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Consequences of Brexit for Real Estate

January 20, 2021

"Sandwiches seized at the border: first consequences of Brexit" – the title of an article of the Italian La Repubblica recently reprinted in Gazeta Wyborcza says. Unfortunately, it doesn't end with sandwiches...

 

Although Great Britain formally left the European Union almost a year ago, it's only recently that its effects have begun to reach us ever more fully. This is because the transition period provided in the agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union (Official Journal of the EU 2019/ C 384 I/ 01) ended only on December 31, 2020. Pursuant to Article 126 of this agreement, the transition period, also known as the implementation period, started on the date of its entry into force, i.e. on February 1, 2020 and ended on December 31, 2020. During this period, in principle, the legal status of British entities within the single market was not changed. In the light of Polish law, the retention of the current status of British entities during the transition period was resolved by the Act of July 19, 2019 on the transition period referred to in the agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (Journal of Laws 2019, item 1516). Under this act, whenever separate regulations refer to a member state of the European Union or the European Atomic Energy Community during the transition period, this term was to be understood also as the United Kingdom of Great Britain and Northern Ireland. As the transition period ended, the effects of Brexit have begun to occur fully, although of course we will not be immediately affected by all of them. Some of them, however, are quite obvious and concern what we do every day.

 

One of them, which is important for the Polish real estate market, is the exclusion of the application of Article 8 sec. 2 of the Act on Acquisition of Real Estate by Foreigners, introducing a general exemption from the obligation to obtain a permit for acquisition of real estate located in Poland by foreigners who are citizens or entrepreneurs of the Member States of the European Economic Area, including all Member States of the European Union. As a consequence of the United Kingdom leaving the European Union, its citizens as well as British legal persons, will have to obtain a permit from the minister competent for internal affairs to purchase real estate in Poland. The exceptions to this rule include the cases listed in Article 8 sec. 1 of the Act on Acquisition of Real Estate by Foreigners, which are not very important from the point of view of the real estate market. Thus, the legal situation of British citizens and investors with regard to the right to acquire real estate in Poland has been equated with that of entities who are not citizens or entrepreneurs of the Member States of the European Union.

 

Consequently, the Article 1 sec. 1 of the Act of March 24, 1920 on Acquisition of Real Estate by Foreigners shall apply to entities of Great Britain. According to that provision, the acquisition of real estate by a foreigner requires a permit which is issued by way of an administrative decision by the minister competent for internal affairs, if the Minister of National Defense does not raise an objection, and in case of agricultural real estate, also if the minister in charge of rural development does not oppose to the acquisition.

 

Thus unfortunately, in the new post-Brexit reality, real estate investors from Great Britain have been placed in a situation which is formally similar to the one in which they had been before May 1, 2004. Similar, but not identical, because it should be remembered that also during the pre-accession period buyers of real estate located in Poland, coming from the Member States of the European Union, and earlier the European Communities, could count on preferential treatment under Article 44 of the Association Agreement of December 16, 1991 (the European Agreement establishing an association between the Republic of Poland and the European Communities and their Member States). At present, trade relations between the European Union and the United Kingdom are governed by the EU-UK Trade and Cooperation Agreement.

 

It is difficult to say at the moment what will be the practice of the Ministry of Internal Affairs and Administration with regards to issuing those permits. Referring to the experience of obtaining permits by British investors during the time before Poland joined the European Union, it can probably be expected that, in principle, obtaining this type of permit will be rather a formality. On the other hand, however, it is a time-consuming formality and thus significantly hinders the execution of the transaction, and therefore it will have a negative effect on the functioning of the market.

 

dr hab. Konrad Marciniuk

Partner, Radca prawny | Partner, Counselor at Law

T: +48 601 67 44 24

E: marciniuk@millercanfield.com

 

Disclaimer: This publication has been prepared for clients and professional associates of Miller Canfield, and is based on the facts and guidance available at the time of its release which may be subject to change. The purpose of the publication is to draw attention to the legal events indicated in it and should not be the sole basis for any decision regarding a particular course of action; nor should it be relied on as legal advice or regarded as a substitute for detailed advice in individual cases. The services of a competent professional adviser should be obtained in each instance so that the applicability of the relevant legislation or other legal development to the particular facts can be verified.