THE BUYING PROCESS

Thanks to the accession of Poland to the EU and the position of the country as forward-thinking and economically well-developed, purchasing a property is straightforward.

Stage 1: Restrictions on foreign buyers

Before EU accession, foreign purchasers had to secure permission from the Ministry of Internal Affairs and Administration in order to buy a home, but thanks to Poland’s EU membership, many of the obstacles have been removed for foreigners seeking to buy in Poland. However, buying land can still be tricky, although you can buy up to five properties, regardless of type, without any difficulty. Although most foreign investors buy as individuals when purchasing a residential home, if you are buying commercial real estate then the favoured approach is to do so via a Polish company.

Stage 2: Financing the purchase

All loans secured will require proof of income in Poland and your mortgage payment must not exceed 38% of your income. Polish banks are willing to lend to foreign buyers and can offer some of the best rates, although non-Polish nationals can only secure a mortgage if they have temporary or permanent residency. Loans can only be secured in euros, Swiss francs or US dollars. You can get a złoty mortgage, but these can end up being extremely costly. Polish banks are also offering buy-to-let mortgages for investment purposes. Today, many companies are offering mortgages of up to 80% or 90% LTV. There are few UK banks who are willing to lend you money to buy a Polish property, and so many people re-mortgage their UK home instead. However there are some specialist loan companies who will finance your purchase in Poland and it is worth talking to them before looking at re-mortgaging.

Stage 3: The contract

You have an option in Poland: you can either take the two-contract approach that is normal for most Eastern European countries, or – if you are ready to move quickly and have confidence in the property and the seller – you can opt for a one contract approach. This requires you to sign in the presence of a notary, having done all the usual title and background checks, but instead of signing a preliminary contract, you can jump right ahead to only signing the final contract.

The more standard approach is to utilise the two-contract approach. The first step is to enter into a pre-agreement arrangement by signing the preliminary contract in order to get the property taken off the market. Be aware that this is a legally binding contract signed in the presence of a notary and it commits both the buyer and the seller to the sale. At this time, a deposit of between 10% and 30% will have to be paid.

Before signing the preliminary contract, you should also ensure that if you are buying a property off-plan, all details of payment schedules and completion dates are included in it. Often, financial penalties are stipulated in case of either side failing to fulfil the requirements. There is usually a period of three months (maximum) between the signing of the preliminary contract and the final contract, and during this period you can modify any of the terms within the contract.

During this time your lawyer or notary should be checking the property title to ensure it is clean before the purchase is confirmed. The final contract will be signed once the details of the contract have been agreed and the title checked out. Signed in the presence of a notary, once the final contract is concluded, the remaining payments are made, contracts exchanged and the courts are instructed to transfer the ownership title into the buyer’s name. Be aware that registration can take many months in Poland, with the registering system much slower than in many other parts of Eastern Europe.

Stage 4: The survey

As with most Eastern European countries in Poland a survey is not regarded as an essential part of the conveyancing process, with few local residents getting one carried out during the purchase of property. Consequently, you will find that there are no licensed surveyors in Poland and you’ll need to commission a report from a local builder or architect which is less detailed than your typical UK survey.

Stage 5: Registering your property

As with most European countries, Poland has a dedicated land registry office which holds the title records for every Polish property. In order to complete the sale of your property and be officially recognised as the owner, you will be required to register the contracts with the land registry department.

It’s essential to be careful when checking the background of a property title. Years of invasion and communist rule resulted in many lands being confiscated, especially from Poland’s Jewish population. While there is little chance of finding your home reposessed by a displaced Pole, more caution should be exercised when buying a property in say, a block of flats. Always ensure the property has its own registry number and that one number does not apply to the entire building, otherwise you will be buying into a community-owned flat and will enjoy less protection from the law. At the end of the day, if you buy a property in good faith from the official owners named on the title, then you will be protected by law should any complications arise.

Fees typically work out at around 1.2% of the cost of the property, but the calculation is complicated and the average fee does vary.

Stage 6: Additional costs and taxes

Extra costs generally come to between 8% to 10% of the total value of the property. The breakdown of additional fees is as follows:

• Agents’ fees: 1.5 – 3%
• Taxes: 5%
• VAT on newly-built properties: 7%
• Stamp duty/transfer tax: 2%
• Notary fees: 2 – 3%
• Legal fees: 1%
• Registrations fees: 2%
• Total costs: 8 – 10%

While capital gains tax of 10% is payable in Poland, if you have owned the property for more than five years, when you come to sell you will not be liable to pay capital gains on any income generated. The announcement that VAT on property is expected to increase from its current 7% to 22% in January 2008 will probably cause a rush of completions prior to this date, benefiting the early investors.