President of the Republic of Poland signed by Parliament Act dated 20 July 2018 to convert the right to use perpetual land built for housing purposes into ownership of those land (hereinafter referred to as the ‘proprietary law’).
Perpetual use is the substantive right closest to property rights. It is called the relic of the previous PRL era, when the state owned the land and the citizen used it under certain conditions, primarily financially.
PRL relic
one the characteristic characteristics of perpetual use are to break with the principle of superficies solo cedit , which means that the owner of the land remains invariably the Treasury or the local government unit, and the owner of the references of the built house, for example, a perpetual user.
During the years of the presence of the right of perpetual use in the Polish legal system, the practice of the operation of this law, including the trade in it or the burden of land, has been developed.
It also appears that sometimes criticism of perpetual use rights is excessive and leaving public property over property, with the possibility of terminating a perpetual use contract, is justified.
For example, this may apply to the situation of giving up perpetual real estate for a specific purpose, such as a small public benefit organisation or foundation wanting to use the property for a good purpose, but the assumptions are not realised due to a lack of funds.
In such a case, the possibility of terminating the perpetual use contract seems justified.
The measurable economic difference between the right to property and the right to perpetual usufruct with regard to fees is that the property tax is a relatively low amount, whereas the property tax plus the land use charge in large cities is a significant value, affecting all the fees paid, for example, by the owners of dwellings placed on land devoted to perpetual usufruct.
However, staying in the construction of perpetual use in the case of immovable property used for residential purposes is a completely different situation and it was right for perpetual users to change the existing situation and to eliminate a certain social injustice that the perpetual user bears a much higher public-law burden on the property than the owner, while their actual situation is very similar.
The transformation will have to be paid.
The measurable economic difference between the right to property and the right to perpetual usufruct with regard to fees is that the property tax is a relatively low amount, whereas the property tax plus the land use charge in large cities is a significant value, affecting all the fees paid, for example, by the owners of dwellings placed on land devoted to perpetual usufruct.
A remediation of such a situation is to be an expropriation bill which already In the first its recipe Article 1(1) categorically, it provides that, by law, by day 1 January 2019 the right to use perpetual land built for housing purposes is transformed into land ownership. It won't matter if the building is even isolated. 1 The place or not.
Unfortunately, the Licensing Act does not introduce special privileges for perpetual users to transform perpetual use into property rights – the conversion will have to be paid. Act allows to bring all 20 one-off conversion fees "in advance".
In fact, the only significant plus of the law of expropriation is to ensure that residents of multi-family buildings can actually exercise the right of conversion resulting from Act dated 29 July 2005 on the conversion of perpetual use to property ownership (Journal of Laws of 2012, item 83, as amended), hereinafter referred to as ‘the Act of 2005 Recast’.
The source of problems in transforming perpetual use rights established on land built with multi-local buildings into property of these land was that perpetual use cannot exist on land that is partly private property.
Consequently, in order to transform the shares in the perpetual land use law, the consent of all owners of premises entitled to the perpetual land use law was essentially necessary.
By law of 2005 of conversion for multi-family buildings, it was possible to request a conversion of at least half of the shares by perpetual users, but at least one the perpetual user effectively blocked the acquisition of land ownership by the other residents of the building until the court decided the case.
The bonus scheme for the transformation of perpetual use into ownership
Work on the Eproprietary Act took quite a long time.
After many changes and consultations, the President finally signed a bill in which one the use of perpetual land used for housing purposes is to be eliminated by law, and secondly, the local authorities are to lose as little as possible, as a result of which they will be deprived of the ownership of the immovable property rendered in perpetual use.
The users of the land will pay the Treasury and municipalities for their ‘compulsory expropriation’ of the conversion fee equal to the annual fee for perpetual use that would be in force on the date of conversion.
The fee will be paid by 20 years, however, the faster the ‘total’ fee is paid as a one-off fee, the greater the bonus can be obtained.
The Act sets out the discounts in the case of conversion of land that is owned by the State Treasury, the maximum discount being 60% where a single fee is paid in the year in which the conversion took place.
In the case of land owned by local government units, only in the resolution of the relevant council or parliament will the system and rules of the concession be defined.
This raises the question as to how local government entities ("JST") will approach the bonus system, whether these rules will be analogous to those set out in the Act of Licensing, or whether other elements or a system similar to those developed under the Law of 2005 the transformation.
It should be noted that discounts granted in connection with the application of the Law on 2005 on transformation, in many cases they have been quite beneficial to citizens.
In the course of the conversion procedure under the provisions of the Law of 2005 about the transformation, it may turn out that the provisions of the old law are more favourable. This includes Warsaw, where the discount can be obtained even at the level 95%.
In such a situation, in the case of ongoing transformation proceedings not completed by the date 31 December 2018 up to day 31 March 2019 the user or users may apply for further investigation under the provisions of the Act of 2005 the transformation.
Work on the Eproprietary Act took quite a long time. After many changes and consultations, the President finally signed a bill in which one the use of perpetual land used for housing purposes is to be eliminated by law, and secondly, the local authorities are to lose as little as possible, as a result of which they will be deprived of the ownership of the immovable property rendered in perpetual use.
Expropriation and use of the apartment
It is also worth considering all the circumstances, as it has happened that in the case of a transformation made under the Act of 2005 of the conversion, the authorities were able to request a refund of the discount granted because of the economic activity carried out on the property. In many cases, explaining to the body the fact that the registration of the company itself does not undermine the main residential function –
as confirmed in the jurisprudence of administrative courts e.g. WSA in Gorzów Wielkopolski II SA/Go 58/11, WSA in Warsaw dated 21 November 2011, reference no. I SA/Wa 1215/11– was usually sufficient, but required time and work.
This issue is also valid under the new law of expropriation, because in many residential premises, even natural persons operating in economic activity are registered.
However, as the project promoters point out in the justification for the expropriation act, the dominant residential function of the building will be decisive for the transformation.
It happens that in the permit for construction, and also in the permit for use the possibility of additional use of the residential building for other purposes is indicated. Sometimes a person who meets housing needs in a given property also uses this property to run his own business.
Such circumstances should not exclude the possibility of transforming the right of perpetual use into property, as they do not undermine the basic function of the residential building, and thus the land built with such buildings fall within the purpose of an expropriation act to support the housing needs of citizens.
However, it is not possible to ignore the fact that the conversion under the Act will be subject to land built in multi-family residential buildings in which at least half of the number of premises is residential.
A fairly long period of application of the new law gave many municipalities time to update the value of the property and increase the fees for perpetual use, the amount of which will be the starting point for determining the conversion fee. The conversion fee cannot be amended by JST or increased beyond the valuation according to the principles of Article 5 Real estate management laws and no more than once per 3 years from the date of final valorisation.
The explanatory memorandum of the Act of Expropriation indicated that the system of payment for a time-limited cyclical conversion payment at the level of the current annual fees would not undermine the financial stability of the public authorities and the Treasury even after the end of the payment period (after 20–33 years) or when a large group of beneficiaries of the Act benefit from the possibility of a one-off payment, as income from annual charges for perpetual use does not constitute a significant item in the budgets of local governments.
For example, from the content available on the BIP website budgetary resolutions for 2015 eight Regional cities (Warsaw, Białystok, Gdańsk, Zielona Góra, Bydgoszcz, Lublin, Krakow and Opole) it is clear that the total share of revenue from management fees, use and annual fees for perpetual use in the budget revenues of these cities is around 1%.
The exception is Warsaw, for which this share exceeds 3%.
Since, according to the project promoter, JST's income on perpetual use is not so significant, a conversion fee could be set at a lower level, which was, in fact, reported in the course of work on the Act at least for the one-time payment of the entire conversion fee (maximum 4 instalments, which would mean a discount of around 80%).
However, the voice of other than the great cities of JST and their associates was apparently more important, since it was decided to remain at 20 a summer fee and leave JST the possibility to establish the bonus system independently.
In spite of the fact that JST has been left with the power to establish the discount, some of them do not already preclude the application of the Act of Licensing to the Constitutional Court, indicating that expropriation is only possible for public purposes and that it is carried out for private purposes under the Law of Expropriation.
Further fate of the bill
The issue is important and can affect the fate of the entire bill, because with one JST pages rely on the recipe Article 165(1) the Constitution, which provides that local government units have legal personality and have ownership and other property rights, and Article 167(4) Constitution and second Government page refers to the provision Article 75(1) The Constitution and in the explanatory memorandum of the Entitlement Act convinces that the principle of the protection of self-government property does not mean that the possibility of the legislature's interference with the ownership rights of municipalities, including by subtracting ownership, is categorically excluded.
The rich conclusions of these analyses are available, among others, in the justifications for: dated 17 October 1995, reference no. K. 10/95, decisions 9 January 1996, reference no. K.18/95, Judgment dated 12 April 2000, reference no. K 8/98.
Given that property is not an absolute law, The Court pointed out that, due to the specific nature (public) and origin of municipal property, its protection is subject to a specific modification, hence the municipalities ‘must reckon with the restriction of their rights of property, whenever it is required to do so by order which does not conform to the new political conditions of the legacy of the PRL (...)’ (Order K.
10/95).
Therefore, it is not known what will be the further fate of the Act of Expropriation, but how, in principle, each act benefits from the presumption of compliance with the Constitution and consequently from the date 1 January 2019 ex legedo transforms the use of perpetual housing land into property.
Perpetual users should receive from JST a certificate confirming the transformation in which, among others, the annual conversion fee will be indicated. Certificates will be issued for real estate, not for a particular person. Certificates will be the basis for entries in the perpetual book of the claim for a conversion fee.
The courts of the monthly accounts will make entries of their own motion, for which fees are apparently not paid as indicated in the provision Article 5(1) A law of expropriation.
In fact, in the case of a one-off charge, the cost was passed on to the citizen, in such a way that in the provision Article 7(10) The Act of Entitlement on the application for removal from the register of a perpetual fee claim, indicated the amount 250 PLN, which is higher than the sum of the fees for the registration of the claim and its deletion together if those charges were fixed in accordance with Article 43(3) and Article 46 of the Act dated 25 July 2005 on judicial costs in civil matters (this would be 225 PLN or 150 PLN for entry and 75 PLN for deletion).
The system of certificates is intended to prevent them from being challenged, as administrative courts in accordance with the NSA’s decision to 9 September 2014, II OSK 2339/14, accept that a certificate issued by a public administration authority is not subject to judicial review.
However, if the beneficiary of the expropriation does not agree with the amount of the conversion fee, he shall have the right to apply for a determination of the amount or period of payment of the charge by decision which he may challenge in accordance with the provisions of the Code of Administrative Procedure.
It should be noted that the vast majority of perpetual property is owned by JST, which, in most cases, are quite reluctant to refer to the new legislation. It is also unclear how and under what principles the municipality will establish a bonus system, which will be extremely important for new property owners.
There is no doubt that the one-off payment of the entire conversion fee will be most advantageous, while obtaining the maximum possible discount, so citizens should already include such expenditure in their budgets.
Author:
Aleksandra Księżyk – Legal advisor, Director of the Legal Department in Warsaw Chancellery Russell Bedford Dmowski and Partners Law Firm sp. k.