Acquisition of real estate in Poland by British citizens and undertakings after Brexit
The transition period during which UK citizens and undertakings were generally treated under EU law like citizens and undertakings from EU member states came to an end on 31 December 2020. This raises the question under what conditions British citizens and undertakings may acquire real estate in Poland or shares in companies holding real estate in Poland.
Under the Act on Acquisition of Real Estate by Foreigners of 24 March 1920, acquisition of real estate in Poland by foreigners requires a permit from the minister for internal affairs. This requirement also applies to acquisition or taking up by a foreigner of shares in a company with its registered office in Poland which is the owner or perpetual usufructuary of real estate in Poland.
Nationals and undertakings of the United Kingdom of Great Britain and Northern Ireland are foreign nationals within the meaning of Art. 1(2) of the act.
The act contains a relatively long list of exemptions from the obligation to obtain a permit for acquisition of real estate by a foreigner. The exemption provided for in Art. 8(2) concerning nationals and undertakings of states-parties to the Agreement on the European Economic Area is the most significant.
The EEA was created in 1994 to bring the countries that are members of the European Free Trade Association under Community internal market rules. Currently, the EEA Agreement forms part of the Community legal order. The agreement applies in the territories in which the Treaty establishing the European Economic Community (now the Treaty on the Functioning of the European Union) and the Treaty establishing the European Coal and Steel Community (expired) are applied and under the conditions laid down in those treaties, and in the territories of the Republic of Iceland, the Principality of Liechtenstein, and the Kingdom of Norway. Therefore, this exemption is linked to the territorial scope of application of the EU Treaties (see also opinion of the Polish Notary Institute of 10 March 2020).
On 1 February 2020, the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community entered into force. The UK thus ceased to be a member of the EU and, as a result, of the EEA. Pursuant to Art. 126 of that agreement, there was a transition period through 31 December 2020, and during that period, pursuant to Art. 127(1) of the agreement, EU law (with certain exceptions) applied to the UK and within its territory.
Therefore, through 31 December 2020, British citizens and undertakings were not required to obtain a permit for acquisition of real estate in Poland or shares of companies owning or holding in perpetual usufruct real estate in Poland.
The EU–UK Trade and Cooperation Agreement of 30 December 2020 entered into force on 1 January 2021. This agreement is being temporarily applied through 30 April 2021. Definitive conclusion of the agreement on the EU side requires ratification by the European Parliament and issuance of a certified translation of the agreement in all of the EU official languages.
However, the agreement does not remove the obligation for citizens and undertakings from the UK to obtain a permit for acquisition of real estate in Poland or shares in a company based in Poland which is the owner or perpetual usufructuary of real estate in Poland. The permit is issued via an administrative decision by the minister for internal affairs, if no objection is raised by the minister for national defence (and in the case of agricultural real estate, if no objection is raised by the minister for agriculture). For detailed information on transactions where consent of the Ministry of the Interior and Administration is required, please see our guide to M&A transactions.
Thus, as the Ministry of the Interior and Administration confirmed in a briefing on 1 March 2021, it is fair to assume that the UK is now regarded as a third country in relation to the EU. Before Brexit, the UK’s membership in the EU also translated into membership in the EEA. But the UK did not, and does not, have any additional or separate relationship with the EEA. Thus, with the loss of EU membership, it also lost EEA membership.
It should also be mentioned that the EEA is founded on the four fundamental freedoms, which do not currently apply in relations between the EU (or EU member states) and the UK. This also applies to the free movement of capital, which is involved in the acquisition of real estate.
For these reasons, it should be concluded that the exemption in Art. 8(2) of the Act on Acquisition of Real Estate by Foreigners ceased to apply to British nationals and undertakings from 1 January 2021. If they wish to purchase real estate in Poland or shares in a company owning or holding in perpetual usufruct real estate in Poland, they should apply for a permit under the general rules of the act (unless there are grounds for one of the exemptions listed in Art. 8(1) in conjunction with Art. 8(3) of the act).
Iwona Kasperek, Sylwia Moreu-Żak, attorney-at-law, Real Estate Development practice, Wardyński & Partners
