Ten years have passed since the introduction of the law on the protection of the rights of buyers of a flat or a single-family house, i.e. the development act. Its amendment will come into force on 1 July. What will change in the regulations, who will benefit and who will lose, and will it significantly affect the real estate market and apartment prices?
The developer act entered into force on April 29, 2012. Its main goal was to provide greater protection for property buyers, who often decided to purchase apartments from developers when the investment was still at the stage of the so-called “Holes in the ground”.
“The entry into force of these regulations has certainly reduced the risk on the side of the buyer, mainly financial, of course. Before that, the funds they paid in were in no way protected against possible insolvency of developers. In addition, the Act of 2012. imposed on developers the obligation to prepare an information prospectus, thanks to which buyers had access to all information regarding the investment they were interested in. This document is attached to the developer agreement and clearly defines the date of transferring the ownership rights to the buyer,” says Maciej Dymkowski, CEO of the table of tables.
A new reality for developers
The new developer law will come into force on 1 July. The biggest change in it is the establishment of the Development Guarantee Fund, on whose account the developer will be required to pay an additional, non-returnable premium of up to 1% of the value of each unit sold. What does this mean in practice?
“The developer, depending on whether he builds a given investment using a closed or open escrow account, will have to pay a fee to the Developer Guarantee Fund for each transfer from the client – from 0.1% to 1% of the gross amount. This means that if the client withdraws from the development contract at some stage, the payments already made by the developer will be forfeited. The amendment to the act imposes a number of new obligations on the developer, and thus an increase in the costs of running a business, and this will have a real impact on the final price of the property that will be paid by the client,” emphasizes Katarzyna Tworska, managing director of redNet 24.
Another important change concerns the regulations regarding the sale of finished apartments and houses, as well as parking spaces and storage rooms. Also, the withdrawal from the escrow account will be paid later than before.
“The current developer act applies only to flats and single-family houses under construction and was intended to protect clients against possible, dishonest developers or bad contract provisions. The changes that are to come into force relate to already completed premises with an occupancy permit, which has not happened so far, and there is a discussion on this topic whether the act should actually cover ready premises. Due to the new regulations, the escrow account must be kept until the very end, i.e. until the notarial deed is signed with the client, and not until the completion of the construction, as has been the case so far. All amounts, including for garages and storage rooms, must also be paid to an escrow account, and thus up to 1% to the Guarantee Fund account, and not directly to the developer’s account as before,” notes Katarzyna Tworska.
Developers who want to avoid additional costs have more than two months to sell the premises under the old rules.
“If a developer starts selling the investment before July 1 and signs at least one development agreement, he will be exempt from complying with the rules of the new act for two years. Personally, I think that it is worth doing because the old system does not impose additional costs on the developer and it will also be beneficial for buyers, because the price will certainly be lower,” emphasizes Maciej Dymkowski.
More security for buyers
Pursuant to the new regulations, the customer will be able to repair irrelevant defects, which the developer will not want to repair, at his own expense. An additional security is also the reservation agreement, which will have legal regulations from July, which has not been the case so far.
“The new act certainly gives buyers a greater sense of comfort and security. Apart from the fact that the developer will be charged with the costs of repairs of irrelevant changes, in the event of major repairs, this may be grounds for the buyer to withdraw from the contract. The funds collected in the Guarantee Fund are an additional security, which will allow for the payment of possible damages if the developer declares bankruptcy. The most important change, however, concerns the reservation agreement, which the current developer act did not cover at all. Until now, there were even no specified conditions on which it is to be included. Now it will have to be in writing, otherwise null and void, the amount of the booking fee and the conditions for its return are clearly defined,” emphasizes Katarzyna Tworska.
