Poland's Real Estate Market And Perpetual Usufruct

• Law Firm: Penteris
• Subject Matter: Real Estate and Construction, Construction & Planning
• Author: Ms Katarzyna Sawa-Rybaczek
• Published date: 18 September 2023

Katarzyna Sawa-Rybaczek is a rarity among lawyers in that she uniquely connects banking and finance with transactional real estate work.

With more than two decades of experience in property transactions and property finance transactions, she combines hands-on knowledge gained in extremely varied real estate transactions (examples upon request) with practical business-oriented advice to investors and financing banks alike.

Katarzyna's considerable experience allows her to understand all aspects of even the most complex property finance projects and provide comprehensive advice.

Understanding Perpetual Usufruct

The oxymoronic "perpetual usufruct" is a quasi-ownership right which has its roots in Poland's communist times. It enabled the State to secure the purpose for which land will be used. What is more, land held in perpetual usufruct is owned either by the State Treasury or a local council.

Although, usufruct is necessarily temporary by definition, "perpetual usufruct" lasts a lengthy 99 years and it is renewable. During this period, the so-called "perpetual usufructuary" has the right to use the property, including the possibility of renting or selling, but - as is the case with usufruct - has no ownership right, and seeing as perpetual usufruct is common on the Polish market, this a worry for the real estate market.

A perpetual usufructuary owns the buildings that are erected on the land but the ownership right over the buildings cannot be transferred to a third party without transferring the perpetual usufruct right over the land.

The statutory fee for land in perpetual usufruct is generally 3% of the land value payable annually in a lump sum. The fees are updated and can be increased every three years if the market value of the land increases.

Real Estate Revolution

On 26 May 2023, Poland's parliament passed an Act that entered into force only recently 31 August 2023. It will eventually lead to the abolition of the perpetual usufruct right from the Polish legal system. Previously, a 2018 Act transformed the right of perpetual usufruct of land for housing purposes into ownership by operation of law. This time, new regulations apply to land for purposes other than residential and cover a wider range of properties, including shopping centres, office buildings, service or commercial and service facilities.

Interestingly, according to Poland's Ministry of Development and Technology, there are 505,796 hectares of land in perpetual usufruct and of that, the...