Price indexation in a development agreement in Poland – can a developer raise the price of a flat?

Price indexation of a property in a development agreement in Poland is an issue that regularly arises when concluding development agreements. Many buyers wonder whether a developer has the right to increase the price of a flat, and therefore when an indexation clause is legal and when it is prohibited. Below we present a comprehensive overview of the current indexation rules and court practice in this area.

What is price indexation in a development contract in Poland?

An indexation clause in a development contract in Poland is a contractual provision stipulating that the value of the performance under the development contract (i.e. the price of the property) will be determined by reference to another measure of value. In other words, the sale price of the premises is not ‘fixed’ on the date of conclusion of the development contract, but the parties to the development contract allow for its change in the future, in accordance with the adopted index. Practice shows that the most common indices include: the inflation index published by the Polish Central Statistical Office, the construction and assembly production price index, or other parameters that may (but do not always have to) reflect the real costs of the investment.

In recent years, due to high inflation in Poland, developers have been introducing indexation clauses en masse into development agreements covering the sale of new flats and houses. For buyers of such properties in Poland, these clauses are generally disadvantageous, as they mean that the final price of the property is not known at the time of concluding the contract, and in many cases it is virtually certain that the price will ultimately be higher than on the date of conclusion of the contract. In practice, this means that the negative consequences of inflation are passed on to the customer.

Is an indexation clause in a development contract in Poland lawful?

First of all, it should be noted that:

1. until mid-2024, the so-called ‘old development law’ was in force, i.e. the Polish Act of 20 May 2021 on the protection of the rights of purchasers of residential premises or single-family houses and the Development Guarantee Fund (Polish Journal of Laws 2021, item 1177),
2. currently, however, the so-called ‘new developer law’ applies, i.e. the Polish Act of 16 September 2011 on the protection of the rights of purchasers of residential premises or single-family houses (Polish Journal of Laws 2011 No. 232, item 1377).

Both acts contain an appendix specifying the template for the information prospectus, i.e. a document presenting the most important information about the investment, the developer and the premises offered. In the Polish ‘new development act’, in Part III, ‘information on the property and the development project’, there is an item entitled ‘allowing price indexation and specifying the rules for indexation’. This was formulated in a similar way in the ‘old’ development act.

Consequently, it seems that the Polish legislator has explicitly allowed for the possibility of indexing the price of the property in both development acts. However, this right is not unconditional, and as will be explained later in this publication, when introducing an indexation clause into a development agreement in Poland, the developer is obliged to specify precisely how and on what terms a possible change in the price of the property is possible.

When can price indexation in a development agreement in Poland be an unfair term?

As an introduction, in general, in court rulings concerning the application of indexation clauses in Polish development agreements, courts indicate that developers (and in practice, notaries acting on behalf of developers) should be extremely cautious when formulating indexation clauses. The Polish courts emphasise that such clauses may in many cases be considered abusive and therefore not binding on the consumer. In practice, the fact that the consumer is not bound by the provision means that the development contract is treated as if the price indexation provision had not been included in the contract at all. The purchaser of the premises is therefore not obliged to comply with the provision, it has no legal effect on them, and therefore the price of the premises remains as originally agreed, without taking into account the indexation. The indexation of the price of the premises cannot therefore be applied by the developer at will, disregarding the interests of the consumer. 

A practical example from Polish case law:

“(…) indexation clauses contained in the contract – like any other provisions of the contract – may be subject to appropriate verification from the point of view of their contractual reliability (Articles 3851 – 3853 of the Polish Civil Code). In concreto, it could therefore turn out that a contractual clause providing for contractual indexation rules could be considered an unlawful (abusive) clause and, therefore, not binding on the contracting party at all (Article 3851 § 2 of the Polish Civil Code).” (judgment of the Polish Supreme Court of 13 May 2025, ref. no. I CK 690/04)

An analysis of court rulings leads to general conclusions as to how indexation clauses in property development agreements in Poland should be formulated in practice in order to be valid and not considered abusive:

1. First and foremost, when assessing whether an indexation clause is prohibited, its wording is examined, rather than whether the consumer has actually suffered damage related to the price increase. It is therefore sufficient that the provision could potentially infringe the consumer’s interests or lead to an unfair advantage for the developer for it to be considered abusive.
   
2. Secondly, the indexation clause should be formulated in a manner that is clear, precise and understandable to the average consumer, and the developer should specify the period of validity of the indexation and the frequency of its application, indicating the upper limit of the price increase for the premises.
   
3. Thirdly, the indexation indicator used in the contract should be as transparent, easily verifiable and measurable as possible, and easy to find by the average consumer without economic knowledge. In order to understand the legal meaning of the clause, the consumer should not be required to have specialist knowledge (e.g. about GUS data on construction and assembly price indices). It should be possible for the average consumer to understand when and on what basis the price of the property may increase.
   
4. Fourthly, the clause cannot be formulated in such a way that the indexation rate constantly increases, and therefore the adoption of such an index practically guarantees a price increase, which is beneficial only to the developer. This wording of the provision is contrary to good practice.
   
5. Fifthly, the indexation of the price of the premises cannot depend on the Polish developer’s subjective decision whether to apply indexation or not, but must take place automatically, which increases the awareness of the consumer – the purchaser of the premises – as to how the price will be determined in the future.
   
6. Sixthly, the indexation mechanism in Poland cannot work solely to the developer’s advantage, i.e. indexation should not be ‘unilaterally positive’ but formulated symmetrically. This means that the clause should provide for the possibility of both increasing and decreasing the price of the property depending on economic conditions. For example, in a situation of deflation (in Poland in 2014-2016), the indexation rate should lead to a reduction in price, rather than having no impact on the value of the buyer’s benefit.

A practical example from Polish case law:

“(…) the grounds for changing the price of the premises provided for in § 5(4) of the agreement were defined in an ambiguous manner, as the indexation rate specified in the agreement was not sufficiently transparent for the claimant as a consumer. It cannot be expected that the average consumer – a buyer of premises from a developer – would be familiar with the current trends in changes in construction and assembly price indices published by the President of the Central Statistical Office.” (judgment of the Regional Court in Warsaw, 5th Civil Appeals Division, of 13 November 2013, ref. no. V Ca 1659/13)

“Although indexation is based on objective, independent indices that are also available to the consumer, these are future indices, unknown at the date of conclusion of the contract, and therefore it cannot be said that the final amount of the consumer’s benefit can be predicted in advance. As indicated above, the consumer was not granted the right to demand negative indexation in the event of a decline in the indices.” (judgment of the Court of Appeal in Warsaw, 6th Civil Appeals Division, dated 3 September 2015, ref. no. VI ACa 830/15).

The consumer’s right to withdraw from a development contract in Poland and the indexation of the price of the premises

Court rulings, legal doctrine and the publication of the Polish Office of Competition and Consumer Protection entitled ‘The Consumer on the Property Development Market’ also indicate that if an indexation clause is included in a property development agreement in Poland, the consumer should have the option to withdraw from the agreement. In other words, an indexation clause cannot lead to a unilateral price increase without providing the consumer with a real means of protection in the form of the right to withdraw from the agreement, i.e. to terminate the agreement without negative consequences for the purchaser of the premises.

However, if the development agreement in Poland does not provide for the right to withdraw from the development agreement in the event of price indexation, the provision may constitute an unfair term within the meaning of Article 385¹ § 1 of the Polish Civil Code and an unlawful contractual provision referred to in Article 385³(20) of the Polish Civil Code, according to which: ‘In case of doubt, contractual provisions which, in particular, provide for the right of the consumer’s contractor to determine or increase the price or remuneration after the conclusion of the agreement without granting the consumer the right to withdraw from the agreement shall be considered prohibited.’

The unfairness of this type of provision in a development agreement in Poland is justified by the fact that the purchaser of a flat (or house) should have full knowledge of the final amount they will be required to pay for the property when entering into a development agreement. However, by introducing an indexation clause into the agreement, the provision on the price of the flat loses its transparency and clarity. As a result, the buyer of the premises is unable to determine the total cost of purchasing the property and should therefore have the right to withdraw from the development agreement in Poland if the developer increases the price after the conclusion of the development agreement.

It is also important that the consumer’s right to withdraw from the development agreement in Poland is not linked to the extent to which the price of the property increases after the conclusion of the development agreement. It seems that the opposite is true, i.e. the consumer should have the right to withdraw from the agreement regardless of how much the price of the premises increases – this right should result from the very fact that the developer reserves the right to index the price of the premises, and not from achieving a specific price or a specific percentage increase in price.

A practical example from Polish case law:

“The following provision is considered an unfair term: “The parties declare that the price of the subject matter of the agreement agreed between them takes into account the currently applicable VAT rates on the sale of premises, and therefore if these rates change, the price of the subject matter of the agreement will change in proportion to the change in VAT rates. Furthermore, in the event of the introduction or change of other taxes or public levies of a price-determining nature related to construction, any increase in price on this account shall be covered by the Purchaser.” (judgment of the Regional Court in Warsaw, Court of Competition and Consumer Protection, of 5 December 2006, file ref. no. XVII AmC 126/05, abusive clause no. 1386).

Refund of overpayment resulting from abusive indexation in a development agreement in Poland

Our experience shows that in many cases in Poland, consumers become aware of the potential abusiveness of a price indexation clause only after they have paid the full price for the premises to the developer. In such a situation, the first step is to conduct a legal analysis of the clause, taking into account the criteria for its application discussed above. However, it seems that price indexation should never be automatically accepted by the purchaser without a legal analysis of the provision.

If, after analysis, it turns out that the clause may meet all the criteria for being considered abusive, then the buyer is entitled to claim against the developer for the return of any overpaid amounts that were paid on the basis of a non-binding indexation clause. This claim is a refundable amount (undue payment) and may also include interest for delay from the date of performance.

In practice, the situation may look as follows:

• price of the property without the indexation clause: PLN 1,000,000,
• price of the premises including the indexation clause: PLN 1,100,000,
• consumer’s claim for a refund of the overpayment: PLN 100,000, plus interest due from the date of payment of this amount.

Price indexation and change in the area of the premises

However, buyers of premises should bear in mind that a completely different category of indexation clauses are the provisions of the development agreement in Poland concerning changes in the price of the premises in connection with a difference in the area of the property found during acceptance or post-completion inventory. Such contractual provisions provide for the obligation to modify the price of the premises if the actual area of the constructed flat or house differs by a specified percentage from the area agreed by the parties in the development agreement. Most often, this will be between 3 and 4 per cent of the area.

The inclusion of such a provision in the development agreement in Poland is due to the fact that at the time of concluding the development agreement, the parameters of the premises under construction can only be determined on the basis of the construction design, and therefore, in the course of the construction process, there is always a possibility of slight differences between the area of the premises resulting from the design and the actual measurement of the premises after construction.

These differences may result, for example, from:

• natural reduction in area after plastering (approximately 1%),
• dimensional tolerances permitted by standards,
• changes in materials,
• the quality of construction work performed.

Unlike the possibility of applying price indexation related to inflation or an increase in construction costs, the introduction into the development contract of the right to index the price due to a change in area is, in principle, not considered an unfair term, provided that the adjustment index corresponds to the actual differences resulting from the construction and does not place an excessive burden on the consumer.

A practical problem may arise, however, if the developer allows for too high a change in the area of the premises in the development agreement in Poland, for example within the range of 3–5%. It seems that specifying a change of more than 1–1.5% of the area may be considered an attempt to transfer the risk of non-performance of the development agreement in Poland to the buyer. In such a situation, the consumer should exercise particular caution and be aware that the application of an excessive, disproportionate index may lead to a unilateral increase in the price of the premises, which in practice may upset the balance between the parties and give rise to claims on the part of the purchaser against the developer.

Price indexation in a development contract – summary

In summary, an indexation clause in a development agreement in Poland is a legal instrument that allows the developer to change the price of the premises after the agreement has been concluded, most often based on inflation rates or construction costs. Such a provision is generally legal, provided that the indexation rules are clearly defined, transparent and understandable to the consumer. When is an indexation clause not permitted? A clause may be considered abusive if it gives the developer a unilateral advantage, does not give the consumer the right to withdraw from the agreement, is based on an unclear index or allows the developer to decide subjectively on a price change. In the event of unfairness, the consumer has the right to demand a refund of the overpaid amount plus interest.

However, with regard to price indexation due to changes in the size of the premises, provisions of this type are generally permissible, provided that the price adjustment corresponds to the actual differences resulting from the construction of the premises and does not place an excessive burden on the consumer. The introduction of an excessive area change index (e.g. above 1-1.5%) may violate the contractual balance and result in claims from the purchaser.