A step closer to perpetual usufruct being abolished in Poland

Perpetual usufruct is title to use state-owned or local-government-owned real estate. The owner grants perpetual usufruct of the property for a period that is usually 99 years, for an annual fee.The annual fee for perpetual usufruct is laid down in law, and is between 0.3 – 3% of the price of the real estate, depending on the purpose for which perpetual usufruct is granted.

As of 31 August 2023, an amendment to the Real Estate Management Act came into force. This is the next step in the process of abolishing this system in Poland, which dates back to communist times. Meanwhile, perpetual usufruct does not automatically become ownership title by law. However, under the amendment, holders of perpetual usufruct are going to be able to apply to the State Treasury or local government authority to be sold the property, and the owners will not be able to object. At the same time, the annual perpetual usufruct fee charged presently will cease to apply. In general, the amendment is intended to apply to businesses and users of commercial real estate, i.e. owners of office buildings, shopping centers, firms in the service industry, and others.

The purchase right will only apply to developed properties, but there are no limitations as to the purpose for which the property is used. This essentially means that regardless of the agreed purpose of perpetual usufruct, it will be possible for the current holder of perpetual usufruct to acquire the property. Importantly, if a perpetual usufructuary of undeveloped land manages to develop it within one year of the amendment being enacted, which is 31 August, 2024, they will also be able to apply to the State Treasury and request to be sold the land. This right will not apply in the case of properties that are developed after this time.

Under the legislation, there are even more restrictions on the right to request sale of perpetual usufruct. The right to request sale will not apply for example in situations in which proceedings are pending to dissolve a perpetual usufruct agreement. This right will be enjoyed solely by perpetual usufructuaries who have realized the goal of the perpetual usufruct as stated in the perpetual usufruct agreement and by perpetual usufructuaries who comply with obligations under agreements under which perpetual usufruct of land was granted.

The amendment gives holders of perpetual usufruct the right, but not an obligation, to purchase the property, and in practice this means that it is up to the perpetual usufructuary to decide whether to submit such a request. For this reason, usufructuaries are able to consider various factors, such as the price and timing of the transaction, that affect whether this is an appealing prospect.

If paid in a single payment, the price of purchasing the property will be twenty times the current annual perpetual usufruct fee, and thus the price of the land is intended to be significantly lower than the market price.

Author: Klaudia Nowak

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