UOKiK resumes work on Developer Act amendment

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The Office of Competition and Consumer Protection (UOKiK) has resumed work on an amendment to the so-called Developer Act, which protects the rights of buyers of developer-built homes, the Polish Association of Developers (PZFD) reports.

PZFD’s legal counsel, Przemyslaw Dziag, highlights the following proposals in the draft bill as “the most important and critical from the industry’s point of view”:

  1. the Act’s provisions – including those that pertain to the running of escrow accounts – will apply also to homes already completed, and to commercial units;
  2. some of the obligations under the Act will be extended to sale-and-purchase agreements;
  3. banks will gain greater powers to screen developers, e.g. to verify whether a developer has no outstanding tax or other public debts, and no outstanding bills to contractors or sub-contractors;
  4. banks will gain greater powers to freeze escrow accounts;
  5. developers will be liable to “statutory penalties” for failing to fulfil their obligations under developer agreements and reservation agreements;
  6. the reservation fee will be capped at 1% of the price;
  7. the buyer will be entitled to remove a defect at the developer’s expense;
  8. the buyer will be entitled to withdraw from the sale-and-purchase agreement due to a major defect;
  9. the developer will be obliged to return the amount paid by the buyer within 30 days of the buyer’s withdrawal, or face being prohibited from selling the apartment/house to another buyer.

But the single most important change being proposed by UOKiK remains the establishment of a Developers Guarantee Fund (DFG), which all developers would be obliged to pay into. Despite the big controversy it has generated, the Office is sticking to this proposal, Mr Dziag notes.

Here are its key points:

  • For each apartment or house that they sell, developers will be required to contribute an amount equal to 3% of its value (or 2%; this is yet to be determined) to DFG;
  • DFG contributions will be non-returnable;
  • The exact rate of the DFG contribution will be laid down in a regulation;
  • Whenever a buyer deposits an amount into an escrow account, the developer will be obliged to calculate and pay the requisite contribution to DFG within 7 days of the amount being received – or face the escrow account being frozen;
  • DFG will reimburse buyers’ deposits when a developer or bank goes bankrupt; it will also return money to buyers who withdraw from sale-and-purchase agreements in cases where developers fail to do so, regardless of whether the withdrawal was legitimate or not;
  • Developers will be obliged to maintain a records system for all DFG payments, and to provide up-to-date information on sales.

PZFD remains highly critical of these changes. As it explains, “the proposed changes are not equitable, ignore economic rationality, and are disproportionate to actual risks. Paradoxically, they will have the effect of limiting the very competition in the market that it is UOKiK’s statutory obligation to protect.”

Source: PZFD

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