New developer regulations from July. This is changing for home and apartment buyers

This is the first major change in ten years. The “New Construction Act” imposes a number of obligations on developers.

As stated by Małgorzata Wełnowska, senior real estate analyst at Cenatorium, the change will increase buyers’ sense of security. The basic change is a new form of buyer rights protection in the form of the Developer Guarantee Fund, which will guarantee buyer payments.

House prices up

However, developers are concerned about the amount of the fee. – The contribution-financed Development Guarantee Fund caused the most discussion and controversy in the environment because of its amount, which is 0.1-1 percent. depending on the type of escrow account – says Krzysztof Adamski of the Housing Platform. – And also the provision according to which each buyer of the property of the developer pays such a premium with subsequent installments and the amount will not be refunded in case of withdrawal from the developer contract – he adds.

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This means that the additional costs incurred by the company, at least in part, are passed on to buyers. – NAccording to estimates, the new developer law will increase the price of flats by 3-5%, which potential buyers probably won’t like. We don’t see the relationship between increasing existing buyer protection and increasing sales – says Krzysztof Adamski.

In his opinion, as the industry looked warmly at the buyer protection issue, lawmakers were approaching it the wrong way, and at a “fatal” moment, as WIBOR grows, there is war behind the fence, the government’s subsidy program has been delayed, all this plus a change in regulations, this everything – according to developers – collapsed so far growing sales.

During the parliamentary work on the new law, analyzes from the Office of Competition and Consumer Protection were cited, which point to the bankruptcy of 150 developers during the period of the previous developer law (2012-2019), says Krzysztof Adamski.

As Adamski explains, according to the May report of the Polish Developers Association, there were seven such bankruptcies, which is notable in the case of six investments, customer claims for building construction and transfer of ownership. Regulations have already introduced a new reality.

– In principle, the Development Guarantee Fund of the Insurance Guarantee Fund serves to cover all losses of the customer, including: in the event of bankruptcy of the developer making the investment or the bank holding the blocked account or failure to repay the money paid by the customer paid money in the event of contract termination – explains Krzysztof Adamski.

Reservation agreements

Another important change introduced by the new law concerns reservation agreements. It must be in writing, otherwise null and void. † It clearly states the amount of the booking fee and the conditions for their return. The booking costs amount to a maximum of 1%. gross sales prices – explains Małgorzata Wełnowska.

He adds that some provisions of the law, such as those regarding reservation agreements or receiving investments prior to transfer of ownership to the buyer, also apply to other players in the market, such as pinball machines.

– The legislator defined, among other things, that if a potential buyer receives a negative credit decision, the developer is obliged to repay the reservation costs paid. Such a solution will affect the comfort of closed contracts, especially in times of rampant inflation and cyclical rate hikes, adds the Cenatorium expert.

Krzysztof Adamski adds another obligation. The information prospectus is now required for the reservation agreement, and not until now – only for the developer agreement.

Another problem concerns repairs. If the changes are not relevant, the developer will bear the costs of removing the defects. If they are significant, this gives a reason to dissolve the agreement.

What will change in the market as a result of the new regulations?

They will increase their operating costs. – Some development companies that have had or applied for building permits, tried to go on sale before July 1. Therefore, at the end of June, we saw an increase in supply – says Małgorzata Wełnowska. As he adds, some of these offerings are “ghost investments,” with rudimentary customer information.

Krzysztof Adamski points to a similar problem. The vast majority of market offers available before July are not covered by the new regulations. As he adds, some players may withdraw from the market† – The current situation is favorable for the consolidation of the market for development companies, it is the time of acquisitions and increasing the land bank by the largest market participants – says Krzysztof Adamski.

– Whether the new developer act was a “disservice” to customers will become clear in the coming years – he concludes.

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