Is this the end of the revitalisation pre-emptive right in Warsaw?
There are many indications that as of 16 March 2024, the City of Warsaw will no longer be vested with a pre-emptive right to purchase real estate in the degraded area and revitalisation area of the city designated by Resolution LX/1967/2022 of 17 February 2022.
Under the Revitalisation Act, the pre-emptive right established in the resolution designating the degraded area and revitalisation area will lapse if a resolution establishing a special revitalisation zone does not enter into force within two years after entry into force of Resolution LX/1967/2022. The state of legislative progress shows that the special revitalisation zone will not be established by the statutory deadline, i.e. 15 March 2024, and the pre-emptive right covered by Warsaw City Council Resolution LX/1967/2022 will expire on that date.
Unlimited pre-emptive right
As we have already written, on 17 February 2022 the Warsaw City Council adopted Resolution LX/1967/2022 designating the degraded area and revitalisation area of the City of Warsaw. The resolution entered into force on 15 March 2022. The revitalisation area included the right-bank suburbs of Praga-Północ and parts of Praga-Południe and Targówek. In an oversight ruling of 24 March 2022, the governor of Masovia Province declared the foregoing resolution invalid insofar as it includes within the boundaries of the revitalisation area land within geodesic zone 4-08-17 (included in the urban information system (MSI) area Bródno, which is part of the Targówek district).
Resolution LX/1967/2022 was adopted based on the Revitalisation Act of 9 October 2015, which provided at the time that the municipal council may establish a pre-emptive right in favour of the municipality to purchase any real estate located in a revitalisation area. Pursuant to the literal interpretation of this provision, as well as the prevailing view in the legal literature and the case law, the municipality could establish the pre-emptive right only with respect to all real estate in the revitalisation area, without the possibility of limiting this right by establishing the pre-emptive right with respect to only a selected catalogue of property or with respect to real estate located only in certain revitalisation areas or by excluding a specific type of property. Par. 2 of the resolution in question establishes in favour of the City of Warsaw the pre-emptive right to purchase all real estate located in the revitalisation area.
Subjecting the property to a statutory pre-emptive right means that the sale (transfer of ownership) of the property is possible only on the condition that the holder of the pre-emptive right does not exercise it. In practice, this means that two notarial deeds must be concluded to transfer ownership of the property to the purchaser. First, a conditional sale agreement is executed, subject to the condition that the pre-emptive right is not exercised by the holder. Then the notary notifies the holder of the pre-emptive right, which has one month to execute the right. If the pre-emptive right is not exercised, the parties will enter into a dispositive agreement transferring ownership of the property.
The adoption in Resolution LX/1967/2022 of a pre-emptive right of unlimited scope means that the foregoing procedure should be applied to any sale of property covered by the revitalisation area, regardless of its nature and type (developed property, undeveloped property, residential property, etc), which complicates legal transactions in such real estate and introduces uncertainty with respect to the success of such transactions, for both sellers and buyers.
With a view to the interests of residents and cooperation with real estate market participants, the City of Warsaw has indicated that it is not interested in exercising its pre-emptive right to purchase residential and commercial premises in buildings of housing associations (private or cooperative), or parking spaces. While this removes to some extent the uncertainty regarding exercise of the pre-emptive right by the City of Warsaw, in practice the parties still have to undergo the notification procedure.
This results in additional costs (e.g. for conclusion of an additional conditional deed, and payment of extra loan instalments due to postponement of transfer of ownership in the case of financed properties), additional formalities, and prolongs the sales process. It also means a considerable time commitment by the city administration to analyse notifications of conditional sales contracts for properties covered by the revitalisation area and exercise the pre-emptive right with regard to properties meeting the objectives set forth in the Revitalisation Act.
Amendment to the Revitalisation Act with regard to the pre-emptive right
The recent overhaul of the land use and development legislation in Poland included changes to the Revitalisation Act. Pursuant to Art. 37(4a) of the Act of 7 July 2023 Amending the Spatial Planning and Development Act and Certain Other Acts, the wording of Art. 11(5)(1) of the Revitalisation Act, governing the scope of the pre-emptive right, was amended to provide that in a resolution designating a degraded area and a revitalisation area, the commune council may establish the commune’s pre-emptive right for all real estate, “property of a specific type or specific real estate, located in the revitalisation area or designated revitalisation sub-areas.” Thus communes were given more flexibility in establishing this pre-emptive right, which should allow this instrument to be used more precisely, in line with the objectives of the Revitalisation Act.
Planned amendment to pre-emptive rights provisions of the resolution designating the degraded area and revitalisation area in Warsaw
Based on these legislative changes, a resolution was drafted to amend Resolution LX/1967/2022 of 17 February 2022 with regard to the pre-emptive right. Under the proposed amendment, the pre-emptive right established in favour of the City of Warsaw would cover “all real estate, excluding apartments, commercial premises, parking places in underground and aboveground garages, and shares in the common parts of real estate, within the revitalisation area.”
The justification for the draft resolution indicated that the adopted amending act opened up the possibility of narrowing the catalogue of properties for possible pre-emption. The pre-emptive right would not extend to all properties in the area, as before, but only to those which the City of Warsaw may be interested in for improving the residents’ housing situation, social services, transit and business development, or environmental conditions in degraded and revitalisation areas, including the objectives of the future Municipal Revitalisation Programme for the City of Warsaw.
This amendment was not adopted. Therefore, currently, the resolution of 17 February 2022 providing for a pre-emptive right with respect to all properties in the revitalisation zone without any restrictions remains in force.
Expiration of the pre-emptive right established by the resolution
Pursuant to the Revitalisation Act, the validity of the pre-emptive right established in the resolution designating the degraded area and revitalisation area is closely linked to the special revitalisation zone. If a resolution establishing a special revitalisation zone does not enter into force within two years from entry into force of the resolution designating the degraded area and revitalisation area, the pre-emptive right will lapse.
There are many indications that the special revitalisation zone will not be established in Warsaw by the statutory deadline of 15 March 2024. Work on the Municipal Revitalisation Programme are now underway, which will determine whether a special revitalisation zone is to be established as an optional revitalisation tool. Therefore, the pre-emptive right covered by Warsaw City Council Resolution LX/1967/2022 will cease to be in force on 15 March 2024.
However, it should be remembered that regardless of expiration of the pre-emptive right specified in Resolution LX/1967/2022, a pre-emptive right may arise by operation of law if a special revitalisation zone is established in the future. Pursuant to Art. 109(1)(4b) of the Real Estate Management Act, a commune has a pre-emptive right in the case of sale of real estate in a special revitalisation zone. Such a zone may be established for a period of up to 10 years without the possibility of an extension. A special revitalisation zone is established in a revitalisation area, and the commune has some flexibility in this area and can adopt separate resolutions, establishing such zones for individual revitalisation subareas.
Conclusion
Since 2022, the future of the City of Warsaw’s revitalisation pre-emptive right to purchase real estate in certain districts on the right bank of the capital has remained unclear. But it is almost certain that as of 16 March 2024, the city authorities will no longer be vested with this right in its full, unlimited scope as designated by Resolution LX/1967/2022. Therefore, it is necessary to follow the progress of legislative and administrative work on revitalisation in the capital, to determine whether a potential pre-emptive right may arise in the future that could burden real estate in the eastern half of Warsaw.
Barbara Wiśniewska, attorney-at-law, Real Estate practice, Wardyński & Partners
