The Warsaw Voice » Law » Monthly - August 17, 2005
SALANS
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Converting Perpetual Usufruct Into Ownership
   
On July 29, 2005, the Sejm approved the Senate's amendments to the Act on Converting Perpetual Usufruct into Ownership Title to Real Estate. The purpose of the law is to enable selected holders of perpetual usufruct to convert perpetual usufruct into full ownership (fee simple) upon request. By accepting the version proposed by the Senate, the legislature abandoned the idea of a complete liquidation of perpetual usufruct rights.

Perpetual usufruct is similar to ownership rights in the sense that it gives one the right to use land to the exclusion of other persons, and a perpetual usufructor, just like an owner, may sell the land or take out a mortgage against it. Notwithstanding the above, the State Treasury or the local municipality continues to be the owner of a perpetually usufructed plot of land; perpetual usufruct rights are limited in time and last only for 99 years with an option to extend this period; perpetual usufructors pay an annual fee to the land owner and there are certain other limitations on the use of land by the perpetual usufructor.

The right to demand conversion of perpetual usufruct rights into ownership title will be vested in the following entities:
1) natural persons, including their legal successors, who on the effective date of the act will be perpetual usufructors of:
a) residential real estate or real estate developed with garages or designated for such purposes;
b) agricultural real estate, except for that intended for purposes other than agriculture.
2) natural and legal persons (and their legal successors) who are owners of apartments in buildings built on perpetually usufructed plots, including those who purchased such rights following the effective date of the act.
3) housing cooperatives (or their legal successors) which own residential buildings or garages on the effective date of the act.

Applications for transformation of a perpetual usufruct right into full ownership will be considered by the county administrator (starosta) if the real estate in question is owned by the State Treasury; or mayors of villages, towns or cities or, alternatively, the executive board of a county or province if the real estate is owned by local government authorities. Conversion of perpetual usufruct rights into an ownership title will take place upon the conversion decision becoming final and non-appealable. Conversion applications may be filed by Dec. 31, 2012.

An entity acquiring an ownership title to real estate by conversion of perpetual usufruct will be required to pay a fee to the existing owner (i.e. the State Treasury or local government unit). The fee will be calculated as the difference between the market value of the real estate and the perpetual usufruct fees already paid. The fee can be paid in installments, and discounts will be available to owners of agricultural real estate. Conversion will be free of charge for persons who were given perpetual usufruct rights in lieu of real estate expropriated or taken over by the State Treasury or on the grounds of the so-called Warsaw Decree (issued right after World War II to nationalize real estate in Warsaw). The president of Poland has 21 days to veto the act. Unless the act is vetoed, it will enter into force 30 days following publication.


Bartosz Clemenz
is a senior associate at SALANS Warsaw office. He specializes in environmental protection, real estate and mergers & acquisitions.