In the “Real estate law guide” we will introduce you to issues related to real estate ownership as well as real estate transactions. As part of the series of articles, we will 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.
Clients who want to buy or sell real estate are faced with various types of sale transaction models, and at the same time with different names of the agreements. It is worth knowing that each of the agreements for the sale of real estate has its own specificity and may have different legal effects, and that the law regulation in specific situations requires to apply specific types of agreements.
Agreements for the sale of real estate can be divided according to various criteria, i.e., for example according to their form (ordinary written form or notarial deed), type (named, i.e., regulated by law or unnamed, i.e., containing the features of various contracts), or effect (obligation and disposition). Nevertheless, in order to distinguish these agreements, it is worth dividing them according to the chronology of their conclusion.
The reservation agreement has not been defined in legal regulations but is often used as the first of the agreements aimed at the sale of real estate, when the parties are not yet prepared, for various reasons, to conclude a preliminary or developer agreement. Its subject is usually an obligation of the seller to reserve a specific property for a client or an obligation not to sell the property to another client. The purpose of this agreement is to secure the basic terms of the transaction for the time specified in the reservation agreement. Often, the reservation agreement specifies a relatively small reservation fee paid by the client, which is credited towards the sale price. This is usually a short agreement that is made in writing. Work is underway in Poland on the detailed legal regulation of the reservation agreement.
Preliminary sales agreement (PSA)
It is a named contract referred to in art. 389 of the Polish Civil Code. The subject of the preliminary real estate sales agreement is the obligation of the parties to conclude a sales agreement within a specified period of time. The parties may stipulate that the conclusion of the sales agreement will take place provided that the conditions agreed by the parties are met. This agreement may be concluded either in a regular written form or in the form of a notarial deed. Widely used both in the primary and secondary market, however, one should take into account the specific regulations regarding the conclusion of preliminary agreements by natural persons in the field of residential real estate.
Preliminary developer agreement
The preliminary developer agreement is an agreement referred to in Art. 2 clause 2 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), commonly referred to as the Developer Act. It is an agreement concluded in the form of a notarial deed creating the obligation for natural persons to conclude the so-called developer agreement within the primary residential real estate market. In practice, it is rarely used.
A special type of contract concluded between a developer and a natural person containing an obligation to establish or transfer to the buyer, after the completion of the development project, the ownership title to a residential apartment or a single-family house. The obligation to apply it in transactions on the primary market between a developer and a buyer who is a natural person results from the provisions of the Developer Act. The Developer Act regulates in detail the basic provisions of developer agreements, among others, indicating the grounds for withdrawing the agreement or the requirement to conclude the agreement in the form of a notarial deed. The appendix to the developer agreement is the information prospectus.
Final sales agreement (FSA)
An agreement under which the seller transfers the ownership of the property (and / or the right of perpetual usufruct) to the buyer. It may have a binding-disposing effect or an obligating effect (e.g., when a municipality has a pre-emption right), then, in order to obtain a disposing effect, it is necessary to conclude another agreement. In the case of the primary market, the conclusion of the sales agreement may be associated with an application for the separation of the property and the establishment of a new land and mortgage register for it. It is obligatorily signed in the form of a notarial deed and cannot be concluded on a conditional basis or for a limited period of time.