Acquisition of real estate in Poland by foreigners
In recent years, real estate transactions has been significantly liberalized in favor of the foreign buyers as a consequence of the transposition of EU law into the legal order of Poland. Restrictions as for the acquisition of immovable property by foreigners concern mainly real estate in the border area and the agricultural land. As for as the nationals from the EU member states, Iceland, Norway, Lichtenstein (i.e. European Economic Area, EEA) and from the Swiss Confederation, Polish law follows the principle of freedom of the acquisition of real estate. In case of foreigners from outside the EEA and Switzerland, generally is required a permit for the acquisition of real estate. There are a few exceptions, when a permit is not necessary for a national of a third country to buy real estate in Poland. The main source of regulations on the issue concerned is the Act of 24th March 1920 on the Acquisition of Real Estate by Foreigners (hereinafter referred to as: the Act).
When is a permit necessary?
It is relatively easy for nationals from the EEA countries and Switzerland to buy real estate in Poland. Until 1st of May 2016 foreigners from this area or companies having its seat there are still obliged to get a permit issued by the minister responsible for internal affairs, but only in case of the acquisition of agricultural and forest real estate.
However, there are some exceptions – a permit is not required for the EEA/Swiss nationals to buy agricultural real estate, if they have concluded a lease agreement for a certain period of time, during which they conducted agricultural activities in person and legally resided on the territory of Poland. Apart from that, the acquisition of agricultural and forest real estate by the EEA/Swiss nationals does not require a permit in case of statutory succession (intestacy) or a specific bequest, since the regulations of the Act does not apply to acquisition of real estate by statutory succession. A permit is required, if a EEA/Swiss national who is not entitled under intestacy rules in a given case acquires agricultural or forest real estate through testamentary succession (i.e. who has been named as a beneficiary under someone’s will). The law applicable to determine who inherits under the statutory succession rules is the national law of the deceased.
Moreover, the acquisition of agricultural and forest real estate is possible in case of the acquisition or subscription of shares of a company, which has its seat on the territory of Poland and who is the owner or perpetual lessee of real estate (see next paragraphs).
As appears from the above, in Poland the acquisition by the EEA and Swiss nationals of real estate other than agricultural and forest real estate (e.g. an apartment, commercial premises, building or leisure plot, etc.) does not require a permit. The acquisition of agricultural and forest real estate requires a permit except for the situations mentioned above. It is worth mentioning, that on 1st of May 2009 the obligation to receive a permit to acquire a so-called “second house” in Poland was abolished. A second house within the meaning of the Act is real estate destined for residential, recreational or commercial purposes, which is not a permanent residence of the foreigner.
The situation of other foreigners i.e. non-EEA/Swiss nationals or companies having its seat outside the EEA and Switzerland under Polish law is distinctively different. They are always obliged to obtain a permit to acquire real estate in Poland, except for very few exemptions. The exemptions, however, do not apply to real estate located in border area and agricultural real estate of area exceeding 1 hectare (10.000 m2).
Non-EEA/Swiss national are exempted from the obligation to get a permit issued by Polish minister of internal affairs, if they are about to acquire:
- a separate living accommodation (a flat, an apartment) or a separate business premises destined for garages (garage), if it relates to providing for the living needs (as a consequence, the acquisition of commercial premises requires a permit);
- real estate after having resided in Poland for at least 5 years following the granting of a settlement permission or the EC long-term residence permission;
- real estate that will constitute marital estate of the spouses by the foreigner who is a spouse of a Polish citizen and have resided in of Poland for at least 2 years following the granting of a settlement permission or the EC long-term residence permission.
What are the requirements to obtain a permit?
A permit is issued through an administrative decision on the basis of a relevant application submitted by the foreigner. There is no pre-printed form of the application. The foreigner may be granted a permission to acquire real estate, if such acquisition does not pose a threat to national security and public order and is not contrary to social policy or public health considerations of Poland. There is also an additional requirement, according to which the foreigner is obliged to prove the circumstances confirming his bonds with the Republic of Poland, such as Polish nationality or Polish origin, being married to a Polish citizen, a settlement permission or the EC long-term residence permission or conducting business or agricultural activities on the territory of the Republic of Poland in compliance with the Polish law.
What other types of real estate acquisition fall within the scope of application of the Act?
According to Polish civil law, real estate acquisition goes beyond a mere sales agreement, encompassing gift, transfer of title to secure loan repayment, testamentary succession, acquisitive prescription and establishment of perpetual usufruct on real estate. Therefore, the rules of real estate acquisition described above will be applicable also in these cases. For example, when an apartment in Warsaw is transferred as a gift to a Hungarian citizen, such acquisition will not require a permit of the Polish Minister of Internal Affairs.
The above mentioned rules are also applicable to the acquisition of real estate through the acquisition or subscription by a foreigner of shares in a company seated on the territory of Poland, which is an owner or a perpetual lessee of real estate in Poland if as a result thereof the company becomes a controlled company (a company is controlled by a foreigner when a foreigner holds more than 50% of the votes at the shareholders’ meeting, or when a foreigner has a dominant position within the meaning of the Polish Commercial Companies Code) or if the company is already controlled and the shares are acquired or subscribed for by a new strategic investor who is a foreign national.
While the acquisition or subscription of shares in such company by a EEA/Swiss national does not require a permit, the acquisition or subscription of share by other nationals requires one. It is worth noticing that according to the regulations issued by the Ministry of Internal Affairs, the acquisition or subscription of shares by a EEA/Swiss national does not require a permit even if the company is an owner or a perpetual lessee (perpetual usufructuary) of agricultural and forest real estate.
When is the Act not applicable to the acquisition of real estate by foreigners?
The restrictions under the Act, i.e. the requirement for a permit, are not applicable in case of a company transformation. However, the above mentioned rules concerning the permit are applicable to merger and division of companies which are not excluded from the scope of applicability of the Act. A permit is not required for the acquisition of the title to a cooperative ownership of the flat as a limited property right. As mentioned above, the regulations of the Act do not apply to the acquisition of real estate by foreigners by statutory succession.
In the event of failure to comply with the regulations of the Act on the Acquisition of Real Estate by Foreigners severe consequences will be imposed. Without a permit issued by the Polish Ministry of Internal Affairs, the act of the acquisition of real estate will be null and void. Therefore, it is in the interest of the potential foreign investors on the Polish real estate market to become acquainted with the rules presented in this article. Should you have any questions regarding the above, please contact us at izabela.kislow@bisztrai.com or gabor.bisztrai@bisztrai.com
Bisztrai Law Office,
January 2012