On 8 June, the President of the Republic of Poland signed an act amending the so-called Act on Real Estate Developers. Will the new regulations simplify the investment process or, on the contrary, will they be a source of additional burdens for developers?
Developer Guarantee Fund (DGF)
The new Development Act provides for the establishment of a completely new institution – the DGF. Thus, the developer is obliged to pay a contribution to the fund from each payment made by the buyer. The contribution amounts to 1% of the value (in the case of open housing trust accounts) or 0.1% of the value (in the case of closed housing trust accounts). Thus, the developer, after receiving the payment from the purchaser, will be obliged to calculate the amount of the contribution on his own within 7 days and transfer it to the bank, which will pay the received funds to a separate account of the DGF in the Insurance Guarantee Fund.
The establishment of the DGF institution arouses many controversies and reservations. However, the legislator indicates that there is a need to accumulate within the DGF an amount of approximately PLN 140 million per year, which would allow covering possible bankruptcies of several developers during one year.
Changes in reservation agreements under the New Real Estate Development Act
Trust accounts – what’s new?
The New Development Act also provides for changes in the operation of trust accounts. Thus, payments made by purchasers to developers will depend on the actual progress of work on the site. If the developer completes a particular stage of the construction works and informs the buyer about it, only the fulfillment of the above obligation will oblige the buyer to make another payment to the trust account.
Additionally, a deadline has been set for making withdrawals from the trust account in favor of the developer. Not earlier than after 30 days from the date of execution of the developer agreement or the ownership transfer agreement.
Banks will also become competent to inspect the performance of the investment by the developer. They will be able to do that, among others, by establishing the status of arrears in payment of social security contributions. Additionally, they will be able to verify whether the developer has paid the contributions to the Developer Guarantee Fund.
Amendments – as of when?
The changes resulting from the amendment of the Act on the developer will not be effective immediately. They will not enter into force until 12 months from the date of the announcement. However, the provisions introducing a new institution, i.e. the Developer Investment Fund, will take effect already after the lapse of 30 days from the date of announcement of the Act.