Buying your own apartment or house directly from a developer is one of the most important events in life. The real estate market in Poland is developing incredibly dynamically – as data from the first half of 2024 show, one of the leading developers in the country concluded as many as 1,289 developer and preliminary agreements during this period, representing a 13% increase compared to the same period last year.
The culmination of the process of searching for your dream home is the signing of the appropriate documents. It is worth knowing that buying real estate from a developer is a two-stage process based on two separate legal acts concluded in the form of a notarial deed. The first and crucial step, guaranteeing the security of a primary market transaction, is signing the developer agreement (umowa deweloperska). In turn, the second step, crowning the entire process after the construction is completed, is concluding the ownership transfer agreement (umowa przeniesienia praw własności). In the article below, I explain step-by-step what these procedures look like, what rights you are entitled to, and what costs you must anticipate when visiting my firm.
What Exactly is a Developer Agreement?
From a legal standpoint, a developer agreement is a form of commitment under which the developer declares to construct a building or separate a residential premises from the entirety of the real estate, and then transfer the ownership right to the buyer. This document formalizes the obligations of both parties – the investor to hand over the finished premises, and the buyer to pay the agreed price.
Polish law regulates these matters in detail. Initially, these rules were based on the Act of September 16, 2011. Currently, however, the foundation of buyers’ security is the so-called new Developer Act – the Act of May 20, 2021, on the protection of the rights of a buyer of a residential premises or a single-family house and the Developer Guarantee Fund. The new regulations entered into force on July 1, 2022, and significantly strengthened the position of consumers. A developer agreement is mandatory when you are acquiring a residential premises or a house from a developer before the construction is completed.
New Regulations – How Do They Protect the Buyer?
The new Developer Act introduced a series of innovative protective mechanisms. In addition to maintaining the mandatory form of a notarial deed, these regulations introduce the following guarantees:
- They oblige the developer to deliver an information prospectus to every person acquiring real estate from them.
- They introduce the obligation to calculate and transfer contributions to the newly created Developer Guarantee Fund (DFG).
- They guarantee the segregation of buyers’ payments from the developer’s general bankruptcy estate into a separate estate, from which buyers will be satisfied first in the event of the company’s bankruptcy.
- They oblige the bank maintaining the account to scrutinize the progress of construction work.
- They introduce changes to the procedure for paying out funds accumulated in housing escrow accounts.
- They change the rules for the handover of the apartment, including the introduction of the institution of so-called substitute performance (meaning you can have defects fixed at the developer’s expense if they fail to do so).
- They give the buyer the right to refuse the handover of the premises if they find significant defects and the developer refuses to acknowledge them in the protocol.
What Must a Developer Agreement Contain?
As a civil law notary, I personally ensure that the content of the signed deed is fully compliant with statutory requirements. A properly drafted document is extensive because it must precisely regulate every aspect of the investment. According to Art. 35 sec. 1 of the Act, a developer agreement includes, in particular:
- Specification of the parties, place, and date of concluding the developer agreement.
- The purchase price of the rights arising from the developer agreement.
- Information about the real estate on which the development project or investment task is to be carried out.
- Specification of the location and essential features of the single-family house or building.
- Specification of the location of the residential premises within the building.
- Specification of the usable floor area of the residential premises or single-family house, the area and layout of the rooms, and the scope and standard of finishing works.
- The deadline for transferring the rights arising from the developer agreement to the buyer.
- The buyer’s commitment to fulfilling the financial obligation arising from the developer agreement.
- The amount, deadlines, and method of making payments to the housing escrow account.
- Information regarding the housing escrow account and the calculation and transfer of contributions to the Developer Guarantee Fund.
- The building permit number, designation of the authority that issued it, and information on whether it is final or has been appealed.
- The start and end dates of the construction works.
- Specification of the conditions for withdrawing from the developer agreement.
- Specification of the amount of interest and contractual penalties for the parties to the developer agreement.
- Indication of the method for measuring the usable floor area of the residential premises or single-family house.
- The buyer’s declaration of having received the information prospectus along with attachments.
- The deadline and method of notifying the buyer about the handover of the residential premises or single-family house, and the handover date.
- The developer’s obligation to construct the building, establish separate ownership of the premises, and transfer it to the buyer.
- Information on the conclusion of a reservation agreement and the reservation fee amount, or the lack of such an agreement.
Before you sign, I always advise clients to pay special attention to the payment schedule, investment completion deadlines, contractual penalties for potential delays, and conditions for price changes (e.g., in the event of a change in the final floor area of the premises or the VAT rate).
Differences: Developer Agreement vs. Preliminary Agreement
I am often asked about the differences between a developer agreement and a preliminary agreement. These differences are fundamental:
- Subject of the agreement: A developer agreement concerns an object that is yet to be built. A preliminary agreement (pre-sale), on the other hand, usually concerns an object that already exists.
- Purpose: A developer agreement directly obligates the developer to build and transfer the ownership of the premises. A preliminary agreement is merely a declaration by the parties that they will sign a promised (final) agreement in the future.
- Financial security: With a developer agreement, the investor is obliged to set up a housing escrow account (MRP), which protects the buyer’s funds in case of the developer’s bankruptcy or withdrawal from the agreement.
- Form: A developer agreement absolutely requires the form of a notarial deed. A preliminary agreement can, but does not have to, be concluded in such a form.
In practice, at an early stage of an investment (e.g., before the buyer secures a mortgage), parties most often conclude a reservation agreement, which involves paying a fee and is much less formalized. However, you must remember that a preliminary agreement does not replace a developer agreement.
Procedure at the Notarial Firm Step by Step
Concluding an agreement before a notary follows a strictly defined, transparent procedure:
- Both parties to the transaction appear at the notarial firm with a complete set of required documents.
- The notary drafts the notarial deed based on the agreement template provided by the developer. As a person of public trust, I meticulously verify this template for legal compliance.
- During the meeting, the notary reads the content of the agreement, clarifies any doubts, and ensures that both parties fully understand the consequences of the signatures they are providing.
- After signing, each party receives an official extract of the notarial deed.
For the procedure to take place, the developer must submit complete documentation in advance, including the information prospectus for the investment, a final building permit, and extracts from the property’s land and mortgage register.
What if the Developer Delays the Handover of the Property?
To be clear from the start, failing to meet the deadlines stipulated in the notarial deed entails consequences for both parties, not just the developer. If the developer is late in handing over the property, the buyer has the right to demand interest for the delay and, in specific cases, to demand a lump-sum compensation in the form of contractual penalties. If the investor evades payment, the matter can be taken to court. This mechanism works both ways – the developer can also claim interest if the buyer is late with payments.
Costs of the Developer Agreement – Division of Fees
The financial aspect is extremely important for buyers. The law in this area is unambiguous and very favorable to consumers. According to Art. 40 sec. 2 of the new Developer Act, the notary’s remuneration for all actions performed in connection with concluding the developer agreement, the costs of drafting extracts of the notarial deed, and the court costs in the land and mortgage register proceedings are borne in equal parts by the developer and the buyer. This means that you only pay half of the bill from the notarial firm.
The amount of fees for the services I provide is precisely regulated by the ordinance of the Minister of Justice on the maximum rates of the notarial fee. Despite the existence of upper limits, each time I determine the total cost of the service in a highly individualized manner, based on a thorough analysis of the documentation you provide.
The following must be added to the costs:
- A fee for extracts of the notarial deed in the amount of PLN 6 for each commenced page.
- VAT (Goods and Services Tax) at a rate of 23%, which is applied to the notary’s remuneration.
When buying an apartment from a developer, we are dealing with two legal acts and, consequently, the necessity to sign two agreements before a notary: the developer agreement and the ownership transfer agreement. In both cases, the basic fee limits apply based on the property value:
- PLN 100 for an apartment value up to PLN 3,000,
- PLN 100 + 3% of the surplus over PLN 3,000 for a value above PLN 3,000 up to PLN 10,000,
- PLN 310 + 2% of the surplus over PLN 10,000 for a value above PLN 10,000 up to PLN 30,000,
- PLN 710 + 1% of the surplus over PLN 30,000 for a value above PLN 30,000 up to PLN 60,000,
- PLN 1,010 + 0.4% of the surplus over PLN 60,000 for a value above PLN 60,000 up to PLN 1,000,000,
- PLN 4,770 + 0.2% of the surplus over PLN 1,000,000 for a value above PLN 1,000,000 up to PLN 2,000,000,
- PLN 6,770 + 0.25% of the surplus over PLN 2,000,000, but not more than PLN 10,000 or PLN 7,500 (for the 1st tax group) for an apartment value above PLN 2,000,000.
Under Polish regulations, for an ownership transfer agreement, the apartment buyer bears notarial costs equal to ½ of the calculated base value. For the notarial deed of the developer agreement, the apartment buyer pays a fee equal to ¼ of the calculated base value, and the developer pays the other quarter.
It is also worth keeping in mind other transaction costs, such as the down payment or earnest money required by developers at the initial stage of the investment. Real estate on the primary market itself is subject to an 8% VAT rate.
Example Calculation of Notarial Costs for an Apartment Worth PLN 850,000
Since all of this looks complicated, let’s calculate together the expenses you will incur at the notary when buying an apartment worth PLN 850,000 from a developer. I have prepared a clear simulation for you based on the maximum statutory rates. Please remember, however, that I always determine the final amount of the notarial fee with you individually, after thoroughly analyzing your case’s documentation.
Phase One – Concluding the Developer Agreement At this stage, you are protected by the provisions of the new Developer Act, which mandate a fair division of fees. This means that you split all notarial costs and court fees half-and-half with the developer:
- Notarial fee: PLN 2,085 net – which, after adding 23% VAT, amounts to PLN 2,564.55 gross,
- Court fee: PLN 150 (a fixed fee for entering your claim into the land and mortgage register),
- Cost of extracts of the notarial deed: approximately PLN 100 gross (the final amount depends on the physical volume of the agreement, as the statutory rate is PLN 6 net for each commenced page).
Your financial share: After jointly dividing the above costs with the developer, your actual expense during your first visit to the firm will be approximately PLN 1,410.
Phase Two – Ownership Transfer Agreement When construction comes to an end and you successfully receive the keys to your new apartment, we meet at the firm for a second time to finalize the transaction. The costs of concluding this final agreement are now borne entirely by the buyer:
- Notarial fee: PLN 2,085 net – meaning PLN 2,564.55 gross,
- Court fee: PLN 200 (a fixed fee for entering the ownership right into the newly established land and mortgage register for the premises),
- Cost of extracts of the notarial deed: approximately PLN 100 gross.
Your financial share: When finalizing the purchase and signing the ownership transfer agreement, your expense will come to approximately PLN 2,865.
A developer agreement is a complex document, which is why I encourage you to ask questions during your visit to my firm. I will gladly explain to you in a simple and understandable way how to interpret individual provisions, ensuring the highest possible legal security for the entire transaction.