According to the Conversion Act, existing perpetual usufructuaries acquire ownership of real property if conditions set forth in the act are met. What are these conditions, and is perpetual usufruct of land converted into ownership of the land if the building on the land is subsequently designated for residential purposes?
Conversion of perpetual usufruct by operation of law
As of 1 January 2019, perpetual usufruct of land in Poland developed for residential purposes was transformed into ownership of such land. Land developed for residential purposes should be understood as real property developed exclusively with single-family residential buildings or multi-family residential buildings, where at least half of the number of units constitute residential premises, together with utility buildings, garages, other structures or installations enabling proper and reasonable use of the residential buildings.
This conversion was intended to be comprehensive. The enfranchisement covered all perpetual usufructuaries of land developed with residential buildings, including accompanying structures enabling proper use of the real property for residential purposes.
As provided in Art. 13(1) of the Act on Conversion of Perpetual Usufruct of Land Developed for Residential Purposes into Ownership of Such Land of 20 July 2018 (known as the “Conversion Act”), if after 1 January 2019 a residential building is handed over for use (within the meaning of the Construction Law) on land held in perpetual usufruct and developed for residential purposes (in accordance with the local zoning plan or land-use decision), the perpetual usufruct of that land is converted into ownership of the land as of the date the residential building is handed over for use.
The basis for disclosing ownership in the land in the land and mortgage register and in the register of plots is a certificate confirming the conversion, issued by:
- The head of the county (starosta) performing the task of government administration, for land owned by the State Treasury
- The director of the local branch of the National Support Centre for Agriculture (KOWR) or the director of the regional branch of the Military Property Agency (AMW), for land where State Treasury property rights are exercised by those agencies
- The head of the local commune (e.g. mayor), county board or province board, respectively, for land owned by local government units
- The director of the Housing Resources Management Board of the Ministry of the Interior and Administration, for land where State Treasury property rights are exercised by that entity.
Handover for use and change of use
Is conversion of perpetual usufruct to ownership also possible if the use of the building changes to residential purposes after 1 January 2019?
The Province Administrative Court in Warsaw ruled on this issue on 11 August 2020 (case no. I SA/Wa 351/20), based on the following state of facts.
As of 1 January 2019, a property was developed with a brick building with the function of “commercial and service buildings.” Thus, at that time it did not meet the statutory requirements for conversion of perpetual usufruct into ownership. Subsequently, the property was dedicated to residential use. Its users applied for a certificate confirming conversion of the perpetual usufruct into ownership, citing Art. 13(1)–(2) of the Conversion Act. They argued that a change of use of the building for residential purposes is analogous to handing over a building for use for residential purposes after 1 January 2019.
However, the public administration authorities found that this substantive provision only applies to situations where the building is residential in nature and is handed over for use after 1 January 2019. Therefore, they refused to issue a certificate confirming the conversion.
The administrative court held this decision to be correct. According to the court, when assessing fulfilment of the prerequisites for conversion, it is necessary to consider the factual and legal situation on 1 January 2019. Also, Art. 13 of the act could not be applied in this case. The court held that this provision contains a special regulation of delayed conversion and relates to conversion of perpetual usufruct into ownership after handing over a residential building for use. But as the court pointed out, the rules for application of this provision are analogous to application of the provision for conversion of perpetual usufruct under general rules. The only difference is the date of conversion of the perpetual usufruct of the land. In the case of delayed conversion, this is the date the residential building is handed over for use.
Currently, the Conversion Act states that:
- As of 1 January 2019, perpetual usufruct of land developed for residential purposes was converted by operation of law into ownership of such land
- If a residential building located on land in perpetual usufruct is handed over for use after 1 January 2019, the perpetual usufruct of that land is converted into ownership of the land on the date the residential building is handed over for use.
The act does not regulate the issue of conversion of perpetual usufruct to ownership in the case of land developed with buildings, where the method of use was subsequently changed to residential purposes.
The administrative court provided only a linguistic interpretation of the provisions, disregarding a purposive interpretation, which, in our opinion, would allow Art. 13 of the act to apply to a change in the manner of use of the building leading to the permanent use of the building for residential purposes. However, according to the above ruling, conversion is not permissible in such a situation. Therefore, only an amendment to the Conversion Act can make it possible in the future to convert perpetual usufruct into ownership in the case of a change in the use of a building to residential purposes.
Karolina Dawidczyk, Sylwia Moreu-Żak, attorney-at-law, Real Estate practice, Wardyński & Partners