Tax & Legal Highlights for Real Estate – August 2019
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1. The right of perpetual usufruct has recently undergone significant reforms
Mainly due to the Act of 20th July 2018 on the transformation of the right of perpetual usufruct of developed land for housing purposes into the ownership right to such property. The legislator is fine-tuning this regulation and removing its defects, which have affected both residents and developers. The changes are introduced by a comprehensive amendment to the Act of 13th June 2019 amending the Act on the National Property Stock and some other acts. The problem of transformation of perpetual usufruct of residential real estate on which other facilities were located, e.g. newsstands, advertising billboards, has been solved through applying the provisions of the transformation act also to land developed with residential buildings on which other buildings or construction facilities are located, provided that their total usable area does not exceed 30% of the usable area of all buildings located on this land. If, however, it exceeds 30%, it is necessary to separate a part of the property into a new land and mortgage register. Moreover, in scope of investment on real property held in the perpetual usufruct, the changes were introduced to the Act of 21st August 1997 on real estate management, which provide that if the basis for the right to dispose of real estate for the construction purposes is a perpetual usufruct right, the incompatibility of the investent with the aim of perpetual usufruct cannot constitute a basis for issuing a decision rejecting the construction design and refusing a building permit. Besides, the provision of Article 73(2) of the act on real management has been amended. At present, if, after the land is granted for perpetual usufruct a permanent change in the manner of the property’s use takes place, resulting in a change of the purpose of perpetual usufruct, the investor is entitled to request changing the purpose. Such a request is also allowed if the property has not yet been developed but already there is a discrepancy between the currently defined purpose and the designation of the property, e. g. in the local plan or a zoning decision.
2. On 15 August 2019 regulations came into force, which will ensure that developers will not have to be afraid of an elevated fee for changing the purpose of perpetual usufruct right to the property designated for an investment.
All thanks to the limit introduced in the Act on Real Estate Management during the amendment of the Act on National Property Stock (Journal of Laws of 2019, item 1309). Both, the refusal by local authorities to grant a building permit in accordance with a local master plan or a zoning decision if the purpose indicated in the agreement establishing perpetual usufruct is not adjusted to the current investment project, as well as the fees charged without a clear legal basis, prompted the legislator to normalise this situation and set the maximum amount of fee, which will not exceed two times the previous annual fee for the perpetual usufruct.
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