• The Sejm has passed a new developer act that will strengthen the protection of people buying residential property in the primary market.
• One of the most important changes is the creation of a Developer Guarantee Fund, from which money will be paid out, among others, in case of bankruptcy of a developer or a bank above the amount guaranteed by the BFG (Bank Guarantee Fund).
• The Act also regulates, among other things, reservation agreements , supervision over the disbursement of MRP funds, removal of defects at the developer's expense or the possibility of withdrawing from the agreement if there are material defects upon acceptance of the apartment.

The Sejm on Thursday finalised work on the act on the protection of rights of buyers of housing units or single-family houses and on the Developer Guarantee Fund, prepared by the President of the Office of Competition and Consumer Protection. The act will now go to the President of Poland for signature.

"The previous legislation did not provide adequate legal as well as financial protection to the customers of developers. The new act will ensure that Polish families who decide to buy an apartment or a house from a developer will not have to be afraid of losing the money entrusted to the entrepreneur. This is also the purpose of establishing the Developer Guarantee Fund, from which in emergency situations, such as bankruptcy of a developer company or a bank, buyers of apartments will receive a refund of paid funds "says Tomasz Chróstny, President of UOKiK.

Housing Escrow Accounts and DFG (Developer Guarantee Fund)

Currently, developers must collect customer deposits in housing escrow accounts (MRPs). They can be closed or open. In the first case, the bank pays the entrepreneur only after the transfer of ownership of the apartment or house to the buyer. However, the market is dominated by (around 90 percent) open MRPs, i.e. MRPs from which funds are transferred to the developer gradually, according to the schedule of works on the construction site. For the consumer, this means there is a real risk of loss if the business stops construction or goes bankrupt and the bank has already transferred funds from such an account to the business.

The bankruptcy of the bank that runs the MRP can also be a threat to the customer. Amounts up to 100 thousand Euros are guaranteed by the Bank Guarantee Fund, but apartments can be more expensive. Moreover, the BFG guarantee covers all of the consumer's money in a given bank, including money accumulated on personal accounts or deposits. Therefore, even in the case of a closed MRP, the developer's customer may not recover the entire amount.

The new law provides for the removal of a form of buyer's funds protection that has not been used in practice so far, namely open MRP with bank guarantee and open MRP with insurance guarantee. Other housing escrow accounts - open and closed - will still be available. The collateral for the buyer's funds accumulated in these accounts will be the Developer Guarantee Fund. Developers will pay contributions to it from customer payments made to the MRP. The amount of the percentage rates according to which the developer will calculate the contribution to the DFG is to be determined in a Regulation by the minister competent for construction matters (currently the Minister of Development, Labour and Technology), who participated in each stage of the legislative process to develop the act. The regulations provide that the contribution can be up to a maximum of 1 percent for open MRPs and up to 0.1 percent for closed MRPs.

DFG money will be released, among others, in the following cases:

• bankruptcy of the developer,
• bankruptcy of a bank - if guarantees from BFG (up to 100 thousand Euros) are not sufficient to cover the funds accumulated in an open or closed MRP,
• withdrawal of the customer from the agreement in situations indicated in the Act, e.g. failure of the developer to transfer the ownership of the unit to the customer within the time limit specified in the developer agreement, lack of consent of the creditor secured by a mortgage for unencumbered transfer of the ownership of the apartment, as well as failure of the developer to remove a material defect that the developer acknowledged in the acceptance report or confirmation of such defect by a construction expert.

Other important changes

• Reservation Agreements They were not regulated in the previous legislation. For buyers, this could mean, for example, high fees or the risk of losing their money. Under the new law, the reservation fee will not be allowed to exceed 1 percent of the property price. If there is a developer agreement, this amount will be credited towards the price of the apartment and will go into the MRP. If the bank does not extend credit to the customer, they will get back the money they paid. If, on the other hand, the developer enters into an agreement with another person for the reserved unit during the reservation period, the developer will have to refund the reservation fee paid by the reserving person in double amount. If, on the other hand, the customer decides against it, then they will lose the amount paid.
• Material defects upon acceptance of the apartment Currently, a buyer cannot refuse to accept an apartment or house if it has significant defects, that is, defects that makes it worthless or unfit for normal use. In practice, this also means that the consumer is obliged to pay the costs associated with maintaining the unit. The new legislation gives the buyer an effective instrument to pursue their claims in such a situation. If the developer acknowledged the material defect in the acceptance protocol and then failed to remove it (they have 3 chances to do so), the buyer will be able to withdraw from the agreement. However, if the developer does not acknowledge a material defect during acceptance, the buyer may request an opinion from a construction expert. In the event that such an opinion confirms the existence of a material defect, the buyer will also be able to exercise their right to withdraw from the agreement. 
• Non-material defects upon acceptance of the apartment The legislation improves the procedure for eliminating non-material defects, increasing the pressure on the developer to remove them in a timely manner. If the developer acknowledged the non-material defect in the acceptance protocol and then failed to remove it (they have 3 chances to do so), the buyer will be able to remove it at the developer's cost.
• Not just housing under construction. The scope of the Act covers all agreements concluded between a developer and a buyer, in which the developer undertakes to build a housing unit (house), establish its ownership or transfer this right to the buyer. It is important to note that such an agreement does not transfer ownership to the buyer, even though the buyer is required to pay 100 percent of the price, and another agreement is required. All provisions of the Act will apply to these agreements, so the developer will have to set up an MRP, pay contributions to the DFG, enter into an agreement in the form of a notarial deed, and the buyer's claims will be registered in the Land and Mortgage Register. The same scope of regulation will apply to agreements concerning commercial units, e.g. garages, if concluded together with a developer agreement. If, however, the developer decides to enter into a sale agreement with respect to the finished units (on the basis of this agreement the buyer becomes the owner of the property) their obligations will be limited only to providing the buyer with certain information prior to entering into the agreement and performing the acceptance. The developer will not have to set up an MRP or pay contributions to the DFG. Analogous rules will apply to an entrepreneur other than a developer who sells new apartments to a buyer.
• Collateral prior to the entry to the Land and Mortgage Register If a mortgage is established on the property on which the development project is carried out (e.g. for the developer's creditor bank), the developer will be obliged to obtain the consent of that mortgage creditor so that the customer, having paid the full price, gets an apartment with no mortgage. This consent will be an annex to the developer agreement. Now such consent is not obligatory, so in case of bankruptcy of the developer it is the crediting bank that has priority in satisfying claims. With the change, the buyer will either receive an apartment without mortgage encumbrances or receive priority in satisfaction of their claims. If the developer does not have this consent from the creditor, despite the existence of a mortgage encumbrance, the customer can withdraw from the agreement and the developer can be fined.
• Oversee the disbursement of funds to the developer. The act increases the scope of oversight by the institution conducting the MRP over the integrity of the developer's spending. The payment schedule was linked to the construction schedule. The buyer will pay as construction progresses - only for the completed phase. In addition, in the case of open MRPs, the last tranche of payment to the developer will occur after the developer has already transferred the ownership of the housing unit to the consumer, based on the concluded notarial deed.

Consumer assistance: 

Tel. 801 440 220 or 22 290 89 16 – consumer helpline
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Consumer advocates – in your town or district

Additional information for the media:

UOKiK Press Office
Pl. Powstańców Warszawy 1, 00-950 Warszawa, Poland
Phone +48 695 902 088, +48 22 55 60 246
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