Real Estate Due Diligence In Poland

• Published date: 13 September 2023
• Subject Matter: Environment, Real Estate and Construction, Tax, Environmental Law, Real Estate, Property Taxes
• Law Firm: Dudkowiak Kopec & Putyra
• Author: Mr Marcin Kręglewski and Anna Kwinto

Real Estate Due Diligence in Poland - Introduction

Before investing often substantial funds in the purchase of real estate in Poland, all risks associated with the transaction should be examined. Failure to check certain legal aspects may result in the failure of the investment or a significant increase in its cost. Also in the case of individuals purchasing real estate for their own needs, it is advisable to verify the legal status of the real estate before purchasing it, following the principle "better safe than sorry". More and more individuals and companies are choosing to carry out "due diligence" on a property in order to gain the best possible understanding of its legal status before making important financial decisions. While the legal analysis is important, it is also worthwhile to carry out a tax, financial, technical and environmental due diligence of the property and the related transaction or future investment.

Legal Due Diligence of Real Estate

Legal due diligence a property allows to establish the legal status of the property and the risks associated with its acquisition. It covers particularly the following matters and areas of risk:

• Examination of legal title to the property and the subject of the transaction,
• Potential encumbrances on the property (mortgage, other limited rights in rem such as easements, usufruct pledge, lease agreements related to the property),
• Potential third-party claims to the property,
• Legal classification of the land in terms of the feasibility of the transaction and subsequent development,
• Analysis of aspects related to the development conditions for the real estate,
  in particular the conditions arising out of zoning plan or zoning decisions;
• Examination of compliance with requirements under building regulations,
• Checking issues arising from environmental legislation,
• Determination of access of the property to the public road,
• Examine the application of historic preservation legislation to the property,
• Annual property tax charge,
• Determination of the possible amount of the perpetual usufruct fee.

1. Legal title to the property

The examination of the title to the property in Poland primarily involves an analysis of the land register maintained for it, as well as verification of the basis on which the property was acquired by the current owner and the existence of reported or potential third-party claims to ownership of the property. In particular, it should be verified whether the property was not sold shortly before the examination. If the subject of the report is the perpetual usufruct of the real estate, it is examined for what period of time the real estate has been given for perpetual usufruct and for what purposes it may be used by the perpetual usufructuary.

Sources of Legal Due Diligence of Polish Property

The primary sources for verifying the legal status of the property located in Poland are:

• electronic version of the Land and Mortgage Register (in Polish "Księgi wieczyste"),
• documents constituting the basis for the acquisition of title by the...