Purchase of real estate in Poland by foreigners – what issues should be verified?

The purchase of real estate in Poland by a foreigner involves a number of legal aspects that must be carefully checked to ensure that the transaction is safe and free from legal risks. In this guide, we discuss the most important issues to consider before signing a preliminary agreement or notarial deed, so that the purchase of real estate proceeds smoothly and without unforeseen complications. In this article, we provide practical tips to help you avoid common mistakes and protect the buyer’s interests.

Does a foreigner need a permit from the Ministry of Internal Affairs and Administration?

First of all, a foreigner who wants to purchase real estate in Poland should absolutely verify whether they are required to obtain a permit from the Minister of Internal Affairs and Administration to purchase real estate in Poland.

As a rule, according to the Polish Act on the Acquisition of Real Estate by Foreigners in Poland, the acquisition of real estate by a person who does not have Polish citizenship requires prior administrative permission issued by the Polish Ministry of Internal Affairs and Administration. However, this obligation does not apply to all foreigners, as the scope of exemptions is relatively broad and includes, among others, some purchases of residential premises, as well as citizens and entrepreneurs from European Economic Area countries and Switzerland. On the other hand, citizens of countries such as the United Kingdom, the USA, Canada, Ukraine, Belarus, Turkey, are required to obtain permission from the Ministry of Internal Affairs and Administration in order to legally purchase real estate in Poland. 

In many cases, foreigners mistakenly assume that permission is not required because they are only purchasing a flat and not land. However, this is a mistaken assumption that may result in the transaction being invalid.

Therefore, before signing a preliminary agreement, a foreigner should verify:

–    their legal status within the meaning of the Polish Act on the Acquisition of Real Estate by Foreigners,

–    the type of real estate being purchased (premises, land, share in a road),

–    the location of the property (e.g. border zones),

–    the basis for acquisition (purchase, donation).

A detailed discussion of cases in which a permit from the Polish Ministry of Internal Affairs and Administration is required, as well as the most common exceptions to the obligation to obtain consent, is presented in a separate article entitled “Purchase of real estate by a foreigner in Poland – when is a permit from the Polish Ministry of Internal Affairs and Administration required?”. In the publication “Acquisition of real estate by a foreigner in Poland – a comprehensive guide”, we describe in detail the procedure for applying to the Ministry of Internal Affairs and Administration for the purchase of real estate.

Verification of the land and mortgage register – transaction security

Another absolutely essential step before a foreigner purchases real estate in Poland is to conduct a detailed verification of the land and mortgage register kept for the property in question.

Land and mortgage registers are public registers disclosing the legal status of real estate in Poland and are maintained by courts. Their primary purpose is to ensure the security of transactions and protect real estate buyers. Land and mortgage registers contain basic legal information about real estate, including:

–    the designation of the property,

–    legal title to the property,

–    any claims and rights of third parties,

–    the existence of mortgages and property debt.

Foreigners should bear in mind that when purchasing real estate in Poland, the mere fact that a land and mortgage register is kept for the property does not automatically mean that the transaction is completely secure. One of the mistakes buyers make is to assume that since the property has a land and mortgage register, its legal status is completely clear and does not require further verification.

In fact, the Polish land and mortgage register provides protection only within certain limits resulting from the principle of public credibility of land and mortgage registers. What does this mean in practice? Pursuant to Article 5 of the Polish Act of 6 July 1982 on Land and Mortgage Registers and Mortgages, in the event of a discrepancy between the legal status disclosed in the land and mortgage register and the actual legal status, a person acquiring ownership or other property rights from an entity entered in the land and mortgage register is, as a rule, protected and may rely on the content of the register. This principle is referred to as the public credibility of land and mortgage registers.

However, this principle is not absolute. In particular, it does not apply when the purchaser acts in bad faith. An act is considered to be in bad faith if the purchaser knew or, with due diligence, should have known that the actual legal status of the property was inconsistent with the content of the land and mortgage register.

In practice, the application of this principle means that the purchaser may, in principle, rely on the content of the land and mortgage register valid at the time of conclusion of the contract transferring ownership, but only on condition that a thorough examination of the legal status of the property has been carried out.

The land and mortgage register should be verified:

–    at the due diligence stage before signing the preliminary agreement,

–    again immediately before concluding the property sale agreement.

In practice, the notary checks the current status of the land and mortgage register immediately before signing the deed, while the buyer should perform the verification before concluding the preliminary agreement.

When analysing the land and mortgage register, particular attention should be paid to the so-called mentions, i.e. information about a submitted application for entry, change or deletion of a right. In practice, the appearance of a mention means that:

• the public credibility of land and mortgage registers does not protect the buyer in the scope covered by the mention,
• the buyer cannot effectively invoke ignorance of potential changes in the legal status of the property.

From the perspective of transaction security, the existence of a note may be one of the most important warning signs for a foreigner planning to purchase real estate in Poland.

More detailed information on the functioning of the Polish land and mortgage register system, its practical significance for foreigners and potential problems that may arise in the land and mortgage register is described in this publication: “Purchase of real estate in Poland by foreigners – the Polish land and mortgage register system”.

Rent, fees and property debt

Before purchasing real estate in Poland, a foreigner should carefully verify the amount of rent payable to the housing community (or housing cooperative) and the individual components of the fee. The rent payable to the housing community (or housing cooperative) is a monthly fee covering various costs related to the maintenance of the property. Its amount may vary significantly depending on the standard of the building, its location and the scope of services provided by the community or cooperative.

Typical components of the rent include, among others:

• maintenance costs for common areas of the building (staircases, lifts, corridors, lighting),
• advance payments for central heating and hot water,
• renovation fund for building modernisation and repairs,
• waste disposal, cleaning and maintenance of green areas,
• heating and hot water in the case of a shared heating system,
• security and monitoring, if provided by the community,
• maintenance of the intercom system,
• lift maintenance costs,
• waste disposal,
• property tax,
• etc.

For anyone planning to purchase real estate in Poland, checking the rent amount and its structure will be crucial for assessing the actual monthly costs of maintaining the property. In practice, the buyer may also ask the seller (real estate agent) for a history of rent changes in the years prior to the purchase in order to predict possible rent increases in the future.

A foreigner planning to purchase real estate in Poland should definitely check the status of rent payments and utility bills. It should be remembered that information about the property’s debt is not limited to the contents of the land and mortgage register. Section IV of the land and mortgage register generally discloses mortgages, i.e. collateral for debts (most often bank loans) that encumber the property and ‘follow it’ regardless of a change of ownership.

At the same time, some of the financial obligations related to the property are not disclosed in the land and mortgage register at all.

From the buyer’s perspective, it is crucial that arrears related to the maintenance of the property, in particular those owed to the housing community or cooperative, in practice encumber the current owner of the premises, and not only the person who originally generated them. This means that after purchasing a flat, the buyer may be asked to pay outstanding fees related to the premises by the housing community or housing cooperative.

Consequently, before concluding a sales agreement, and ideally at the stage of concluding a preliminary agreement, the seller (or estate agent acting on behalf of the seller) should be asked to provide the following documents:

• a certificate from the community or cooperative confirming that there are no outstanding maintenance fees (or confirming the existence of outstanding fees),
• a certificate confirming current utility bills (electricity, gas, heating, water),
• a certificate confirming that there are no outstanding property taxes,
• in the case of land granted for perpetual usufruct – confirmation that there are no outstanding payments in this respect.

Our experience shows that failure to verify the debt on a property is one of the most common mistakes made by foreigners purchasing real estate in Poland. In practice, foreigners often assume that since the property is the subject of a transaction, it is free of debt. Unfortunately, this is not the case, and arrears may only become apparent after the transaction, when the community or cooperative submits a claim to the new owner, who will be obliged to settle them.

However, after the transaction, at the stage of transferring the property to the new buyer, the parties record the status of all meters located in the premises. This is usually done during the handover of the flat and documented in a handover protocol. On this basis, the new owner can then conclude or transfer contracts with utility providers, while the previous owner should settle accounts according to the meter readings on the day of handing over the premises. This is important in order to avoid charging the buyer for consumption costs incurred before the transaction.

Registration and third party rights in the premises

When purchasing a flat in Poland, especially on the secondary market, a foreigner should check whether another person is registered in the premises. Registration in Poland is a legal obligation for both Polish citizens and foreigners residing in the country. There are two types of registration: permanent and temporary. Temporary registration is usually linked to the validity period of residence documents (e.g. visa, residence card), while permanent registration is registered without a specific date.

However, it is important to distinguish between registration and legal title to the premises. The mere fact of registering a person at a given address does not give them the right to use the flat or enter the premises. Registration is solely an administrative obligation and does not constitute a legal title entitling the person to dispose of the property.

In practice, therefore, the new owner of the premises has the right to refuse entry to a registered person if they do not have any legal title to the premises (e.g. ownership, co-ownership, lease agreement, loan for use or other legal relationship). However, if the registered person has legal title (e.g. is a co-owner or tenant), refusing to allow them to enter the flat may give rise to civil claims, e.g. for restoration of possession, and in certain circumstances, also liability for trespassing.

For the security of the transaction, the foreigner should verify with the local authority competent for the location of the property whether anyone is registered in the flat. This is a simple administrative procedure that can be done in person or through a representative (e.g. a real estate agent). This allows you to avoid possible disputes with persons who are formally registered but have no right to stay in the property.

Energy performance certificate

From 28 April 2023, regulations will come into force in Poland according to which, when selling or renting a building or part of a building (e.g. a flat), the owner is obliged to ensure that an energy performance certificate is drawn up and provided to the buyer or tenant. An energy performance certificate is a document specifying the energy demand of a building or premises necessary for its use (including heating, ventilation, hot water preparation and cooling). As a rule, the certificate is valid for 10 years from the date of issue, unless work affecting the energy performance of the building or premises has been carried out in the meantime, in which case a new document must be drawn up.

When purchasing a property in Poland, the buyer should therefore verify whether an energy performance certificate has been issued for the premises and whether it is valid. This obligation applies to both single-family houses and premises in multi-family buildings.

For the buyer, it is not only of formal importance, as it allows them to estimate future operating costs and compare the energy efficiency of the property.

In practice, the document should be handed over to the buyer at the latest when the notarial deed is signed, and the notary public records this fact in the deed.

From the perspective of verifying the legal status of real estate in Poland when purchasing a ‘regular’ flat, it is therefore worth checking:

• whether the certificate was issued by a person entered in the central register of authorised persons,
• whether it applies to a specific flat and not the entire building (which is a common mistake in practice),
• the date of issue and any modernisation work that may cause the certificate to become invalid,
• the energy class and energy consumption indicators, which are part of the calculation of property maintenance costs.

A common mistake made by buyers of real estate in Poland is to treat the certificate as a mere formality for the notarial deed. In fact, this document is one of the few objective sources of data on the future costs of using the premises, especially in older buildings, where differences in energy demand can be significant. Contrary to popular belief, the lack of a certificate does not always prevent the conclusion of a property sale agreement, but it does generate unnecessary liability and dispute risks.

Land use planning applicable to the property being purchased

When purchasing real estate in Poland, it is worth checking the local spatial development plan (MPZP), i.e. the document determining the purpose of the land and the conditions for the development and use of the property. Knowledge of the MPZP allows you to assess both the current and future possibilities of using the property.

In the case of residential properties (i.e. flats in multi-family buildings), the local zoning plan will usually be of lesser importance to the buyer, as the plan does not directly affect the existing flat. However, it can provide information about the neighbourhood, e.g. whether new buildings, roads, service facilities or investments are planned nearby that may affect the comfort of living or the value of the property.

On the other hand, in the case of land properties (building plots, agricultural land intended for development), the local zoning plan is of key importance, as it specifies what can be built on the plot in practice and what the development restrictions are, e.g. maximum building height, building area, building lines, land use (residential, commercial, industrial). Knowing the plan allows you to avoid a situation where the purchased plot does not meet your investment expectations or is not suitable for the planned investment.

In many cases, the local zoning plan can be checked online via municipal geoportals.

Technical condition of the property – inspection before purchase

It is also worth commissioning a technical inspection of the building or plot before purchase, especially in the case of older buildings or land properties. This is important both for assessing the physical condition of the property and for predicting future operating or renovation costs.

The technical condition is usually verified after the preliminary agreement has been signed, which allows the buyer to obtain a complete picture of the condition of the property and, if necessary, take the results of the inspection into account in further price negotiations before the notarial deed is concluded.

The technical inspection should include, among other things:

–    electrical, plumbing and gas installations,

–    the structure of the building, including walls, roof, foundations, ceilings and balconies,

–    damp-proofing and thermal insulation,

–    heating and ventilation systems,

–    any damage caused by moisture, fungi or pests.

In the case of building plots, the following should also be checked:

• access to utilities (electricity, water, gas, sewage),
• access road and its legal status (whether it is owned by the plot, easement or public road),
• terrain, plot slope and any building restrictions.

Summary

In summary, the purchase of real estate in Poland by a foreigner requires comprehensive verification of many legal, technical and administrative aspects. It is crucial to check whether the transaction requires a permit from the Ministry of Internal Affairs and Administration, analyse the land and mortgage register, verify debts, rent, the registration status of the premises, the validity of the energy performance certificate, the local spatial development plan and the technical condition of the property. Careful control of these elements minimises legal and financial risk, ensures the security of the transaction and allows for an informed and safe purchase of real estate in Poland.