Recently, we have been focusing more and more on maintaining good physical and mental form. Each of us knows or is able to easily get information about what to eat, how to exercise, and how to rest to feel better. Nevertheless, we still make the same mistakes, we eat unhealthy or too rarely, we prefer resting on the couch to a walk in the fresh air, and finally we are unable to cope with stress. The recipe how to stay in a good physical and mental form is similar to the recipe for a good form of agreement in real estate transactions. Maintaining the appropriate form of a legal transaction, although it may require additional effort from us, allows us to avoid “agreement disease”, and therefore affects our peace of mind.
The form of agreement is nothing more than the way in which a given activity can be expressed externally. It can therefore be a certain set of spoken words or the behavior of the parties, text expressed in writing or electronically.
Freedom to choose the form of declaration of will
Agreement is concluded by submitting valid and consistent declarations of will by the parties. Based on art. 60 of the Polish Civil Code, the principle is that the parties are free to choose the form of declaration of will. Therefore, the parties may decide for example to conclude the agreement verbally or implicitly (per facta concludentia), i.e., by any behavior of the parties that discloses their will sufficiently.
In addition, there are six basic forms of concluding an agreement:
- document (a document that allows the identification of the person submitting the declaration), art. 772 of the Polish Civil Code;
- ordinary written (a document made in writing with the handwritten signatures of the parties), art. 78 of the Polish Civil Code;
- electronic (declarations of will in electronic form with a qualified electronic signature), Art. 781 of the Polish Civil Code;
- in writing with a certified date, art. 81 of the Polish Civil Code;
- with signatures certified by a notary, Act of February 14, 1991 Law on Notaries (consolidated text, Journal of Laws of 2020, item 1192, as amended, hereinafter referred to: “Law on Notaries”,
- notarial deed, form regulated in the Law on Notaries.
Restrictions on the freedom to choose the form of an agreement in real estate transactions
Due to the importance of various types of transactions, the provisions of the Polish Civil Code impose requirements on the parties to maintain the appropriate form of agreements.
In the case of reservation and preliminary sales of the real estate agreements, the Polish Civil Code does not provide for restrictions on the form of their conclusion. However, both the preliminary agreement to the developer agreement (art. 2 sec. 2 in conjunction with art. 26 of the Act of September 16, 2011 on the protection of the rights of the buyer of a flat or single-family house, consolidated text Journal of Laws of 2019, item 1805, as amended, hereinafter referred to: “Developer Act”), a developer agreement (Art. 26 of the Developer Act), but also a real estate sales agreement, generally should be concluded in the form of a notarial deed, otherwise null and void (Art. 158 of the Polish Civil Code).
The restrictions on the form also apply to commonly concluded real estate lease agreements. Pursuant to art. 660 of the Polish Civil Code, a lease agreement of immovable property or of premises for a period of time longer than a year shall be concluded in writing. Also, a written form, under pain of nullity, is required to conclude an occasional lease agreement (art. 19a sec. 6 of the Act of June 21, 2001 on the protection of tenants’ rights, municipal housing stock and amendment of the Civil Code, consolidated text, Journal of Laws of 2020, item 611, as amended, hereinafter: “u.o.p.l.”), as well as institutional rental agreements (art. 19g sec. 1 of u.o.p.l.). The declaration of submission to the execution and the obligation to empty and hand over the premises, in the case of both types of lease agreements requires the form of a notarial deed (art.19a sec. 2 point 1 and art. 19f sec. 3 of u.o.p.l., respectively).
It should also be remembered that under Art. 76 of the Civil Code, the parties to the contract may impose on themselves the obligation to maintain a specific form when concluding an agreement or amending it.
Consequences of failure to comply with the form of agreement in real estate transactions
Failure to observe an appropriate form of agreement or legal statement in real estate transactions, in the worst situation, may lead to nullity of the legal act. This will be the case when the ordinary written form, which has been reserved in the act under pain of nullity, wasn’t maintained e.g., an occasional lease agreement concluded by the parties orally (art. 73 § 1 of the Polish Civil Code). The same situation will occur when the parties have concluded an annex to the lease agreement in ordinary written form, but previously reserved that the annex should be concluded in the form of a notarial deed under pain of nullity. The contract of sale of real estate concluded in the ordinary written form, instead of the form of a notarial deed (art. 73 § 2 of the Polish Civil Code), will be affected by the nullity sanction.
We can speak of milder consequences of failure to maintain the appropriate form if the agreement has not been concluded in the required ordinary written, document or electronic form, however, the provisions of the law or the agreement do not provide for the sanction of nullity. In this case, the agreement is not null and void, however, the parties lose the possibility to refer to the evidence from the testimonies of witnesses and to question the parties to prove the conclusion of agreement (art. 74 § 1 of the Polish Civil Code). Such a restriction will therefore apply to a lease agreement for a fixed period of time longer than one year concluded orally. The ad probationem restrictions do not apply in the cases specified in detail in art. 74 of the Polish Civil Code, i.e., between entrepreneurs or when requested by the consumer in a dispute with an entrepreneur.
For what other reasons does the form of agreement matters?
When choosing an appropriate form of agreement related to real estate transactions, one should not be limited only to the analysis of the mandatory regulation. Often the choice of the form of agreement will determine what provisions we can include in it, what effects such an agreement will have or whether we will be able to determine the fact of its existence or the exact content of its provisions. For example, by choosing the form of a notarial deed for the conclusion of a preliminary agreement for the sale of land, we will be able to include in such an agreement an effective declaration of submission to enforcement. If the lease agreement is concluded in writing and with a certain date in the event of sale of the leased premises, the buyer will not be able to terminate the lease agreement pursuant to Art. 679 § 1 of the Polish Civil Code. On the other hand, when a reservation agreement is concluded orally, the parties may have problems determining whether, for example, the amount paid for this agreement constitutes a reservation fee and whether it is refundable.
Taking into account the certainty of legal transactions, we advise our Clients to consider what form of agreement will be the most advantageous for them, and we always warn against concluding agreements related to real estate transactions verbally or implicitly.
In the Polish “Real estate law guide” we introduce you to issues related to real estate ownership as well as real estate transactions in Poland. As part of the series of articles, we explain useful notions related to real estate, present legal regulations associated with the real estate market and show what aspects are worth paying attention to when buying, selling or renting real estate.