Date of entry into force of the new Developers Act and transitional provisions
Analysis of the transitional provisions of the new Developers Act is complicated and unfortunately does not lead to unequivocal conclusions. Indeed, we believe these provisions should be amended immediately to remove doubts, so that developers can prepare for application of the new law and avoid litigation in the future.
Entry into force of the new Developers Act
The drafters provided for several stages of entry into force of the provisions of the new Developers Act in Poland (Act on Protection of Rights of Acquirers of Residential Units or Single-Family Houses and the Developers Guarantee Fund of 20 May 2021). In principle, most of the provisions will enter into force on 1 July 2022, i.e. after the grace period of 12 months from publication of the act in the Journal of Laws, which took place on 30 June 2021.
When the new Developers Act enters into force, the old Developers Act (Act on Protection of Rights of Acquirers of Residential Units or Single-Family Houses of 16 September 2011) will expire, subject to the need to apply it in cases specified in Art. 76–79 of the new act.
Exceptions to this rule have also been provided for, namely:
- The regulations governing the legal status of the Developers Guarantee Fund and the rules for financing and origin of funds in the Developers Guarantee Fund entered into force on 31 July 2021.
- Amendments to the Act on Certain Forms of Support for Residential Construction of 26 October 1995 entered into force on 1 July 2021, namely Art. 7a added to the current Developers Act, imposing certain obligations on developers in the event of bankruptcy of the bank operating the housing escrow account, in particular the obligation to conclude a housing escrow account agreement with another bank and to inform the buyers of the units accordingly.
Transitional provisions
Art. 76 of the new Developers Act provides that, in certain cases, after 1 July 2022, developers will continue to apply the existing act.
Art. 76(1) states: “Where sales commenced before the date of entry into force of this act and before that date at least one development agreement was concluded within the meaning of Art. (3)(5) of the act repealed in Art. 80, the current provisions and Art. 10 (1)–(3), Art. 11 and Art. 43(1)(7) and (9) of this act shall apply to development projects within two years from the effective date of this act.”
Pursuant to this provision, the current act will apply to development projects in respect of which the developer commenced the sales process before 1 July 2022 and entered into at least one development agreement. In such a case, only the enumerated provisions of the new act will have to be applied, in particular those concerning the consequences of termination of the housing escrow account agreement by the bank.
However, to complicate matters further, the parliament introduced a maximum two-year period for application of the provisions of the previous Developers Act. Only after 1 July 2024 will it be necessary to apply the provisions of the new Developers Act to ongoing development projects, in particular with respect to the obligation to enter into reservation agreements, payments to the Developers Guarantee Fund, extended oversight by banks, and the extended scope of the prospectus.
Art. 76(2) states: “The current provisions and the provisions of Art. 10(1)–(3), Art. 11 and Art. 43(1)(7) and (9) of this act shall apply to development agreements concluded within two years from the date of entry into force of this act in a development project referred to in section 1 and in relation to which the right referred to in Art. 1 of the act repealed in Art. 80 has not been transferred after the end of two years from the date of entry into force of this act.”
This provision raises the most controversy and doubts in interpretation. In our opinion, its literal wording does not reflect the drafters’ real intentions. It states that the provisions of the existing Developers Act will apply to a development agreement concluded within two years from entry into force of the new Developers Act as part of a commenced development project, for which the title to the units will not be transferred to the buyer by 1 July 2024. It would follow from this that the provisions of the existing Developers Act should be applied to development agreements, so defined, without any time limitation. This will also apply to agreements transferring title to the units in execution of concluded development agreements, even if this takes place, for example, in January 2025.
What about development agreements concluded before the date of entry into force of the new act? Should the existing act also be applied in that case without any time limitation? From the literal wording of Art. 76(2), it would appear that it does not. However, in our opinion, such an interpretation does not seem to be justified, as the solution adopted in relation to development agreements concluded after 1 July 2022 should be all the more applicable to agreements concluded before 1 July 2022, i.e. when the provisions of the new Developers Act were not in force at all. There are also opposing views, according to which, for development agreements concluded before 1 July 2022 for which the title to the units was not transferred to the buyer by 1 July 2024, the new regulations should apply, as in the case of development projects pursuant to Art. 76(1) of the new Developers Act.
The other transitional provisions do not raise such doubts. It is also worth mentioning that pursuant to Art. 77 of the new Developers Act, it will already be necessary to apply the new Developers Act in its entirety to separate project tasks in respect of which the developer commenced the sale of units after 1 July 2022.
Summary
The analysed transitional provisions are complex and raise a number of questions. It may happen that developers will not be able to clearly determine which development agreements the new act should be applied to, which in turn may result in a risk of violating the provisions of the new Developers Act and expose developers to potential claims from buyers of units. For this reason, the provisions of the new Developers Act should be amended immediately, even before 1 July 2022, to remove all of these doubts.
Łukasz Łubiński, Sylwia Moreu-Żak, attorney-at-law, Real Estate practice, Wardyński & Partners
