Prospectus for residential developments
A developer commencing sales of residential units or single-family houses in Poland must prepare a prospectus for the property. The prospectus should include information on other projects planned in the vicinity of the development. In this regard, the current provisions are imprecise and raise concerns. Does the new Developers Act eliminate them?
The prospectus is a document drawn up by the developer containing detailed information on the developer’s legal and financial situation and the project, including the particular residential unit or single-family house offered for sale.
Under the current Developers Act, a prospectus is provided to prospective buyers upon request, but after the new Developers Act of 20 May 2021 comes into force, the developer will be required to deliver a prospectus to the buyer whether or not the buyer requests it.
The prospectus consists of a general part and an individual part. The general section includes:
- The developer’s identifying data (e.g. NIP, REGON and KRS numbers) and contact details
- A description of the developer’s experience
- Information on the property and the project, including measures to protect buyers.
The individual part specifies the price per square metre for the unit or house, and the location and other essential features of the property, including the finishing standard and access to utilities and public roads.
The new provisions significantly extend the scope and level of detail of information in the general part of the prospectus.
Among other things, the following information will be added to the prospectus:
- The date on which the decision on occupancy of the building or completion of construction of a single-family house became legally final
- The percentage at which the contribution to the Developers Guarantee Fund is calculated
- Information provided in the event of conclusion of a housing escrow account agreement with a branch of a credit institution referred to in Art. 4(1)(18) of the Banking Law
- The surface area of the unit or house
- The price of the unit or house
- The date of issue of a certificate of autonomy for a residential unit
- The date of establishment of separate title to the residential unit.
With regard to the land and development in the vicinity of the project, the developer will have to provide information contained in publicly available documents on projects planned within a radius of 1 km from the property, in particular construction or extension of roads, construction of rail lines and planned air corridors, as well as other known municipal projects, in particular sewage treatment plants, waste incineration plants, landfills and cemeteries.
This obligation also exists today, but the provisions do not explicitly indicate the source of this information, nor do they specify how to determine the boundaries of the site “within a 1 km radius.” The appendix to the new act specifies which sources the developer should consult when preparing the prospectus. These include:
- Local zoning plans
- Study of the conditions and directions for spatial development in the municipality
- Decisions on land use and development conditions
- Decisions on environmental conditions
- Resolutions on limited-use areas
- Local reconstruction plans
- Flood hazard maps and flood risk maps
- Determinations of decisions regarding the location of public-purpose projects that may be of significance for the area covered by the development.
These documents are publicly available, as stated for example in the Planning and Spatial Development Act of 27 March 2003, or may be obtained at the developer’s request pursuant to the Act on Access to Public Information of 6 September 2001.
Identification of the sources of information in the new Developers Act should be assessed positively, although it still does not specify how to determine the boundaries of the study area. Nor is there any definition of what is meant by “publicly available documents.” It would appear that, to identify projects within a 1 km radius of the property, it would be practical to designate a 1 km-wide strip of land around the property. Therefore, in this respect, the risk of inadequate preparation of the prospectus is not entirely eliminated.
Additionally, in terms of the land and development, the developer will need to provide information regarding existing facilities in the vicinity of the project affecting the living conditions. According to footnote 3 of the annex, this refers in particular to facilities generating olfactive, noise or light nuisance. It should not be difficult for a developer to provide this information, as these are considerations that must be taken into account at the planning, design and construction stages of the project.
Under the new Developers Act, a new appendix has been added to the prospectus: a sketch of the development concept for the project site and its surroundings, indicating the building and important conditions of the project location resulting from the existing status of the neighbouring land use (e.g. land functions, protection zones, nuisance).
In the event of changes to the data or information contained in the prospectus or appendices, the prospectus should be amended and the information about the changes should be delivered to the buyer.
Under current law and the new Developers Act, inconsistency of the information provided in the prospectus with the legal and factual status existing on the date of signing the development agreement and lack in the prospectus of the information specified in the statutory template are grounds for the buyer to withdraw from the development agreement or other agreements specified in the Developers Act.
The developer or any other person required under the agreement with the developer to prepare the prospectus is subject to civil liability or potential criminal liability, e.g. for providing false information.
Therefore, due diligence must be exercised when preparing the prospectus.
Iwona Kasperek, Real Estate practice, Wardyński & Partners
