The main sources of real estate law are:

• the Civil Code;
• the Real Estate Management Act;
• the Land and Mortgage Registers and Mortgage Act;
• the Construction Law Act; and
• the Spatial Planning and Development Act.

These are supplemented by legislation on specific kinds of real estate, such as forest land (the Forest Act), agricultural land (the Agricultural System Formation Act) or residential premises (the Residential Property Acquirer Protection Act, the Tenants’ Rights Protection Act), as well as local laws.

Construction in the commercial segment slowed down in 2022, as illustrated by the following statistics:

• office: 600,000 sq m under construction at the end of 2022 compared to 1 million sq m at the end of 2021;
• logistics: 3.8 million sq m under construction at the end of 2022, which is a drop of 25% compared to Q1 2022;
• 25% fewer dwelling units sold in Q4 2022 in Warsaw compared to Q3 2022; and
• a 4% drop in investment activity (measured by value of transactions expressed in EUR) in 2022 compared to 2021, and a drop of almost 40% compared to the record years of 2018 and 2019.

Nevertheless, several significant real estate deals took place in 2022, including:

• the sale of Generation Park Y tower in Warsaw by Skanska to Hansainvest for EUR290 million;
• the sale of the Warsaw Hub by Ghelamco to Google, for EUR580 million (a record transaction for an office building in Poland and Central Europe);
• the sale of Forum Gdańsk (prime retail) by Blackstone to NEPI (the largest single asset transaction in 2022); and
• the sale of portfolio of 14 logistics properties by Hillwood to CBRE Global Investors for EUR270 million.

While the impact of the pandemic on the real estate market is no longer significant, rising interest rates and inflation are key factors, resulting in decreased interest in residential properties among buyers, increased prices for the construction of housing, and restricted access to bank loans. All of these factors contribute to a drop in the construction and sale of new houses and apartments.

New trends in real estate have stemmed from the following requirements or needs:

• carbon-footprint reduction;
• safer buildings;
• smart access control;
• the spread of blockchain;
• automated valuation models;
• AI-driven marketing and data gathering;
• a growing focus on machine learning;
• video tours; and
• rental management software.

These trends have just emerged but some are increasingly supported by new legislation – eg, requiring each new car park built in any new building to have a sufficient number of electric car chargers.

The new law on spatial planning and zoning will likely be adopted in 2023, bringing revolutionary changes to the construction process. It should simplify the procedure and cut planning process delays, but also ensure more harmonised development.

Changes in the Real Estate Management Act are also expected in 2023, to allow the transformation of perpetual usufruct of land held by business entities into freehold, as the next step in the elimination of perpetual usufruct title from the Polish system. As a result, the transferability of real estate will be less restricted and the holding of properties will not be subject to perpetual usufruct fees (3% annually of the land value for the commercial designation of land and 1% annually of the land value for residential).

Ownership

Ownership (or freehold) in the strict sense is the broadest property right available, but its scope is still limited by provisions of law, the socioeconomic purpose of the right, and the rules of social coexistence.

Perpetual Usufruct

Land owned by the State Treasury or a local government unit may be placed in perpetual usufruct for a period of 40 to 99 years, subject to an annual fee. Notably, buildings and structures erected on such land belong to the perpetual usufructuary rather than the landowner.

While the right of perpetual usufruct is similar to ownership in terms of the powers it confers on the right holder, its transferability and its effectiveness vis-à-vis third parties are subject to further limitations imposed by law and the decision or agreement under which it was created. Since land in perpetual usufruct belongs to a third party, some actions require the landowner’s consent, such as subdividing a plot of land.

The right of perpetual usufruct of land developed for residential purposes was abolished and transformed into ownership on 1 January 2019. This change also applies to any land in perpetual usufruct to be developed for residential purposes in the future. Similar solutions are to be adopted for commercial real estate; however, the proposed regulations are likely to hinder effective transformation.

Limited Property Rights

In principle, limited property rights are effective towards third parties and can be disclosed in the relevant registers. Obviously, their scope is narrower than in the case of other property rights. Such rights applicable to real properties include mortgage, usufruct, easements appurtenant and a co-operative ownership right to residential premises.

The provisions of law universally applicable to the transfer of any kind of real estate are included in the Civil Code, as well as the Land and Mortgage Registers and Mortgage Act.

Specific regimes may apply, depending on the kind of real estate, the seller and the buyer, as follows:

• transfers of agricultural land are strictly regulated and limited by the Agricultural System Formation Act and the Management of State Treasury Owned Agricultural Real Estate Act;
• the acquisition of land by foreigners (largely not including EU citizens and companies) is regulated by the Acquisitions of Real Estate by Foreigners Act; and
• transfers of land owned (also previously owned) by the State Treasury and local government units are regulated in the Real Estate Management Act.

The effective transfer of title to real estate (as an asset deal) typically requires a notarial deed. The transfer of a perpetual usufruct right additionally requires the registration of the transfer in the land and mortgage register in order to be effective.

Transfers of shares in companies holding real estate (share deals) do not require any particular form, except for the transfer of shares in limited liability companies, which requires notarised signatures.

For additional requirements that may apply to effect a lawful transaction in Poland, please see 2.6 Important Areas of Law for Investors.

Transfers of freehold title are recorded in land and mortgage registers maintained by the district courts but, except for the transfer of a perpetual usufruct right, registration is not a prerequisite to effective acquisition (failure to register the transfer, however, may result in a fine). Whenever a transaction is executed as a notarial deed, the notary will file a relevant motion for registration electronically; otherwise the applicant must fill out a registration form and apply to the court independently.

Depending on the kind of real estate and the structure of the planned transaction, legal, technical, environmental, tax and commercial due diligence may be carried out, with the help of professional advisers in the field.

Legal due diligence typically covers issues related to the title to the real estate, access to public roads, zoning, construction, permitting, IP rights, environment, disputes and, if applicable, leasing and corporate issues (particularly in the case of share deals) and other issues and/or limitations.

Due diligence is based on documents and information made available by the seller, as well as publicly available information, certificates obtained from authorities on the basis of power of attorney obtained from the seller, and reviews of the files of land and mortgage registers and other files held by authorities, such as files of pending proceedings, if applicable.

The scope of representations and warranties in real estate transactions depends on the kind of transaction, the characteristics of the real estate and the arrangements between the parties. Typically, both the seller and the buyer make representations in respect of their capability to enter into the contract. The seller will also make representations in respect of matters such as title to the property and the following, as the case may be:

• construction, permitting and zoning;
• contractual and statutory limitations relating to the real estate, including third party rights thereto;
• environmental issues;
• tax matters;
• disputes; and
• other matters, depending on the particular situation.

The seller’s liability (duty to indemnify the buyer against incurred losses) is primarily based on general warranty for legal and physical defects of the real estate as regulated in the Civil Code. In commercial real estate transactions, the statutory warranty is typically modified by the parties, and the seller’s liability may be limited to the breach of representations and warranties and its duty to disclose (hence representations are often limited by “seller’s best knowledge”) and/or broadened, so that the seller’s liability for breach is based on risk and not the fault principle.

The seller’s contractual liability for breach is typically limited in terms of time and amount. The parties in real estate transactions tend to differentiate between breaches of fundamental representations and warranties (such as those pertaining to the title to real estate) and of non-fundamental ones. Liability for breach of fundamental warranties typically survives for five years and is capped to the total price (but in no case should this be treated as a rule). In the case of non-fundamental warranties, the limits may be lower.

When purchasing real estate, an investor should consider the area of civil and administrative law that regulates the basic prerequisites for the effective sale of real estate (see 2.2 Laws Applicable to Transfer of Title regarding specific regimes). These include issues such as the required form of the documents, the potential statutory rights of first refusal, required third party consent, limitations in real estate transactions of particular types, rules and limitations of development, etc. In addition, the investor should consider issues resulting from corporate law (corporate consents, rules of representation) or tax law (proper taxation of the transaction). Thirdly, a diligent investor will analyse spatial planning regulations, particularly when purchasing an undeveloped piece of land, and regulations pertaining to the technical requirements for buildings in any purchase of developed property.

The above and other areas of law, if applicable, are typically subject to the legal due diligence of the real estate purchaser; see 2.4 Real Estate Due Diligence for details.

The current real estate title holder (also the buyer after purchasing the real estate) is generally liable for so-called “historical contamination” of land that occurred before 30 April 2007 or was caused by an event that occurred more than 30 years before it was identified.

The polluter is liable for contamination caused after 30 April 2007.

Once a real estate title holder proves that the contamination occurred through no fault or knowledge of their own, the liability may be incurred by the actual polluter or by the polluter and the title holder jointly, or it may even be transferred to the relevant environmental protection authority.

Permitted use of a parcel of real estate is determined mainly by the Spatial Planning and Development Act, the Construction Law Act, the Environmental Law Act and individual acts issued by the competent authorities, such as environmental decisions, local development plans, outline planning permissions and planning permission (see 4. Planning and Zoning).

It is possible to enter into specific agreements with relevant public authorities in order to facilitate a project. These agreements primarily concern the construction of roads or utility infrastructure (see 4.6 Agreements With Local or Governmental Authorities regarding urban planning agreements).

Expropriation is admissible only on the basis of administrative decisions issued in accordance with the Real Estate Management Act and other statutes, if public utility projects require the permanent use of private land, and only for fair compensation.

Before an expropriation decision is issued, the authority conducts negotiations with the real estate owner. If these fail, expropriation proceedings are initiated and disclosed in the land and mortgage register, and the authority conducts an administrative hearing.

Other ways to restrict use or deprive the owner of the property include:

• restricting use of the real estate on the basis of decisions issued under the Real Estate Management Act – such restriction is imposed only in the case of construction of public communication facilities and if the owner of the land opposes the construction of such facilities on their land; and
• confiscation, which is possible only with respect to criminal offenders and is limited to the proceeds of crime so it rarely affects title to properties.

In asset deals, the transaction may be classified as a sale of an enterprise, a sale of an organised part of an enterprise (OPE) or a sale of assets that do not constitute an enterprise/OPE. Sales of enterprises or OPE are not subject to VAT and are instead taxed with civil law activities tax (CLAT). Sales of assets that do not constitute an enterprise are generally subject to VAT.

VAT is paid by the seller, but the buyer is obliged to pay the purchase price along with the relevant VAT for the seller. VAT on the purchase price can be subject to a refund from the buyer, provided that the buyer runs VAT-taxable activities with the use of the acquired properties. The CLAT obligation arises on the part of the buyer and is not refundable.

Share deals are subject to 1% CLAT on the market value of shares. The CLAT obligation arises on the part of the buyer.

The acquisition of real estate in Poland by foreigners (foreign citizens, companies and entities seated outside Poland or controlled by such a foreign entity), including the acquisition of shares in companies being perpetual usufructuaries or owners of real estate in Poland, is subject to limitations resulting from the Acquisitions of Real Estate by Foreigners Act and requires the consent of the Minister of Internal Affairs. However, several exceptions exist – most notably, such consent is not required for foreigners from the EEA and Switzerland, nor for the acquisition of residential premises.

The most popular forms of commercial real estate acquisition finance in Poland include:

• secured bank loans granted for a specific purpose (investment loans used to finance or refinance the acquisition of real estate);
• mezzanine loans used to supplement a bank loan granted for a specific purpose;
• intra-group financing (typically loans or bonds) provided by a parent company or affiliate; and
• bonds.

The following types of security interests are typically required by lenders:

• a mortgage over acquired or developed real estate;
• a registered financial pledge over shares in the SPV holding the acquired or developed real estate;
• a registered financial pledge over the bank accounts of the borrower;
• power of attorney authorising the lender to access the borrower’s bank accounts in the event of default, along with a block on the bank accounts of the borrower;
• a security assignment of the borrower’s receivables;
• a statement on voluntary submission to enforcement;
• the subordination of existing and future liabilities owed by the borrower to subordinated creditors (typically shareholders, other providers of intra-group borrowing) under the subordination agreement; and
• for development loans specifically, banks may also require a guarantee issued by the parent or affiliate of the borrower securing unforeseen increases of development costs (cost overrun guarantee).

There are no specific restrictions on granting security over real estate to foreign lenders.

Similarly, there are no restrictions on repayments being made to a foreign lender or enforcement of security in favour of a foreign lender under a security document.

Taxes and fees payable on granting security over real estate (mortgage) include CLAT, the notarial fee (plus VAT) and a court fee payable upon the execution of the mortgage deed and upon the filing of an application for the registration of mortgages in the appropriate land and mortgage register.

Such taxes and fees are payable promptly after the date establishing the mortgage, and are collected by the notary public.

The enforcement of security over real estate involves certain court fees (for appending the enforcement clause) and bailiff fees, which are payable upfront at certain stages of enforcement proceedings. As a rule, the costs of enforcement should be reimbursed to the lender upon enforcement of the mortgage.

Providing security over a real estate asset requires prior verification of whether any corporate consents or approvals are required under law or under the articles of association of a given entity. If required, such corporate consents must be obtained prior to establishing a valid security over the real estate.

The scope of formalities depends on the type of security. If the lender elects to enforce security over the bank accounts or interest (shares) only, a notification to the borrower will be required prior to taking over the proceeds or interest.

In the majority of cases, however (eg, for mortgages), before starting enforcement, a lender must request the court to give an enforcement clause against a borrower in simple proceedings based on the submission to enforcement made by the borrower in the loan agreement. As a rule, such proceedings should be completed within three days from submission of the request.

The time needed to successfully enforce and realise security on real property can take from several months to a year or more, depending on the specific circumstances of the case.

The process to enforce and realise security can typically be broken down into the following steps:

• filing a claim with the court requesting enforcement of the real estate security;
• obtaining a court order granting the creditor the right to enforce the security;
• auctioning the real estate;
• transferring ownership title if the auction is successful; and
• satisfaction of the debt from the proceeds from the sale.

In response to the COVID-19 pandemic, the Polish government implemented a number of measures aimed at providing financial relief to borrowers who were consumers (eg, suspension of repayment of consumer loans, prohibition of auction of residential premises). Lenders’ ability to foreclose or realise collateral remained largely unchanged during the pandemic.

The subordination of existing debt to newly created debt can be agreed contractually between two lenders, with the participation of a borrower.

A mortgagee is not liable under environmental laws unless the mortgagee caused the pollution. A lender/mortgagee may only become liable under environmental laws if it becomes the owner of the property as a result of a mortgage foreclosure.

The bankruptcy of a borrower does not void a security interest created by a borrower in favour of a lender. As a rule, any security interests established by a borrower prior to the declaration of its bankruptcy survive and, in the case of major security interests such as a mortgage or a pledge, a lender will be entitled to satisfy its claims separately in the bankruptcy proceedings, from the secured assets.

Nevertheless, according to Polish bankruptcy law, the security for an unmatured debt made by the bankrupt within six months before the date of filing the bankruptcy petition is ineffective by operation of law, unless the creditor proves that they were unaware of the existence of grounds for bankruptcy at the time of the security execution.

Furthermore, in some cases the general receiver of the bankruptcy estate may request, in court proceedings, that certain securities on the bankrupt’s assets are considered ineffective.

In the case of a subordination agreement between a lender and subordinated lender, the subordination and the priority of claims agreed upon in the subordination agreement will have no effect in the bankruptcy proceedings, and the satisfaction of creditors will be made solely in the order arising from bankruptcy law.

The LIBOR index has not been applied in loan documentation since early 2022. The following new alternative risk-free rates for a given currency have been implemented:

• the Euro Short-Term Rate (€STR) for loans in euros;
• the Sterling Overnight Interbank Average Rate (SONIA) for loans in British pounds;
• the Swiss Average Rate Overnight (SARON) for loans in Swiss francs;
• the Secured Overnight Financing Rate (SOFR) for loans in US dollars; and
• the Tokyo Overnight Average Rate (TONAR) for loans in Japanese yen.

For agreements concluded before 1 January 2022, this means that the transposition to one of the new indices has become necessary, based on the rate switch provisions included in amended contracts (typically automatic); for contracts that have not yet been amended to regulate such a transposition, the interest should be calculated based on the existing fall-back provisions within the contract.

Local and governmental (for projects of national importance) agencies are competent in matters of spatial planning and zoning.

Local administration (at the municipal, district and provincial levels) is responsible for the determination of the specific requirements for planning and zoning on the basis of the Spatial Planning and Development Act and the Construction Law Act. These authorities operate on two levels: first instance and appeal. The most important planning and zoning documents issued by the authorities are local development plans and outline planning decisions.

Various governmental agencies are responsible for the preparation of new general laws and the introduction of new regulations, and deal with the interpretation of regulations. Certain governmental agencies are responsible for the planning of infrastructure and similar projects on a national level.

The most important legislation regarding the design, appearance and method of construction is the Construction Law Act and specific regulations regarding technical matters regarding safety, appearance and design.

The most important documents regulated under the Construction Law Act regarding construction are planning permission and occupancy permissions, which allow a developer to legally commence and perform the construction, and to legally use and occupy the new (or refurbished) building.

There are also dedicated legal documents such as local development plans regulating specific construction requirements for a given area, in addition to the above-mentioned planning and zoning matters, as well as outline planning permission, which includes the same scope of information as the local development plan but is issued for specific real estate.

The construction supervision authorities (at the local and central level) are responsible for verifying the fulfilment of obligations imposed in the aforementioned documents and supervision of the construction process.

Entities responsible for the development and designated use of real estate include:

• local authorities (municipal, district or voivodeship), which operate on the basis of the Spatial Planning and Development Act and the Construction Law Act (and other acts regulating specific matters in that respect); and
• construction supervision and inspection entities involved in matters of development and their compliance with relevant provisions of law (construction, sanitary, fire protection, etc).

The majority of restrictions and requirements on the development and designated use of real estate, other than provisions of law, are included in the following documents.

Local Development Plan

Such plans are adopted by resolution of a local council, have the status of a local law, and include:

• area-specific land use and development conditions;
• archaeological and environmental protection; and
• road and utility management.

Land Use Permit

The local authority may issue a land use permit when there is no local development plan, upon application. Its scope is typically limited to a particular piece of real estate.

Building Permit

This is an administrative decision on the basis on which construction can be carried out legally. It has to comply with the provisions of the local development plan or outline planning permission.

Building permits allowing a new project to be developed or a major refurbishment to be completed are issued upon application to the competent authority. The application should be accompanied by:

• a statement confirming the applicant’s right to use the real estate for construction purposes;
• the outline planning permission (in the absence of a local development plan);
• a copy of the land registration records and map extract;
• a set of building designs;
• documents confirming the design engineers’ qualifications; and
• additional documents that may be required under the Construction Law Act in specific circumstances.

Developers, owners, perpetual usufructuaries or managers of any real estate located within the area affected by the project may actively participate in the proceedings at any stage.

The competent authority will verify whether the application is correct or should be supplemented. The building permit should be issued within 65 days.

A building permit may be appealed within 14 days of receipt of the decision by anyone involved in the proceedings, as described in 4.4 Obtaining Entitlements to Develop a New Project.

It is possible and common to enter into agreements with local or governmental authorities or utility suppliers in order to facilitate a development project.

Most commonly, such agreements concern the construction of road infrastructure and/or utility infrastructure at the expense of the investor.

For real estate located in specific revitalisation zones, it is possible to execute an urban planning agreement. By entering into such an agreement with the municipality, the investor undertakes to build at their own expense and to transfer free of charge to the municipality complementary investments in the form of technical infrastructure, social infrastructure or housing units to the extent indicated in the local revitalisation plan.

Failure to obtain a building permit when required (or to comply with planning condition) may result in:

• an inability to obtain the occupancy permit; and
• the suspension of construction works.

If the construction is suspended, the title holder may apply for the building design to be approved, so that any outstanding work can be completed. If such approval is not obtained, the demolition of the building can be ordered by authorities.

Other breaches in development and designated use restrictions are mostly punishable by fines. Major breaches may even result in the restriction of liberty or imprisonment of the liable person.

Investors may conduct business in Poland by setting up a company or partnership. The most common type of company is a limited liability company (spółka z ograniczoną odpowiedzialnością), with a joint stock company (spółka akcyjna) being less frequent. Investors may choose from the following partnerships:

• general partnership (spółka jawna);
• limited partnership (spółka komandytowa); or
• limited joint stock partnership (spółka komandytowo-akcyjna).

Notably, companies incorporated in the EEA can also be direct owners of real estate in Poland without obtaining consent from the Minister of Internal Affairs (see 2.11 Legal Restrictions on Foreign Investors).

See 5.2 Main Features of the Constitution of Each Type of Entity regarding the differences in liability of investors for these types of entities.

Limited Liability Company and Joint Stock Company

Both types of companies acquire legal personality when they are entered in the Registry of Entrepreneurs of the National Court Register, at which point the company becomes solely responsible for its obligations. The risk borne by shareholders and stockholders respectively is generally limited to the amount of contributions made to the company.

General Partnership

A general partnership starts functioning upon registration in the Registry of Entrepreneurs of the National Court Register. All partners of a general partnership are liable for all obligations of the company without limitation.

Limited Partnership

A limited partnership starts functioning upon registration in the Registry of Entrepreneurs of the National Court Register. Limited partnerships have two types of partners:

• general partners, who bear unlimited liability for the obligations of the partnership; and
• limited partners, who bear liability up to only the amount specified in the partnership agreement.

Limited Joint Stock Partnership

A limited joint stock partnership combines the features of a joint stock company and a limited partnership, and starts functioning upon registration in the Registry of Entrepreneurs of the National Court Register. Limited joint stock partnerships have two types of partners:

• general partners, who bear unlimited liability for the obligations of the partnership; and
• shareholders, who bear no personal liability for the obligations of the partnership.

The capital requirements for the foundation of companies are as follows:

• limited liability company: PLN5,000;
• joint stock company: PLN100,000;
• general partnership: no minimum capital required;
• limited partnership: no minimum capital required; and
• limited joint stock partnership: PLN50,000.

The capital should be covered in cash or by in-kind contributions.

Limited Liability Company

The governing bodies of a limited liability company are the shareholders’ meeting and the management board.

The management board is authorised to run a company on an ongoing basis and to represent the company, whereas the most significant decisions are made by the shareholders’ meeting. A supervisory board is optional. If the share capital exceeds PLN500,000 and there are more than 25 shareholders, a supervisory board is obligatory.

Joint Stock Company

The governing bodies of a joint stock company are the stockholders’ meeting, the management board and the mandatory supervisory board. While the management board represents the company, major decisions require the consent of the stockholders’ meeting and, in some cases, the supervisory board.

General Partnership

A partnership is represented by general partner(s).

Limited Partnership

A partnership is represented by general partner(s). Limited partners are not authorised to represent the company, unless they have been granted power of attorney.

Limited Joint Stock Partnership

A limited joint stock partnership is governed by its shareholders’ meeting. A partnership is represented by general partner(s). Shareholders are not authorised to represent the company, unless they have been granted power of attorney. A supervisory board is optional, but becomes compulsory if there are more than 25 shareholders.

Maintenance and accounting compliance costs depend on the type of business activity and the number and volume of investments.

The main statutory obligations include:

• keeping accounting books;
• submitting annual financial statements;
• having the accounting books examined by a statutory auditor (for companies/partnerships exceeding statutory thresholds, which is usually not the case for asset companies in real estate groups); and
• maintenance of a register of shareholders by a brokerage house (for limited joint stock companies).

Two main types of contracts regulated by Polish law allow occupancy and the use of real estate.

Lease Contract (umowa najmu)

The tenant can use a specific part of a piece of real estate (most commonly premises of various kinds) for a limited period of time or an indefinite period terminable by notice, in exchange for rent payable to the landlord. A subcategory of a lease contract is an institutional lease contract (najem instytucjonalny), which is applicable only to institutional landlords engaged in the business of leasing out residential premises.

Tenancy Contract (umowa dzierżawy)

The tenant can use a real property or part thereof and collect income generated thereby, in exchange for rent payable to the landlord.

Lend for Use Contract (umowa użyczenia)

Lend for use is of minor importance commercially and differs from the above as the lender commits to allow the borrower to use premises (real estate included) free of charge.

Polish law does not distinguish a separate category of “commercial lease”, in particular with regard to the way in which leased premises are used. A commercial lease as a market term is based on the type of parties to the contract.

The vast majority of commercial leases are net type leases – ie, in addition to rent, the tenant pays a proportionate share of the operating costs, calculated as a ratio of the area occupied by the tenant to the total area of the property. Such costs include maintenance costs, real estate tax and insurance (payable as monthly advances and adjusted annually).

The terms and conditions of commercial leases are freely negotiable between the parties, subject to mandatory provisions of law that cannot be modified by the parties and supersede the arrangements of the parties. Likewise, general provisions of law apply to any matters that are not otherwise regulated in the contract.

Parties are free to negotiate the way rent is calculated (eg, payable per square metre or as a lump sum) and the payment thereof (currency, period of payment, etc).

Lease contracts typically cover:

• a description of the premises and real estate – premises area, location, layouts, etc;
• the conditions and procedure of handover of the premises;
• the purpose of the lease/permitted use of the premises;
• rent and other lease payments – ie, rates, discounts, invoicing, indexation, reconciliation of operating costs;
• the condition of the premises and the scope of the landlord's or tenant’s planned work on the premises;
• either party’s responsibilities with respect to maintenance, repairs and alterations;
• lease term, break or extension options – notably, contracts for institutional lease must be made for a fixed term (with a clearly specified expiry date), but the parties may freely determine the actual length;
• the conditions of early termination, including liquidated damages;
• collateral;
• insurance;
• conditions of sub-letting; and
• dispute resolution (common courts, arbitration).

In commercial leases, rent is usually paid in euros and adjusted annually in line with Eurostat’s harmonised index of consumer prices for the euro area or EU countries. Where rent is in Polish złoty, rent adjustment is typically based on the average CPI in Poland. As long as an appropriate provision has been included in the contract, the tenant should only be informed about rent adjustment and no amendment to the contract is necessary. As a market standard, rent is adjustable upwards only.

Aside from automatic adjustments of rent as specified in 6.5 Rent Variation, the parties need to reach an agreement in order to determine new rent rates.

Polish law allows the unilateral increase of rent by a landlord, subject to a one-month notice period; however, in commercial leases this right is usually excluded by the parties and only indexation applies. In institutional leases, the landlord is not entitled to raise the rent if such an increase is not agreed in the contract.

Landlords pay income tax on rental income. VAT is added on top of rent and most other payments due under a lease contract.

At the start of a lease, the tenant bears the costs of providing collateral securing a lease contract (usually a bank guarantee, deposit and/or notarial deed on declaration of submission to enforcement). Certain commercial lease agreements on the retail market may provide for additional fees – eg, a technical co-ordination fee.       

Maintenance costs of common areas are paid by tenants, who usually participate proportionately in all operating costs, calculated as the ratio of the area leased by the tenant to the total area of the property. Such fees are typically payable in monthly advances and adjusted annually.

In most cases, the costs of metered utilities are re-invoiced by the landlord to the tenant. For utility costs that are not measured separately for the premises, the cost is incurred proportionate to the leased area with respect to the total gross leasable area or sum of areas of the premises participating in such costs. Sometimes, tenants have separate agreements with utility providers for all or some utilities and then settle payments directly with the providers.

Tenants are usually contractually obliged to maintain third-party liability insurance and to insure all materials, equipment and other belongings brought into the premises, including ensuring Contractor All Risk (CAR) insurance (or similar) to cover any tenant’s fit-out works. Sometimes the tenants are also obliged to be insured against business interruption.

Landlords are contractually obliged to ensure that the real estate is properly insured against incidents such as fire, flood and others that are deemed reasonable. The cost of insurance of the real estate is usually allocated to all tenants as part of maintenance fees.

Tenants are allowed to use the leased real estate solely for the purposes and in a manner agreed in the contract. Any change in the manner of use or its purpose requires the prior consent of the landlord.

If the contract does not describe the manner of use, tenants are obliged to use the leased real estate corresponding to its character and designation.

Significant alterations or improvements to the leased real estate require the landlord’s consent.

Under Polish law, if the tenant improved the leased real estate, the landlord, in the absence of a different agreement, may retain the improvements and pay the tenant the sum corresponding to the value at the time of giving back the real estate, or may demand the real estate is returned to its previous state. The parties may agree otherwise in the contract.

Commercial leases, such as industrial, office or retail, are not separately regulated by law.

Polish law provides for specific regulations with respect to residential leases (including institutional leases). The Tenants’ Rights Protection Act regulates protection measures for residential tenants and certain specifics of institutional leases.

Polish insolvency law does not allow the application of clauses under which the lease contract can be terminated when a bankruptcy petition is filed or if a tenant’s bankruptcy is declared.

A lease contract remains binding on parties if the real estate was delivered to the tenant prior to the declaration of bankruptcy. Upon the consent of a judge-commissioner, the bankruptcy trustee is authorised to terminate such a lease contract (even if the contract could not have been terminated by the bankrupt tenant) within a three-month termination period.

If the leased real estate has not yet been handed over as of the date of the tenant’s bankruptcy declaration, each party may withdraw from the lease contract, within two months after bankruptcy is declared.

As a rule, it is not mandatory to provide collateral for a lease contract.

Usually, tenants are contractually obliged to deliver and maintain either a bank guarantee or cash deposit. Parent company guarantees (suretyships) are sometimes used on the retail market. Regardless of the type, security typically amounts to three months’ gross rent plus maintenance fees. Tenants are also expected to provide a statement on voluntary submission to enforcement with respect to the obligation to pay any amounts due under the lease contract, and to surrender the leased real estate to the landlord upon the expiry of the lease term.

For institutional lease contracts, an optional security deposit can be provided for a maximum amount of six months’ rent (calculated as of the date of the contract). However, tenants are obliged to provide the landlord with a statement on voluntary submission to enforcement with respect to the obligation to surrender the leased real estate to the landlord upon the expiry of the lease term in the form of a notarial deed. The tenant’s statement must also include the tenant’s explicit acknowledgement of the fact that they will not be entitled to any social housing or temporary premises upon eviction, thus simplifying the eviction process.

If a tenant continues to use the real estate with the consent of the landlord after the lapse of the lease term or notice period, the lease contract is considered to have been extended for an indefinite period.

If the lease term expires and no consent for occupying the real estate is given by the landlord, the tenant is obliged to vacate it. This obligation is often contractually secured with liquidated damages of 200% to 300% of daily rent for each day of delay.

An assignment of the tenant’s rights and obligations under the lease contract requires the landlord’s consent, while the landlord is authorised to assign the right to collect future rent without the need of the tenant’s consent.

Subleasing leased real estate is allowed (without the separate consent of the landlord), unless the contract states otherwise. Typically, the landlord’s permission is required under the contract.

The parties are free to agree on the right to sublet or assign upfront in the contract (as a general rule or with respect to certain assignees).

Both tenants and sub-tenants (who are not party to the lease contract) are liable towards the landlord for using the sublet real estate in accordance with the obligations arising from the contract. A sublease expires by virtue of law upon the expiration of the main contract at the latest.       

Under Polish law, a lease contract concluded for a fixed term can be unilaterally terminated only in cases specified in the contract.

A lease contract concluded for an indefinite term can be terminated with a termination notice ranging from one day to three months, depending on the stipulated frequency of rent payments.

The Civil Code provides for the parties’ right to terminate the contract in the following situations:

• the landlord can terminate the lease contract if a tenant is in arrears with payment of rent for at least two full payment periods and after the landlord’s notification providing for an additional one-month grace period;
• the tenant can terminate the lease contract without notice if, at the time of handover to the tenant, the leased real estate has defects which preclude it from being used as provided for in the contract, or if the defects arise later and the landlord does not, despite receiving a notice, remove them in an appropriate time, or if the defects cannot be removed; and
• the tenant can terminate the lease contract without notice if the defects of the leased real estate pose a danger to the health of the tenant or its employees.

Statutory regulations regarding institutional leases provide that the landlord’s termination requires prior written notice with a notarised signature, stating the reasons for terminating the contract and giving the tenant at least 14 days to give back the premises. The tenant is obliged to pay damages corresponding to amounts payable for the premises had the lease not been terminated.

Polish law does not provide for any registration requirements with respect to lease contracts.

A lease contract can be disclosed in the land and mortgage register. However, this rarely happens as its legal effects are not significant in practice.

If a tenant occupies the leased real estate after the expiry of the contract, the landlord is entitled to institute eviction. Surrender of the leased real estate is commonly secured by means of a tenant’s statement on voluntary submission to enforcement with respect to surrendering the leased real estate to the landlord upon the expiry of the lease term. The statement in the form of a notarial deed with an appended enforcement clause by the court is a writ of enforcement allowing eviction of the tenant by a court bailiff. The tenant’s statement on voluntary submission to enforcement with respect to surrendering the premises to the landlord is mandatory under institutional lease regulations.

No third party can terminate the lease contract. However, either party to the contract may bring a lawsuit to court and demand termination of the contract if there is an extraordinary change of external circumstances rendering the performance of obligations excessively difficult, or causing serious loss to the performing party (rebus sic stantibus).

Fixed price contracts continue to be most commonly used. As a rule, the contractor is then authorised to demand an increase in remuneration only when the employer orders additional work. However, due to the unstable economic situation, other pricing structures such as “open book” or “cost plus margin” are increasingly popular, as well as a mix of these concepts (fixed price for part of the work and “cost plus margin” for an outstanding part).

Both “design and build” and “pure construction” contracts are common on the market. For commercial developments, a concept design and a “building permit design” are typically provided by the architect engaged by the employer. Responsibility for the detailed “execution design” is often assigned to contractors. For infrastructure and industrial developments, the “design and build” concept is as popular as “pure construction”.

Typically, the contractor is fully liable for damage to persons and property on site and other damage caused by work from taking over the site until its completion.

The contractor is usually contractually obliged to indemnify and protect the employer from any third-party claims resulting from such construction-related damages.

According to the Civil Code, the party causing damage is liable for full repair within normal foreseeable consequences of its acts and omissions. Limitation of liability clauses are rare, but the parties sometimes exclude liability for lost profit.

Contracts always require the contractor to maintain a third-party liability insurance policy up to the agreed amount, and usually also a CAR policy. However, the CAR policy is sometimes provided by the employer.

With respect to the quality of work and risk of defects, contracts typically foresee seven to ten years' statutory warranty and a contractual quality guarantee for the structure and watertightness of buildings, and two to five years for other works and devices.

Parties usually set the completion date and several milestones. If there is a delay in meeting any of them, the employer is authorised to demand liquidated damages for each day of delay. Liquidated damages are most often capped at 10% of remuneration, but the employer is authorised to claim supplementary damages if they incurred a higher loss as a result of delay. The payment of liquidated damages is typically secured by a performance bond.

In most cases, proper performance of the contract is secured with a performance bond amounting to 5% to 10% of the contract value (10% is most common), which is:

• irrevocable, unconditional and payable upon first demand through a bank or insurance guarantee;
• retained from each invoice; or
• a mix of guarantee and retention.

After completion of the work, the value of the performance bond is typically reduced by 50% for the guarantee period.

Contractors and designers are not entitled to any specific lien or construction mortgage. However, there are two statutory tools to secure the payment of contractor and subcontractor remuneration.

• The contractor is authorised to demand at any time during work that the employer provides them with security in the form of a bank or insurance guarantee or bank surety for remuneration. The cost of such security is split 50:50 between the contractor and the employer. If the employer fails to provide said guarantee, the contractor is authorised to withdraw from the contract due to fault on the part of the employer. Demanding such a guarantee is generally deemed to be an aggressive act and is rarely applied by contractors.
• The employer and contractor are jointly and severally liable for payment of remuneration to subcontractors who have been approved by the employer. Therefore, construction contracts typically include a strict mechanism of monthly supervision of payments of subcontractor remuneration by the contractor.

Neither solution can be contractually excluded or restricted by the parties.

In most cases, commencement of the use of buildings must be preceded by obtaining an occupancy permit. A simplified procedure is applied for certain simple projects, whereby it is sufficient that the construction authority is notified about completion of work and does not submit an objection within 14 days. In both scenarios, the building has to be previously passed by the fire brigade and sanitary authority.

In general, the sale or purchase of corporate real estate is subject to VAT. Under VAT provisions, the sale of real estate intended for development, as well as the sale of developed real estate, is treated as a supply of goods subject to VAT.

The standard VAT rate on the sale of real estate is 23%. It is also possible to apply an 8% rate to the sale of residential buildings or parts thereof that are covered by a social housing programme.

VAT provisions provide an exemption for the sale of buildings and structures or parts thereof, with several additional conditions which must be met in such cases.

See 2.10 Taxes Applicable to a Transaction regarding the application of CLAT.

If the subject of the transaction is classified incorrectly (see 2.10 Taxes Applicable to a Transaction), VAT or CLAT risk arises. To secure the correct classification of the subject of the transaction, it is recommended to apply for an individual tax ruling.

The buyer’s liability for the seller's outstanding tax obligations may be mitigated by applying for certificates confirming there are no arrears in taxes. For share deals, however, the performance of full-scope tax due diligence is recommended.

In addition, transactions aimed at obtaining a tax benefit may fall within the scope of an application of the General Anti-Avoidance Rule (GAAR), and may be subject to Mandatory Disclosure Rules (MDR, DAC6) reporting obligations. To protect against GAAR, taxpayers may apply for a specific tax ruling (so-called security opinions).

The following are subject to real estate tax:

• lands;
• buildings or parts thereof; and
• structures or parts thereof which are used for business.

The tax rates are set by particular municipalities and are higher for properties that are related to business activities. However, the provisions specify the following maximum real estate tax rates:

• PLN1.16 per sq m for land related to business activities;
• PLN28.78 per sq m for buildings or parts thereof related to business activities; and
• 2% on the value of structures.

Taxpayers with no registered office or management in Poland are subject to tax liability only on income they earn in Poland. The income earned from real estate or rights to real estate in Poland is subject to 19% income tax and may be reduced by deductible expenses.

Certain entities may be exempt from income tax if they meet the conditions specified in the provisions, such as pension funds, mutual institutions and open-end investment funds.

Non-residents who receive income from real estate in Poland are required to also declare rental income by submitting tax returns to the Polish tax office.

Generally, the disposal of real estate is taxed at a 19% rate calculated on income – ie, the difference between revenue from the sale of real estate and the deductible costs of that revenue (depreciation deductions are not included).

Furthermore, income from buildings that are located in Poland and owned or co-owned by the taxpayer, and that have been given in whole or in part for use on a lease, rental or through other contracts of a similar nature, is subject to so-called minimum income tax on commercial real estate.

The tax rate is 0.035% of the tax base for each month. The tax base is the initial value of the buildings resulting from the records kept, reduced by PLN10 million. Minimum income tax on commercial real estate can be deducted from income tax during the year, and taxpayers may apply for a refund if it is higher than the income tax due.

The initial value of buildings and structures used for business that are acquired or constructed is subject to tax depreciation. The general annual tax depreciation rate is 2.5%, and may be increased to 10% for real estate acquired from the secondary market.

Due to the limitations introduced on 1 January 2022, the following applies:

• tax depreciation write-offs may not exceed accounting ones; and
• residential buildings cannot be subject to depreciation write-offs from 1 January 2022.

The value of land or perpetual usufruct is not subject to depreciation write-offs, but it might be deducted upon sale.