Security deposit in a trust account, preliminary agreement in the form of a notarial deed, information prospectus - just to name a few measures introduced by the new regulations protecting consumers buying property in the primary market

So far in Poland, a property buyer in the primary market was not protected by any special regulations. Preliminary agreements, often signed at very early stages of building construction, did not have the required form of a notarial deed. In the case of bankruptcy of a developer, a consumer bore the investment risk – meaning also losing the possibility of transferring the right to housing to him and losing the money he had paid. The law on the protection of purchaser of residential premises or a single-family house, entering into force on 29^th April 2012, will reduce the risk borne by the consumer with regard to the purchase of an apartment or a house in the primary market.

Housing trust account

Under the new law, the deposits of consumers buying a flat or a house from a developer will be protected. The money paid by the purchaser will be collected in a housing trust account maintained by a bank. The buyer can choose one of four types of security:

• closed housing trust account – whichprovides complete protection to the consumer because the bank pays the developer the money collected by the purchaser only after receiving a copy of the agreement in the form of a notarial deed transferring the right to property to the purchaser;

• open housing trust account – which does not provide complete protection to the consumer because the bank pays the money accumulated by the buyer to the undertaking after completion of consecutive phases of the developer’s project is noted.
• open housing trust account with guarantee – such open trust account is additionally reinforced by an insurance guarantee (payments of buyers are insured by the developer) or a bank guarantee (a developer has paid a security equal to the payments made ??by buyers). Both the open housing trust account with an insurance or bank guarantee and the closed housing trust account guarantee complete protection of money in case of developer’s  insolvency.

Information prospectus

Persons interested in conclusion of a developer agreement gain the right to information about investments. Developers will be responsible for preparing an information prospectus composed of two parts:

• general part – it should include the identity and contact details of the developer, information on experience and the investment, e.g. the land register number, the allowable building height and the number of buildings and their placement (including the minimum distance between buildings) and the planned investments in a 1-kilometer radius from the property (e.g. railway lines, sewage treatment plants)
• individual part – it will inform about the surface and the layout of the housing, the price per square meter, the number of storeys, the standard of finishing of the common part of the building and the surrounding land, the number of dwellings, parking places, etc.

If the information contained in the Prospectus is changed, the developer should inform the buyer about the changes. Failure to deliver the prospectus, and the lack of information as required by law, or presenting false information gives the consumer the right to withdraw from the agreement within 30 days from its conclusion.

Conclusion of the agreement

Under the new regulations, both a developer agreement (under which the developer undertakes to transfer the right to property to the buyer) and a preliminary agreement should be concluded as a notarial deed. Thus, the land register kept for the property will contain a relevant entry protecting the consumer's right to separate the property and transfer ownership.

Under the new regulations, a developer agreement should include, among others, information regarding the property on which the building is constructed, the parameters of the acquired dwelling, such as size, floor plan, the standard of completion and the date of commencement and completion of construction works and the transfer of ownership.

The new legislation gives consumers the possibility to withdraw from the agreement when the data in the agreement are not compliant with the prospectus, and when the agreement lacks the elements required by the law. Moreover, the protection also covers buyers in the case of whom the developers fail to respect the deadline for the transfer of ownership of residential premises or a house. They are given the possibility to withdraw from the developer agreement maintaining claims for contractual penalties for delays.

The Council of Ministers will review the operation of the law within two years after its entry into force and will submit their proposals for possible amendments to the Seym.

More information on consumer rights in the property market is available at the Office’s website in the section questions and answers. Please remember that in order to obtain free assistance in pursuing consumer rights, you should contact poviat or municipal consumer ombudsmen, or call 800 007 707 from Monday to Friday, 9.00-17.00. Help can also be obtained in the branches of the Consumer Federation.

Additional information for the media:
Małgorzata Cieloch, Spokesperson for UOKiK
Department of International Relations and Communication
Pl. Powstańców Warszawy 1, 00-950 Warszawa
Phone: +48 22 55 60 106
Fax: +48 22 826 11 86
E-mail: [SCODE]bWFsZ29yemF0YS5jaWVsb2NoQHVva2lrLmdvdi5wbA==[ECODE]