Conversion of the right of perpetual usufruct into ownership upon request

25 July 2023 | Knowledge, News, The Right Focus

On 25 July, the President signed the amendment to the Act on Real Estate Management and Certain Other which will make it significantly easier for existing perpetual usufructuaries to acquire ownership of these properties. Under the reform, usufructuaries of commercial land and business entities will also have the right to request the sale of a real property. This is a further stage of the elimination of perpetual usufruct from the Polish legal system.

Amendment to the Act on Real Estate Management: New rules for the purchase of land

The general rule is that land may not be sold to its perpetual usufructuary before the expiry of 10 years from the date of the agreement to grant perpetual usufruct.

The bill provides for enfranchisement upon request and not by operation of law, as was the case with residential land.

Within 12 months from the date of entry into force of the Act, a perpetual usufructuary will be entitled to request the sale of the property to them from the State Treasury or local government bodies.

If the perpetual usufructuary submits the request within the prescribed deadline, the public authorities may not refuse to sell the land to them. If the sale is refused, despite the usufructuary’s fulfilment of all the conditions under the Act, the usufructuary will be entitled to bring an action to court for a so-called substitute declaration of intent to sell.

Currently, the decision to sell the property is made at the discretion of the owner.

Properties excluded from the request for sale

Perpetual usufructuaries will not be allowed to make a request for sale in respect of a property:

  • Let for perpetual usufruct after 31 December 1997
  • In relation to which the perpetual usufructuary failed to perform a contractual obligation
  • Used as a family allotment garden
  • Located within harbours and marinas
  • In respect of which proceedings are pending for the termination of the agreement to let it for perpetual usufruct

In addition, undeveloped land will be available for purchase with the consent of the provincial governor (wojewoda), local government or head of the district (starosta), provided, of course, that the perpetual usufruct agreement has continued for a minimum of 10 years.

The claim will also not be applicable to land owned by the National Agricultural Support Centre (Krajowy Ośrodek Wsparcia Rolnictwa), the Military Property Agency (Agencja Mienia Wojskowego), the State Forests, national parks, and the State Water Management Authority ‘Polish Waters’ (Wody Polskie) – due to the vital importance of such land for the state economy.

High costs of purchasing property under perpetual usufruct

The amendment provides for the following payment schemes:

  • Single payment: 20 times the existing annual perpetual usufruct fee; or
  • Payment in instalments: 25 times the existing annual perpetual usufruct fee

Local governments will be able to either adopt the above payment rules or determine them themselves and may also grant discounts, e.g. due to the duration of perpetual usufruct or no arrears in payment of perpetual usufruct fees.

As a result, a perpetual usufructuary who pays an annual fee of 3% will have to pay 60% of the value of the land to own it. The remaining 40% should be covered under the de minimis aid limit (permitted state aid), regulated by EU law. However, taking into account the rather low aid limits and high property prices, businesses will often need to pay more if the value of the land does not fall within the applicable limit, and consequently pay more than 60% of the market value of the property.

Too short a time limit for the purchase

The bill provides for a 12-month deadline for the perpetual usufructuary to request the sale of the property, starting from the Act’s entry into force. An amendment in this respect was tabled by the Senate, which proposed a three-year deadline, however, was not passed by the Sejm.

According to the explanatory memorandum to the bill, the request procedure is intended to allow perpetual usufructuaries to take a decision on land purchase taking into account their current financial condition and investment plans.

However, according to experts and representatives of businesses, the deadline proposed by the lawmaker is too short to make such a decision and verify whether one meets the relevant conditions. Especially considering that public aid must be settled within three years.

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Weronika Duda

Malwina Jagiełło

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Weronika Duda

Weronika Duda

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