On 1 July 2022, most of the provisions of the new Developers Act will come into force. One of the changes is to make the handover procedure for a residential unit or single-family house more detailed, and to introduce new rights for buyers. The new rules are particularly controversial among developers.
At present, handover of a residential unit or single-family house in Poland to the buyer takes place before transfer of title to the buyer, upon notification of completion of construction, with no objections raised by the competent authority, or on the basis of a decision issuing an occupancy permit.
During the handover, a protocol is drawn up in which the buyer may report any defects found in the unit or single-family house.
Within 14 days from signing of the protocol, the developer should deliver to the buyer a statement acknowledging the defects, or refusing to acknowledge the defects, with reasons for the refusal.
If the developer acknowledges the defects, it should cure them within 30 days of signing the protocol. The developer may also indicate another deadline for curing the defects along with a justification for the delay.
Handover under the new Developers Act
Under the new Developers Act (Act on Protection of Rights of Acquirers of Residential Units or Single-Family Houses and the Developers Guarantee Fund of 20 May 2021), handover of a residential unit or single-family house will still be carried out before the transfer of title, after notification of completion of construction, with no objection from the competent authority, or on the basis of a legally final decision issuing an occupancy permit. Still, during the handover, a protocol will be prepared in which the buyer will be entitled to point out defects.
However, in the new act, the parliament distinguished “material defects” and introduced the possibility of refusal to accept the unit or single-family house, withdrawal from the agreement, as well as substitute removal of defects at the developer’s expense.
Under the new rules, if a material defect is identified and the developer refuses to acknowledge it, the recipient will be entitled to refuse to accept the unit or single-family house.
If the developer acknowledges a material defect (which should be noted in the protocol), it will be obliged to cure the defect within 30 days from signing of the protocol. If it is not possible to cure the defect within 30 days, the developer will set an additional period. If the developer does not remove the material defect by that time, the buyer will be able to indicate an additional period, and if that deadline is also not met, the buyer will be able to withdraw from the contract.
Once the material defect has been cured, the parties will participate in a second handover. A second refusal to accept the handover on the grounds of a material defect (e.g. in the case of failure to sufficiently cure the defect) will require the buyer to present a construction expert’s opinion. If the construction expert determines the existence of a material defect, the buyer will be able to withdraw from the contract, and the costs of preparation of the opinion by the construction expert will be borne entirely by the developer.
In case of other defects, within 14 days from the signing of the protocol, the developer will provide the buyer with notice whether it acknowledges the defects or refuses to acknowledge the defects and the reasons for such refusal, on paper or in another durable medium. If the developer fails to do so within the specified period, it will be assumed that the developer acknowledges the defects. If the developer acknowledges the defects, it should cure them within 30 days of signing the protocol. If this is not possible, the developer may set an additional period, which should not, however, cause undue inconvenience to the buyer.
Importantly, if the developer fails to cure the defects by the new deadline or fails to set such a deadline, the buyer will be able to set a new deadline for the developer to cure the defects, and if that deadline is not met, can cure the defects at the developer’s expense. The regulation on substitute performance will only apply to the remaining defects.
Defects identified after handover
Under the new Developers Act, the regulations pertaining to the removal of defects identified during the handover will also apply to defects identified in the period after the handover but before transfer of title to the property to the buyer. The new act removes an existing loophole in the provisions regarding the identification of defects during this period.
Under the new Developers Act, a developer will have a maximum of three deadlines to cure material or other defects. If those deadlines are not met, the buyer will be allowed to:
- Withdraw from the contract in case of material defects
- Cure the defects at the developer’s expense in case of other defects.
Thus, buyers will gain influence on the pace and quality of the developer’s removal of defects reported in the handover protocol for a residential unit or single-family house. However, these entitlements may prove dangerous for developers, so it will be extremely important for them to verify the work executed by contractors in detail.
It should be noted that in the act, the parliament uses such terms as “material defect” and “undue inconvenience for the buyer,” which are not defined in generally applicable law or in the new act. Thus, interpretation of “material defect” will be based on the case law of the courts and the legal commentaries on warranties covered by the Civil Code. However, the grounds on which a defect may be considered “material” can be difficult to distinguish and interpret, especially for consumers. Therefore, there are likely to be interpretation disputes, difficulties in exercising buyers’ rights, as well as prolongation of the process of handover of residential units and single-family houses.
Karolina Dawidczyk, Real Estate practice, Wardyński & Partners