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The Warsaw Voice » Real Estate » April 16, 2008
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Watchdog Probes Developer Contracts
April 16, 2008   
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Housing developers prepare standard form contracts that obligate them to build apartments, create separate titles for them and transfer these to the purchaser. Having done so, the developer becomes subject to consumer protection regulations in addition to its own industry code of good practice.

The Office of Competition and Consumer Protection (UOKiK) is an administrative body that seeks to eliminate any practices detrimental to consumers. To this end they examine standard form contracts prepared by developers. The office is especially concerned with eliminating unlawful, onerous and unconscionable ("abusive") terms from such contracts. The UOKiK can order developers to abandon practices deemed abusive and/or impose financial penalties.

Polish law prohibits practices detrimental to consumers. This includes any contractual terms listed in a register of abusive clauses in standard form contracts. Terms are entered into this register following judgments from the Court of Competition and Consumer Protection. Applications to have a clause deemed abusive can be initiated by consumers themselves or by the UOKiK president. Should the court find in favor of the plaintiff then the judgment spells out those terms deemed abusive. These are then unenforceable in the contested contract and their use is proscribed in any future contract.

Should the examination of a standard form contract reveal clauses similar or identical to those in the register, the UOKiK president may initiate explanatory proceedings and seek clarification from the developer. If the contract is found to contain proscribed terms, the UOKiK president may simply order the developer to delete them and refrain from using them in future. Failure to comply may lead to a judgment deeming the contested clause detrimental to consumers and an order that it should not be used again.

The UOKiK president may also impose a financial penalty and order the developer to submit a declaration, several times if need be, whose form and contents are set out in the judgment. The president may also order the decision to be published, with the costs to be borne wholly or partially by the developer.

Developers engaging in practices judged detrimental to consumers, however unintentionally, are liable to fines of up to 10 percent of their revenue for the preceding financial year. The UOKiK president may levy a maximum fine of 200 times the average Polish monthly salary on those developers that earned no revenue in the preceding financial year. This is currently around zl.500,000.

Our experience shows that it is extremely difficult to draw up a standard form contract which is free of abusive clauses and in no way detrimental to consumers. The register currently lists nearly 1,500 abusive clauses. Avoiding these and abiding by the civil law, building laws and ownership laws is like negotiating a maze. The fact that many common commercial practices make use of contractual terms frowned upon by anti-trust courts complicates this task even further. For example, terms that disallow purchasers to rescind contracts involving price adjustment due to changing VAT rates are expressly forbidden, as are those that do not allow purchasers to rescind contracts where the surface area of the apartment differs from that stipulated in the contract.

Nor can developers reserve the right to postpone the completion deadline, the delivery date or the date of transferring title for reasons such as inclement weather. Developers cannot consider any letter mailed to a purchaser at the address given in the contract as having been delivered. These clauses are all in common use but developers need to be aware that their use may incur the wrath of the UOKiK.

The UOKiK published a report based on its inspection of standard form developer contracts in July 2007 that may serve as a helpful guideline in drawing them up. This paper contains a detailed analysis of contracts used by developers in Poland and discusses the most frequent legal errors. It can be very useful in helping ensure that the guidelines are adhered to and all Polish consumer protection requirements are met.

Anna Malicka, lawyer, Marcin Płoszka, legal trainee

LENGIEWICZ WROŃSKA BEREZOWSKA I WSPÓLNICY Kancelaria Prawnicza s.c. l tel. (+48-22) 826 30 33, 828 14 73; e-mail: lwb@lwb.com.pl
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