REAL ESTATE LAW GUIDE: Transformation of the cooperative right to the premises into the ownership right
One of the objectives of introducing, the institution of the cooperative occupancy right to the premises, and later the cooperative ownership right to the premises, into the Polish legal system was undoubtedly to satisfy the growing housing needs of the society. These rights are still often mistakenly equated with the ownership right. We invite you to read the article in which we will explain the differences between a cooperative occupancy right and a cooperative ownership right to the premises, and how to transform these types of rights into the widest of rights to real estate, i.e., full ownership right.
The cooperative occupancy right to the premises
The cooperative occupancy right to the premises arises when concluding an agreement to establish a cooperative occupancy right to the premises between the cooperative and the person for whom the right is established. On the basis of this agreement, the cooperative undertakes to give to this person the premises for use, and this person undertakes to make a housing contribution and pay certain fees. This right may be established only for the benefit of a member of the cooperative or a member of the cooperative and his spouse. A cooperative occupancy right to the premises is inalienable (cannot be sold or donated), cannot be inherited (relatives, however, have a claim to conclude an agreement to establish a cooperative occupancy right to the premises), it cannot serve as security for a mortgage loan, but on the other hand, it cannot be enforced. The freedom to dispose of the premises for third parties is in principle limited to the possibility of renting the premises without the consent of the cooperative. Therefore, the cooperative occupancy right to the premises, unlike it might seem, in its structure is much closer to the lease than to the full ownership right. What distinguishes the situation of the person for whom the indicated right is established from the tenant is its relative stability. The termination of the cooperative ownership right to the premises is possible only upon termination of membership (e.g., due to death) or on the basis of a court decision, in particular in connection with arrears in payment of fees.
The cooperative ownership right to the premises
As a result of the amendment to the act on housing cooperatives, it is no longer possible to establish a cooperative ownership right to the premises. Nevertheless, still, in particular in the context of the block of flats built of large prefabricated concrete panels it is a common legal title to a residential premises. The cooperative ownership right to the premises, unlike the cooperative occupancy right to the premises, has a lot more to do with the ownership right. The cooperative ownership right to the premises is a limited proprietary right directly indicated in the Polish Civil Code. This means, which is important for a person who has such a right, that the law provisions on the transfer of ownership apply accordingly to this right. Therefore, this right may be sold, but also donated, inherited, may be subject to execution, it may be disclosed in the land and mortgage register, as well as a mortgage may be established on it. In practice, however, the owner of the premises, as well as common parts of the property or land, is the cooperative and it is the cooperative that influences the way the real estate functions. In addition, potential buyers of a residential premises may prefer to acquire ownership over a cooperative ownership right to the premises, and banks may be more cautious in granting mortgage loans secured by this right.
Ownership of the premises
Ownership is the most extensive right of all that constitutes a legal title to a residential premises. The owner has the right to own, use and dispose of the residential premises. Restrictions on the ownership right may result only from the legal act, the principles of social coexistence, as well as from the socio-economic purpose of this right. Although the ownership of the property is not an absolute right, the guarantee of the protection of ownership right has been expressed directly in the Polish Constitution.
Stages of transformation of the cooperative right to the premises
Due to the prohibition to establish a cooperative ownership right to the premises, it is currently not possible to transform a cooperative occupancy right to the premises into a cooperative ownership right. Both cooperative occupation right and cooperative ownership rights to the premises can be transformed directly into ownership rights. Although the Polish Act on Housing Associations provides for separate procedures for transforming each of these rights, there are common elements between them.
– motion of the person for whom the law was established
Both in the case of the will to transform a cooperative occupation right, as well as a cooperative ownership right to the premises, the initiation of the transformation belongs to the person for whom this right was established. The entitled person submits a motion to the housing cooperative, in which he or she requests the transfer of ownership of the premises upon payment of the obligatory repayments. Despite the fact that cooperatives often allow the initiation of the transformation procedure in various forms, the application should be made in writing for evidence reasons.
– repayment of liabilities
In the case of a cooperative occupancy right to the premises, the cooperative member is obliged to repay: 1) the housing contribution for his premises resulting from the settlement of the construction costs of the investment task, and in the event that the cooperative has taken a bank loan for part of this contribution, part of the loan debt with interests, 2) if the cooperative has used the funds obtained from public aid or other funds, the repayment of the part of the remission of the loan related to the premises in the amount to be transferred by the cooperative to the state budget.
In the case of a cooperative ownership right to the premises, the person for whom the law was established is obliged to repay the cooperative in full the construction contribution resulting from the final settlement of the construction costs of the investment task, and in the event that the cooperative has taken a bank loan for this contribution, part of the cooperative’s loan debt with interests.
Moreover, with regard to both of these rights, the person for whom the law was established may not have arrears in fees related to the operation and maintenance of real estate.
– the date of the conclusion of the agreement transferring the ownership of the premises
Both the agreement for the transfer of a cooperative occupancy right as well as a cooperative ownership right to the premises should be concluded within 6 months from the date of submitting the motion to the cooperative by an entitled person, subject to a situation where the property has an unregulated legal status, or the cooperative does not have the right of ownership or perpetual usufruct right to the land on which the building was built or was built by its legal predecessors. The period between the submission of the application and the conclusion of the agreement for the transfer of ownership is the time during which both the cooperative and the entitled person should agree on the content of the agreement and prepare the necessary documents, such as, in particular, an excerpt from the land register or appropriate premises plans. Of course, if both parties are ready, there are no obstacles to concluding the transfer agreement sooner.
– the form of the transfer agreement and the costs associated with its conclusion
The agreement for the transfer of ownership of the premises is drawn up before a notary public in the obligatory form of a notarial deed. The notary’s remuneration for all activities performed when concluding a contract that transfers ownership as well as the court costs in land and mortgage register proceedings are borne by the person to whom the ownership right is established. The notary’s remuneration for the indicated activities is 1/4 of the Polish minimum wage.
If you need legal advice related to the transformation of the cooperative right to the premises into the ownership right, e.g.. preparation of an appropriate motion or verification of the transfer agreement, or in any other matters related to real estate, please contact the Law Firm: via the Contact Form available on the website joannakoziollek.com or by e-mail to the following e-mail address: kancelaria@joannakoziollek.com