Developer delays in Poland due to the war in Ukraine: how to claim compensation

Developer delays in transferring property ownership are a common problem on the housing market in Poland. For buyers, this situation causes additional stress, organisational complications and the need to conclude an annex to the loan agreement. However, it also allows them to claim compensation from the developer for the delay in transferring ownership.

Our litigation practice shows that in many such cases, starting from 2022, developers argue that they are not liable for the delay in transferring ownership, as it results directly from the outbreak of war in Ukraine and its effects on Poland.

However, is this position consistent with the current legal situation and court practice in cases concerning claims arising from development agreements? Can a developer therefore be exempt from liability due to the ongoing war in Ukraine? In this publication, we will attempt to answer these questions.

Developer’s delay in transferring ownership of the premises in Poland – what do the regulations say?

The Polish Development Act (i.e. the Polish Act on the Protection of the Rights of Purchasers of Residential Premises or Single-Family Houses and the Development Guarantee Fund) requires that a development agreement include a specific date for the transfer of ownership of the premises. This date is entered into the agreement, and the provision reads, for example: ‘the developer and the purchaser undertake to conclude an agreement transferring ownership of the premises after signing the premises acceptance protocol, but no later than 31 August 2025.’ Therefore, if the transfer of ownership does not take place by 31 August 2025, and thus in practice by 1 September 2025, and the transfer of ownership agreement has still not been concluded, the purchaser is entitled to claim compensation from the developer for the delay.

Pursuant to Article 35(1)(14) of the Polish Development Act, the parties are free to decide whether or not to include contractual penalties in the agreement. However, if the parties have not provided for contractual penalties in the development agreement and the developer fails to perform or improperly performs its obligation (i.e. fails to transfer ownership on time), the purchaser of the premises is entitled to compensation. The amount of compensation corresponds to the amount of statutory interest due to the developer for the purchaser’s delay in making the payment. At the same time, it should be noted that the developer may not include a clause in the development agreement that excludes contractual penalties (see the judgment of the Polish Supreme Court – Civil Chamber of 10 August 2017, file ref. no. I CSK 10/17). Therefore, in accordance with the Polish Development Act and case law, there will be no situation where the developer delays the transfer of ownership and the buyer is not entitled to compensation, whether in the form of a contractual penalty or compensation.

in Poland if the parties have stipulated a contractual penalty in the development agreement, its amount usually corresponds to the product of: the price of the premises, the number of days of delay and the amount of the contractual penalty, for example:

– price of the premises: PLN 500,000,

– contractual penalty: 0.1% for each day of delay,

– number of days of delay: 365 days,

which gives a total of PLN 182,500 in claims by the buyer against the developer.

Developer’s liability for delay in transfer of ownership – force majeure as an exception to the principle of fault

Pursuant to Article 471 § 1 of the Polish Civil Code, the debtor (i.e. the developer) is liable for non-performance or improper performance of an obligation (i.e. delay in transfer of ownership), unless the non-performance is the result of circumstances for which the debtor is not responsible. The above provision therefore means that the only exception when a developer may be released from liability for the obligation to pay compensation (in the form of a contractual penalty or compensation) will be a situation where the failure to meet the deadline for the transfer of ownership of the premises is due to circumstances for which the developer is not responsible, for example in the form of force majeure.

Although the regulations do not define force majeure, in the light of established case law, force majeure is:

1)      an external event (i.e. originating outside the enterprise whose operation is associated with liability for damages, i.e. outside the developer),

2)      impossible to predict in the light of an objective assessment of events and the low probability of the event occurring,

3)      impossible to prevent, not so much the phenomenon itself, but its harmful consequences.

Developer’s delay in transferring ownership – invoking war alone is not sufficient

Although it is generally accepted that war may meet the definition of force majeure (and thus release the developer from liability), the developer is required to prove in court that it was precisely these circumstances (and not any other) that prevented it from performing its obligation on time. The developer must therefore present evidence in court proceedings showing that

1)      the event was indeed a ‘force majeure’,

2)      there is a causal link between this event and the developer’s failure to perform its obligation,

3)      even with due diligence, the developer could not have prevented the consequences.

In practice, therefore, the mere reference by the developer to the fact of the war in Ukraine will not be sufficient to release it from liability, as the developer must demonstrate the specific impact of the war on the investment. According to Article 6 of the Polish Civil Code, the burden of proving a fact rests with the person who derives legal consequences from that fact, and as indicated in the doctrine, ‘the burden of proof consists in the necessity to present to the court material on the basis of which the court could be convinced of the validity of the parties’ claims.’ (Adrych-Brzezińska Izabela, Burden of proof in civil law and civil proceedings, LEX 2015). Therefore, in order to be released from liability, the developer should demonstrate in the evidence that the non-performance of the obligation was a direct result of the war in Ukraine. At the same time, the purchaser of the premises does not have to prove that the developer could have performed the contract despite everything.

This raises a practical question: how can the developer prove this?

Our experience shows that typical arguments used by developers in Poland include pointing out that the war in Ukraine affected the investment because it led to sudden and unforeseen:

– an outflow of labour,

– increased costs of fuel and other key raw materials,

– shortages of certain raw materials or goods,

– disruptions in the supply chain.

In accordance with the above, in order to prove in court that the delay was not the fault of the developer, the developer should present, for example, the following evidence during the proceedings:

– contracts with contractors/subcontractors, together with statements of termination due to the lack of available workers from Ukraine,

– correspondence or documentation showing the unavailability of certain raw materials or a sharp increase in their prices,

– invoices for the purchase of materials documenting significant increases after the outbreak of the war,

– industry reports or expert opinions indicating supply chain disruptions in the construction sector,

– witness statements (e.g. from construction managers, suppliers, subcontractors) confirming difficulties in the implementation of the investment,

– reports on delays or downtime on the construction site, drawn up during the course of the investment,

– any annexes with contractors/subcontractors.

Only the presentation of this type of evidence (and not the developer’s vague claims about the delay) will allow the court to assess whether there was in fact a direct and unavoidable impact of the war on the investment, and thus whether the developer can effectively invoke force majeure to release itself from contractual liability.

In our experience, however, Polish developers find it extremely difficult in practice to present any evidence to the court. Developers usually only use general statements about alleged ‘problems’ without submitting any documents to support them. They also often call on company employees as witnesses, whose testimony, however, has limited evidential value – courts approach them with great caution, recognising (rightly) that they are not fully objective. Importantly, as indicated in the doctrine, ‘the degree of evidence is expressed in its “intensity” and “quality” – not every piece of evidence presented by a party to the proceedings will lead the judge to reach a degree of conviction that will allow a given factual circumstance to be considered proven’ (Adrych-Brzezińska Izabela, Burden of proof in civil law and civil proceedings, LEX 2015). Developers should bear this in mind, but in practice this is often not the case.

Delay by the developer in transferring ownership – the developer’s awareness of potential difficulties at the stage of concluding the development agreement

Another important issue that courts review in proceedings concerning compensation for delays in transferring ownership in Poland is the developer’s awareness at the time of concluding the development agreement of potential difficulties that may arise in the implementation of the investment.

This is because if, at the time of concluding the development agreement, the developer already knew or could easily have foreseen that certain circumstances resulting from the war in Ukraine might occur (e.g. difficulties in the supply of materials, increased costs, outflow of employees, etc.), it cannot effectively invoke force majeure to evade liability. It is difficult to consider these events unforeseeable, given that the developer was fully aware of the risks arising from the ongoing conflict and its direct impact on the construction sector, and yet set an unrealistic date for the transfer of ownership of the premises.

In practice, it often happens that a developer, in order to encourage a customer to conclude a contract, sets short deadlines for the conclusion of the transfer of ownership agreement and then, in the event of a delay, attempts to shift the responsibility to circumstances related to the war in Ukraine. However, our practice shows that in such cases, courts award compensation to property buyers, pointing to the possibility of the developer setting a realistic date for the transfer of ownership.

Established Polish case law also emphasises that all economic risks of conducting business activity are borne by the entrepreneur. As a professional, the developer should take into account the possibility of difficulties and adequately secure their own interests and those of the buyers of the premises, for example by including realistic deadlines for the conclusion of the transfer of ownership agreement in the development agreement. Failure to foresee or, more commonly, underestimating the risk of delays cannot have negative economic consequences for the purchasers of the premises.

In practice, courts therefore examine, among other things:

• whether the developer, when concluding the agreement, was aware of existing difficulties, e.g. delays in deliveries, sharp increases in raw material prices (more on this later in this publication),
• whether, on the date of concluding the agreement, the economic situation was so tense that a professional entity should have foreseen the possible consequences (discussed in more detail later in this publication),
• whether the developer took measures to limit the effects of the problems (e.g. searching for alternative suppliers, renegotiating contracts with subcontractors, concluding annexes with buyers of premises).

If the answers to the above questions are negative, the court will reject the developer’s argument invoking unforeseen difficulties. The courts consider that the developer, as a professional, should calculate the risks and ensure the proper organisation of the investment process in a situation where, when concluding the development agreement, he was aware (or should have been aware) of the potential difficulties resulting from the war in Ukraine.

A practical example from Polish case law (the judgment concerns the state of epidemic, but the court’s argument applies analogously to the war in Ukraine, as it emphasises the predictability of risk at the time of concluding the development agreement):

“In the opinion of the Regional Court, on the date of conclusion of the agreement with the claimant (…) the defendant was already aware that it might be impossible to meet the deadline for transfer of ownership of the premises by 31 December 2020. The agreement was concluded after a state of epidemic threat (and later a state of epidemic) was introduced in the country during the ongoing lockdown. Therefore, since the defendant claims that the delays in the performance of the agreement were caused by the introduction of a state of epidemic threat and a state of epidemic (although, in the opinion of the Court, this was of limited significance), on the date of conclusion of the agreement, the defendant could already foresee the potential difficulties resulting from the lockdown and, consequently, the delays” (judgment of the Regional Court in Olsztyn, 9th Civil Appeals Division, case no. IX Ca 213/23).

Developers also often point to the fault of utility connection operators, which we have described in more detail in this publication: “Contractual penalty for developer delay in Poland – does a delay in connecting utilities release the developer from liability?”

Construction schedule and the impact of the war on Polish developer delays

Another situation that needs to be discussed is the issue of the investment schedule and the progress of works. If, at the time of the outbreak of war in Ukraine, the majority of the construction work had already been completed by the developer, and the investment was therefore in its final stage, it cannot be considered that an external event such as armed conflict could realistically and inevitably prevent the developer from completing the project on time.

Therefore, there is no causal link between the lack of availability of materials or labour and the developer’s delay in the final stage of the investment. It should be noted that the final stage of an investment often does not require significant material expenditure or a large number of employees, but rather the developer’s focus on technical acceptance or administrative formalities related to the preparation of documentation for the transfer of ownership.

In practice, this means that when assessing the developer’s liability, the courts examine not only the occurrence of the obstacle (i.e. the war in Ukraine), but also the moment of its occurrence in relation to the investment schedule and the progress of construction works. The closer the investment was to completion, the more difficult it is to accept that an external factor such as the war in Ukraine had any impact on the delay in the transfer of ownership of the premises by the developer.

A practical example from Polish case law:

“However, in the opinion of the Court, the war in Ukraine cannot be considered a fundamental obstacle to the implementation of this investment, as it broke out just over a month before the planned completion of construction works” (judgment of the District Court in Ciechanów (Poland), 1st Civil Division, of 5 November 2024, ref. no. I C 174/24).

Summary

Delays by developers in Poland in transferring ownership of residential premises or single-family houses are a common problem on the Polish property market. Although the outbreak of war in Ukraine may constitute an external obstacle, its mere presence does not release the developer from liability for failure to meet the deadlines set out in the development agreement.

The Polish developer is liable for the delay in transferring ownership, unless the failure to perform the obligation results from circumstances for which it is not responsible, i.e. force majeure. In practice, this means that in order to be released from liability, the developer must prove in court that:

• the war actually prevented the timely completion of the investment,
• there was a causal link between the outbreak of war and the delay in transferring ownership of the premises,
• the developer used all available means to prevent the effects of the delay.

Our experience shows that developers often find it difficult to present convincing evidence in court, and buyers of premises successfully obtain compensation from developers.

In addition, the courts always examine the developer’s awareness at the time of concluding the contract and the progress of construction works. If the developer knew or could have foreseen possible difficulties arising from the conflict at the time of signing the contract, they cannot effectively invoke force majeure. Furthermore, if the investment was already in its final stage of completion, difficulties in accessing materials or labour rarely have a real impact on the delay.

In practice, this means that buyers of premises who have experienced a delay in the transfer of ownership have real grounds for claiming compensation in the form of contractual penalties or compensation, unless the developer provides sufficient evidence of force majeure. The developer’s professionalism imposes an obligation on them to anticipate risks and organise the investment process properly. It therefore seems that in most cases it is worthwhile to pursue claims for damages from the developer when they cite the war in Ukraine to justify their delay.