By Urszula Makówka / TURCZA Law Firm
The acquisition of real estate by foreigners in Poland is subject to specific legal regulations, the understanding and correct application of which are critical to the success and validity of such transactions. The key legal framework is set out in the Act of 24 March 1920 on the Acquisition of Real Estate by Foreigners, which provides that, pursuant to Article 1(1), the acquisition of real estate by a foreigner requires a permit issued by the Minister of Internal Affairs and Administration (MSWiA).
Who Qualifies as a Foreigner?
Under the Act, a foreigner is defined as:
- a natural person who is not a Polish citizen;
- a legal entity with its registered office abroad;
- a partnership without legal personality, formed under the laws of another country by persons listed above;
- a legal entity or partnership without legal personality with a registered office in Poland, which is directly or indirectly controlled by the entities mentioned above.
Control is broadly defined and includes holding, either directly or indirectly, more than 50% of votes in the shareholders’ meeting or general meeting – even through security interests or contractual arrangements – as well as having a dominant position within the meaning of the Commercial Companies Code.
Exemptions from the Permit Requirement
The Act provides for several key exemptions from the requirement to obtain a permit. Notably, a permit is not required in the following cases:
- acquisition of real estate by nationals or entrepreneurs from countries that are parties to the European Economic Area Agreement or the Swiss Confederation;
- acquisition of real estate by statutory heirs (but not testamentary heirs, unless they also qualify as statutory heirs);
- transformation processes of commercial companies, as defined under the Commercial Companies Code.
Of particular importance is that the Act covers not only direct acquisitions of ownership or perpetual usufruct of real estate through legal transactions such as sale, gift, or exchange, but also indirect acquisitions. This includes capital transactions in which a foreigner acquires control over a Polish company that owns or holds perpetual usufruct of real estate.
Therefore, barring statutory exemptions, a permit is required for transactions involving the acquisition of shares or stock in a company owning real estate if such transactions result in the company becoming a foreign-controlled entity. In practice, failure to account for this indirect acquisition route is a frequent oversight among foreign investors.
Permit Application Procedure
The application for a permit must be submitted to the MSWiA along with a complete set of supporting documentation, as detailed in the Regulation of the Minister of Internal Affairs of 20 June 2012 on the scope of required information and documents.
The application must include:
- detailed identification of the foreign applicant;
- exact identification of the real estate;
- purpose of the acquisition;
- description of the planned investment;
- source of financing;
- documentation confirming the above information;
- justification of the statutory conditions for issuing the permit.
These statutory conditions include:
- existence of ties between the foreigner and the Republic of Poland (e.g., Polish origin, marriage to a Polish citizen);
- absence of any threat to national defense, state security, or public order;
- consistency of the acquisition with public policy and health considerations.
Additionally, the application must include:
- a written declaration from the seller expressing the intention to sell the property to the foreigner;
- in case of a company transformation, the agreed merger or division plan, including proposed resolutions and draft agreements or statutes for the acquiring, newly formed, or spun-off company.
The application is subject to a stamp duty.
Administrative Proceedings
The submission of the application initiates administrative proceedings. During the procedure, the Minister may:
- request further documents or information;
- verify whether the acquisition poses risks to national interests;
- consult other government bodies, professional organizations, or state institutions.
The decision is issued in the form of an administrative decision. A positive decision constitutes a permit identifying the buyer and seller and specifying the subject of the transaction. The permit remains valid for two years.
The proceedings follow the Administrative Procedure Code, which stipulates a general deadline of two months (Article 35). However, this period does not include time required for document submissions or official deliveries. In practice, the permit issuance process may take approximately six months.
Promise of a Permit (Promesa)
The Act also provides for the issuance of a promise of a permit (promesa), which is a binding commitment to issue a permit in the future, provided that the factual and legal circumstances do not change. A promesa is valid for one year and is particularly useful in complex or time-sensitive transactions requiring due diligence, financing arrangements, or fulfillment of conditional obligations. The application procedure for a promesa mirrors that of the permit itself.
Legal Consequences of Failing to Obtain a Permit
Acquiring real estate – or shares in a real estate-owning company – without the required permit renders the transaction null and void by operation of law. This can have serious consequences, especially where the investor undertakes further obligations based on the invalid acquisition. It is also important to note that obtaining a permit does not override other statutory restrictions, including those stemming from the Agricultural Land Management Act or local zoning plans.
Legal Due Diligence and Professional Involvement
Given the complexity of the legal framework, a thorough legal due diligence is highly recommended prior to any transaction involving real estate or shares in real estate-owning companies. Legal counsel is particularly valuable when preparing the permit application, especially in corporate restructuring scenarios involving mergers or divisions that require comprehensive documentation.
