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When it comes to buying real estate in Poland, making sure you fully grasp the property sales contract is essential.
Indeed, not fully understanding the document you will sign can lead to financial losses, including the forfeiture of deposits, payment of penalties, unexpected costs, legal expenses, and potential poor investment decisions.
We've heard countless stories of people making costly mistakes when signing their property agreement in Poland. We want to help you avoid the same experience.
We'll give here a very brief overview regarding the property sales contract in Poland ; if you want a full checklist, please check our property pack for Poland.
What is the Umowa Przedwstępna / Umowa Kupna-Sprzedaży Nieruchomości in Poland?
In Poland, the property purchase agreement for real estate transactions is known as the "umowa przedwstępna" (preliminary agreement) or "umowa kupna-sprzedaży nieruchomości" (real estate purchase-sale agreement).
This document is a key part of the property buying process and is legally binding.
The preliminary agreement, "umowa przedwstępna," is often signed before the final purchase-sale agreement.
It outlines the terms and conditions of the sale, including the price, property details, and any conditions that must be met before the final sale.
It's a commitment by both the buyer and the seller to proceed with the transaction under agreed terms.
This agreement is particularly important because it provides a degree of security for both parties, the seller is assured that the buyer is serious, and the buyer gets a guarantee that the property won't be sold to someone else.
A deposit, typically around 10% of the property's value, is usually paid by the buyer when this preliminary agreement is signed. This deposit serves as a security for the seller and is usually forfeited if the buyer backs out without a valid reason.
If the seller backs out, they may be required to return the deposit in double.
For international buyers or non-residents, there are some additional considerations.
Non-EU citizens often need a permit to purchase property in Poland, and this process can involve additional paperwork and time. It's crucial for international buyers to be aware of these requirements and plan accordingly.
In comparison to other countries, Poland's real estate transaction process is quite standardized, but the necessity of a permit for non-EU residents is a notable difference.
Additionally, the legal implications and the role of the deposit in the preliminary agreement might vary from other jurisdictions.
The final purchase-sale agreement, "umowa kupna-sprzedaży nieruchomości," is signed at a later stage, typically after all conditions in the preliminary agreement have been met and necessary approvals (like the permit for non-EU residents) have been obtained.
This final agreement is signed in the presence of a notary and officially transfers ownership of the property.
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What should be included in the property purchase agreement in Poland?
In Poland, the property purchase agreement for real estate is governed by the Civil Code (Kodeks Cywilny).
This agreement, crucial for the legality and validity of the transaction, must include specific elements and can also encompass additional clauses based on the parties' agreement.
Mandatory clauses in the property purchase agreement typically include:
| Mandatory Clause | Description |
|---|---|
Identification of the Parties |
Full names, addresses, and identification numbers (like PESEL for Polish residents) of both the buyer and seller. |
Property Details |
A precise description of the property, including its location, size, and any relevant legal identifiers (like the land and mortgage register number). |
Transaction Price |
The agreed-upon purchase price for the property. |
Payment Terms |
Details on how and when the payment will be made. |
Transfer of Ownership |
Conditions under which the ownership will be transferred from the seller to the buyer. |
Legal Status of the Property |
Declaration of the legal status, confirming there are no legal impediments or encumbrances on the property. |
Date of Agreement |
The signing date of the agreement. |
In addition to these mandatory clauses, parties often include additional clauses tailored to their specific situation.
These can cover aspects like:
- Clauses regarding the responsibility for any property defects discovered after the sale.
- Stipulations for financial penalties if either party fails to uphold their end of the agreement.
- Conditions that must be met before the transaction can be completed, like obtaining necessary permits or approvals.
Contingencies can also be part of the agreement. Common contingencies include the buyer obtaining financing, the property passing inspection, or the sale of the buyer’s current home.
Authentication of the agreement in Poland requires a notary. The final purchase agreement must be signed in the presence of a notary to be legally binding and for the transfer of ownership to be recognized.
This notarization also ensures that the agreement meets all legal requirements and that both parties fully understand their obligations and rights.
Real estate agents in Poland may assist in preparing the agreement and facilitating negotiations, but they do not have a direct legal role in the agreement's creation or execution.
What's the signing process like?
In Poland, the process of signing a property purchase agreement is structured and involves several key steps.
The agreement is bilateral, meaning it must be signed by both the buyer and the seller. Either party can consist of multiple people.
For instance, a married couple might jointly sell a property, or a group of investors might purchase a property together. In such cases, all individuals involved must sign the agreement.
Both parties need to provide specific documents and information.
For the seller, this includes proof of ownership, a land and mortgage register extract, and personal identification documents. The buyer typically needs to present personal identification documents and, if applicable, proof of financing (like a mortgage approval).
Here are the steps for signing:
| Step | Description |
|---|---|
Preparation |
Before the signing, both parties must gather all required documents and information. This may include obtaining up-to-date extracts from the land and mortgage register and ensuring all personal identification is valid. |
Drafting the Agreement |
The property purchase agreement is drafted, often with the assistance of a real estate agent or a legal representative. This draft includes all mandatory clauses and any additional agreements between the parties. |
Review and Finalization |
Both parties review the agreement, potentially with their legal advisors, to ensure accuracy and understanding of all terms. |
Signing |
The final agreement is signed in the presence of a notary. This is a crucial step as the notary’s involvement validates the legality of the document. |
Physical presence is generally required for signing the agreement, especially due to the involvement of a notary.
However, if one of the parties cannot be physically present, they can grant power of attorney to someone who can sign on their behalf.
Remote signing options might be available, but these usually still require some form of official representation at the notary’s office.
There isn’t a standard deadline for signing the property purchase agreement. The timing depends on various factors, such as the readiness of both parties, completion of preliminary steps like property inspection, and obtaining necessary documents.
Once signed, the contract remains valid until all obligations have been fulfilled, typically culminating in the transfer of property ownership. The agreement may specify a completion date by which all conditions must be met.
After signing, the agreement and the change of ownership must be registered with the relevant local authorities. This is usually done by submitting the notarized agreement to the land and mortgage register.
This registration is essential for the legal transfer of property ownership.
Any amendments to the contract after signing are possible but must be agreed upon by both parties and typically require additional notarization
It’s crucial that any changes are formally documented to maintain the legality of the agreement.
Completing all necessary paperwork and approvals can vary in time, usually ranging from a few weeks to several months.
Factors influencing this timeframe include the speed of obtaining financing, completing any required inspections, and the efficiency of local authorities in processing the registration.
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How is the payment handled when signing a property purchase contract in Poland?
In Poland, understanding the financial aspects of a property purchase agreement is crucial for both buyers and sellers.
Here's a detailed look at what you need to know.
When you sign the sales agreement, you're typically required to pay a down payment. This is also referred to as a deposit or "zaliczka" in Polish.
The down payment is often around 10% of the property's sale price, but this can vary. It's a significant sum, intended to secure the property and show your commitment to the purchase.
Besides the down payment, there may be additional costs at this stage, such as notary fees, real estate agent fees (if applicable), and any legal fees if you're consulting a lawyer.
The payment is usually made directly to the seller, but in some cases, it might be held in an escrow account, especially if a real estate agent or legal representative is involved. This provides an added layer of security for the transaction.
The due date for the down payment is typically outlined in the sales agreement. It's usually due upon signing the agreement but can be scheduled for a later date, depending on what both parties agree upon.
There are tax implications to consider.
Property transfer taxes, known as PCC (podatek od czynności cywilnoprawnych), are usually required in Poland for real estate transactions. The buyer often bears this cost, and the rate is generally 2% of the property value.
You can negotiate the down payment amount with the seller. This is part of the overall negotiations surrounding the purchase agreement.
If the sale falls through, the down payment's refundability depends on the terms outlined in the agreement. If the buyer backs out without a justified reason, they risk losing this deposit.
If there's a failed inspection or financing contingency and these were stipulated in the agreement, the down payment may be refundable.
Using a mortgage for the down payment is uncommon. Usually, the down payment is expected to come from your personal funds, demonstrating your financial commitment and stability to the seller.
An attorney or real estate agent can help facilitate the payment process. They ensure that all legal requirements are met and that the transaction is executed smoothly. Their involvement can add a level of trust and professionalism to the transaction.
You should always request a receipt or confirmation of payment when making the down payment. This serves as proof of the transaction and is essential for your financial records.
For the seller, capital gains tax may apply, especially if the property isn't their primary residence. For the buyer, besides the property transfer tax, ongoing property taxes and any mortgage-related taxes or fees need to be considered.
What are the potentials risks and pitfalls?
You might be interested in reading our article about the common risks and pitfalls surrounding a property transaction in Poland.
Understanding the risks and pitfalls associated with property purchase agreements in Poland is vital for both buyers and sellers.
In Poland, withdrawing from a property purchase agreement is generally not straightforward once it has been signed, especially if it has been notarized. Both parties are legally bound to the terms of the agreement.
Unlike some other countries, there is typically no cooling-off period in Polish real estate transactions once the agreement is signed. This means that after signing the agreement, you cannot simply change your mind and back out without potential consequences.
If a party wishes to withdraw, they generally need a valid motive, which should be stipulated in the agreement.
For instance, a buyer may back out if they are unable to secure financing, but this contingency must be included in the agreement.
If one party fails to fulfill their obligations as outlined in the agreement, they face potential legal and financial consequences. This could include forfeiting the deposit or facing a lawsuit for breach of contract.
The penalties for withdrawing from the agreement without a valid reason can be severe.
For the buyer, it often means losing the down payment. If the seller withdraws without cause, they may be required to return the down payment in double, or face legal action.
In some countries, there is a cooling-off period during which the buyer can back out without penalty. The strictness of the Polish system, with no cooling-off period and potential heavy penalties, is a notable difference.
Buyers should be aware of the risk of losing their deposit if they cannot complete the purchase. Sellers face the risk of legal action or financial penalties if they fail to honor the agreement.
Both parties should ensure they fully understand the terms and have the means to fulfill their obligations.
Disputes arising from the agreement are typically resolved through negotiation or legal proceedings. It's common for disputes to be settled out of court to avoid the costs and time involved in legal action.
If defects or issues with the property are discovered after signing, the resolution depends on the terms of the agreement.
If the seller knowingly hid defects, they could be liable for damages. However, proving this can be challenging.
Disputes are not uncommon in real estate transactions. They often arise from misunderstandings or unmet expectations regarding the property's condition, terms of the agreement, or delays in fulfilling obligations.
In real-life scenarios, disputes have been resolved through renegotiation of the sale terms, financial compensation, or, in some cases, legal action resulting in the nullification of the sale or monetary penalties.
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.