (Krajowy Zasób Nieruchomości, or KZN) was adopted on 20 July 2017 in the way of implementation of the National Residential Programme. In the reasoning to this statute, its authors cited the constitutional duty of the Polish state to meet the housing needs of citizens, especially those with small incomes. It had become necessary, as the reasoning went, to establish a state legal entity administering, on a centralised basis, lands owned by the State Treasury outright as well as used by it on another legal basis (i.e. land owned by local self-government bodies) and earmarked for residential development and infrastructural investments associated therewith.

As it established the National Properties Resources, the legislature equipped it with legal instruments enabling it to purchase real estate. It also obligated state entities managing or holding in perpetual usufruct lands owned by the State Treasury (local authorities, the Military Assets Agency, the National Centre for Support of Agriculture and, until 15 August 2019, the national forests authority) to draw up inventories of land owned or used by them in, respectively, urban areas, mixed areas, and rural areas where local zoning plans or general development studies earmark such land for residential development. These inventories were passed on to KZN, and every property specified therein could, at KZN’s exclusive discretion, be classified as a national resource.

Changes affecting KZN as of 15 August 2019

The central feature of the changes affecting the National Properties Resources effective 15 August 2019 lies in the fact that the legal duty of presenting inventories of State Treasury land has been expanded to state companies and to their subsidiaries. As of that date, KZN may take over land owned by State Treasury companies or held by them in perpetual usufruct.

A specific property is subsumed within the National Properties Resources either on the basis of a protocol drawn up in ordinary written form or, in the case of lands hereuntil held by a State Treasury company, on the basis of a notarial deed.

Impact of the statute and of the amendments thereto on the market for residential development land

Purchase of land from a state entity obligated to present inventories to the KZN is subject to a right of first refusal reserved for the National Properties Resources (this provision of the law has remained unchanged by the amendments of 15 August 2019). The practical effect is that an investor looking to purchase land from a local authority or from a State Treasury company (not only for the purpose of residential development) ought to allow for an extra month within the project schedule, during which the KZN may step forward to exercise this right. Moreover, analysis of the amended Act yields the conclusion that dealing in investment properties belonging to the State Treasury and administered by local authorities, owned by local authorities but used by the State Treasury, or owned by State Treasury companies will be significantly curtailed.

A positive change brought by the amendments, meanwhile, is comprised in introduction of a statutory norm sorting out the conflict arising when a right of first refusal extending to the local community or to the State Treasury under art. 109 of the legislative Act of 21 August 1997 regarding real property management and the right of first refusal extending to the National Properties Resources coincide. Before the amendments, prospective buyers of some properties had to notify the relevant local authority as well as the National Properties Resources of execution of a conditional purchase agreement; in the event that both stepped forward to exercise their respective rights of first refusal, the law prescribed no way forward, and the investor had no choice but await resolution of the resulting conflict. After 15 August, meanwhile, if the National Properties Resources are entitled to a property by statute, the State Treasury or the local community will be compelled by law to yield.

That said, the new laws do not regulate a situation where a conflict of rights of first refusal arises from a statute other than the legislative Act regarding real property management. The working assumption would be that, in such a situation, the proposed sale may proceed if neither KZN nor the other entitled entity exercises its right to buy the property – for instance one located within a special economic zone or at an airport.

The present raft of amendments also brings beneficial (from the perspective of investors) modifications of the legislative Act regarding real property management and of the Construction Law as regards the possibility of changing the objective of perpetual usufruct in cases of permanent change of a property’s designated purpose. In this way, the Polish legislature accommodated the suggestions of property market players, first and foremost of developers seeking to build houses in former industrial areas. The status to date was that various municipal authorities would apply different interpretations of art. 73 of the Act regarding real property management, which could result in refusal to issue a construction permit, legal challenge to construction permits already granted, or imposition of high (and not always justified) fees. Under the amended rules, a construction supervision body may no longer refuse issue of a construction permit on the sole grounds that the proposed project is not covered by the objects specified in the perpetual usufruct contract. While the language employed by the legislature in this context, to wit “permanent change of the designated purpose” of lands held in perpetual usufruct, may engender interpretational doubts of its own, the general spirit of the amendments should be welcomed as rational.