One in ten abusive clauses in UOKiK register concerns the real estate market. Only in 2006 the President of the Office initiated 50 proceedings in this regard

The current situation on the real estate market, i.e. the shortage of flats and skyrocketing prices (which increased by as much as 26% on the primary market and 23% on the secondary market within the last six months) on the one hand, and the wish to possess one’s own flat and the possibility to finance it thanks to commonly available mortgage loans on the other, results in the consumers increasingly often falling prey to deceptive practices of property developers, social building societies or real estate agents.

In such cases UOKiK President takes action. He may question contractual provisions which formulate consumer rights and interests in a way which is contradictory to good practice and grossly violate consumer interests. In the case of other illegal practices, the President of UOKiK, having concluded proceedings concerning infringement of collective consumer interests, may order the entrepreneur to discontinue a specific practice.

The analyses of the Office prove that the real estate market is full of traps. Therefore, weaker participants of the market should remain especially cautious and reasonable from the very first moments of searching for the most appropriate offer, i.e. at the stage of browsing through the property advertisements. In 2006 the President of UOKiK conducted 17 proceedings in this regard. The entrepreneurs most often mislead their customers by providing in their advertisements net instead of gross price for a square meter. In the case of such high value investment as a purchase of real estate the difference is significant and therefore full, reliable and not misleading information is so important. Such position was also confirmed by a court decision (verdict of the Court of Competition and Consumer Protection of 19 May 2005, ref. no. XVII Ama 11/04 concerning the advertisement of J.W. Construction Holding SA).

Other major irregularities are related to the price of flats. Following the analysis of standard contracts used by developers, the President of UOKiK questioned imprecise provisions which provided the entrepreneur with a possibility to change (in practice, to increase) the price of the flat. It means that upon the conclusion of the contract the consumer is not sure how much exactly he/she will have to pay. Such a clause is unacceptable. The weaker participant of the market should have a guarantee that the terms and conditions of the contract may be changed only as a result of objective circumstances.

Fast growth of prices of flats also results in the developers concluding the so-called reservation agreements with consumers prior to obtaining all required permits for the investment. Thus, they take advantage of consumers’ weaker position on the market: consumers agree on such a solution in order to receive a guarantee that they will be able to buy a flat before another price increase. Consumers often reserve flats in buildings which do not yet exist and pay e.g. 1% of the value of the flat (at least several thousand PLN) in advance. If in the end they do not sign the actual contract with the developer, the previously paid amount is lost. The President of UOKiK questioned such practices.

 
Contracts with property developers can also be full of traps. Sometimes entrepreneurs reserve the right to withdraw from the contract, e.g. due to technical problems, and do not grant the consumer the right to receive due contractual penalties or interest on sums which were already paid . At the same time they introduce provisions which impose an obligation on their clients to pay an excessive contractual penalty or compensation for a breach of contract on their part.

It also happens that the entrepreneurs reserve themselves the right to postpone the date of handing over the flat due to reasons beyond the seller’s control such as a change in the building law. The Court of Competition and Consumer Protection decided that such provisions are illegal, arguing that the change of law does not always result in the inability to observe deadlines from the contract (verdict of the Court of Competition and Consumer Protection of 18 May 2005, ref. no. XVII Amc 86/03).

Property developers often exclude their liability for inappropriate performance of the contract, for example, when the flat which was handed over to the consumer proves to have defects or is located on a different floor than it had been agreed. The clause questioned by UOKiK also provides for the right of the entrepreneur to correct the building design of the property and to implement those changes if they prove to be necessary or appropriate due to technological or economic reasons. The consumer does not have the possibility to reject the proposed changes or to withdraw from the contract without facing negative consequences. The illegal nature of such provisions was confirmed by the Court of Competition and Consumer Protection in its verdict of 10 October 2004 (ref. no. XVII Amc 47/03).

UOKiK President also discovered irregularities in the contracts concluded by the social building societies. Similarly to property developers, they also impose the obligation to pay a contractual penalty, e.g. for withdrawing from the contract. It also happens that when a customer is late with the payment of the instalment specified in the contract, the entrepreneur automatically terminates the contracts without additional call for payment. The building society provides for the return of the payments made on condition that it concludes another contract with a new consumer. Until then the entrepreneur illegally disposes its client’s money.

Illegal provisions are also encountered in agency contracts. They concern, among others, excessive scope of the so-called exclusivity clause, under which the consumer undertakes to sell or buy the flat only to or from the given entrepreneur. According to the Civil Code, this clause is acceptable in the consumer trade but it cannot limit the possibility of terminating the contract with the entrepreneur. The agents often provide for such right only when the client gives up the idea of selling the property altogether. It deprives the consumer the right to withdraw from the contract if the level of the agent’s services does not fulfil his/her expectations.

In addition, the agents providing for the automatic extension of the contract for unspecified period beyond the original expiry date do not set forth the cooling-off period.

UOKiK conducts ongoing monitoring of the application of abusive clauses. The list of all clauses is available on UOKiK’s website www.uokik.gov.pl in the register of abusive clauses. One in ten entries from among almost 1000 concerns the real estate market.

Additional information:
Małgorzata Cieloch, UOKiK spokesperson
Pl. Powstańców Warszawy 1, 00-950 Warsaw
Tel. 22 827 28 92, 55 60 106, 55 60 314
faks 22 826 11 86

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