Transfer of a building permit without the consent of the prior investor
Since 19 September 2020, acquirers of real estate have been able to transfer a building permit to themselves without the consent of the prior investor. Does this change facilitate implementation of development projects by property buyers?
Under Art. 40(1) of the Polish Construction Law, the authority that issued a decision granting a building permit is required, upon consent of the party to whom the decision was issued, to transfer the decision to another entity if the new entity accepts all the conditions set forth in the decision and submits a declaration that it holds the right to use the real estate for construction purposes.
The Act of 13 February 2020 Amending the Construction Law and Certain Other Acts, which entered into force on 19 September 2020, added Art. 40(1a), which provides that such consent is not required if, after issuance of the decision granting a building permit, the ownership or right of perpetual usufruct of the real estate covered by the decision passed from the prior investor to the new investor applying for transfer of the building permit.
According to the justification for the draft amendment, “It often happens that a person acquires real estate (through sale or auction) along with a structure under construction, but during the acquisition of the property, unwittingly, unfortunately does not obtain consent to transfer the decision granting the building permit. When the acquirer realises that to continue construction and commence occupancy of the structure, it must conduct a transfer of the building permit to itself (for which the consent of the prior investor is required), problems can arise. The prior investors may not wish to consent, or demand additional fees for such consent, and sometimes there are situations where the investor cannot be reached…. It should be presumed that the aim of the sale of real estate on which construction has already begun is to acquire the real estate together with the construction and the rights to carry it out.”
Under the literal wording of Construction Law Art. 40(1a), this provision applies only when the prior investor is also the prior owner or perpetual usufructuary of the property. However, it often happens in practice that the investor is an entity that holds the right to use the real estate for construction purposes, but the right arises under a different legal basis than ownership or perpetual usufruct. In that situation, Art. 40(1) of the law will still apply, requiring the prior investor’s consent to transfer of the building permit.
It should be borne in mind that a decision granting a building permit also involves approval of the construction design, execution of which may require acquisition of the economic copyright from the prior investor. The construction documentation may contain legally protected data and information. Execution of the project by a new entity may be possible, but without resolving these issues the investor must face the risk of claims for infringement of these rights.
Nonetheless, abandoning the requirement to obtain the consent of the prior investor to transfer of the decision granting a building permit to the acquirer of the real estate will facilitate the issuance by architectural administrative authorities of decisions on transfer of building permits and continuation of development projects by new investors.
Iwona Kasperek, Real Estate Development practice, Wardyński & Partners