Flexible payment arrangement for land purchase in Poland

My offer for land purchase has been accepted from an acquaintance(very nice couple).

the issue is they don't want to conclude the sale this year otherwise they will get a hefty tax payment(22%),they rather do it early next year.

part of the deal to accept my low price provided that we found a solution to pay them now so they could start building whilst labour cost is slightly cheaper now and for other reasons.

can you advice any type of payment or buying process safe for both of us without completing the sale now.

is there anything in Poland similar to UK where you can have an exchange contract but completion six month later.

your input is appreciated

Yes there is such an arrangement - it's called an Umowa Przedwstępna (preliminary contract) whereby you pay a deposit and agree to complete by a certain date. You can also include various conditions - e.g. if they pull out you get your deposit back etc. Talk to your notary about how to protect yourself as they need to draft the contract anyway.

Thank you inkrakow,is it possible for me to pay the whole amount or 90% as a deposit,will that cause any problem for the seller(tax wise).

i can always add a clause to recover my deposit+any incurred costs.

many thanks
Sam

Hi
do I need a lawyer and notary agent or just a good notary will do fine.

cheers

ragtime27
I assume that you are a Polish national (or at least with a Polish passport). The purchase of land by foreigners is still forbidden by law. I think you would have to get permission from the Ministry if you wanted to purchase land. Make sure you are thoroughly covered before you pay anything over. Any deposit is USUALLY non-refundable, except if the seller pulls out.

You need a good notary agent who can prepare a contract. If you do not understand Polish well enough, make sure you have a good translator - you cannot pull out of a contract later, saying that you didn't understand the terms and conditions.

Hi Terri

No,I'm not a polish national.
My wife is polish and I'm British,it's going to be on my wife's name.

Typically you pay a 10% deposit but it's up to you to agree with the vendor. My understanding is that the pre-agreement doesn't count for tax purposes - the land is only considered sold when you sign the final agreement and pay the balance and it's only then that the tax becomes due on it, but this is something that a lawyer or accountant should be able to confirm very easily.

It's true that deposits are usually non-refundable, but there are two forms of deposit and it should be noted in your contract which one is being used. If the deposit is called a 'zadatek' and you pull out the vendor gets to keep the deposit but if he pulls out, he has to give you back the deposit plus pay an equivalent sum. If the deposit is called a 'zaliczka' - he just has to give you back the deposit if he pulls out.

Technically you don't need a lawyer and a notary as only the latter is essential and they're lawyers as well. However I've never regretted running a deal past our solicitor as there is usually some detail that he picks up on.

Good insight inkrakow, I will incur costs arranging the payment,therefore I will go with zadatek.

I'm not sure yet if i will skip the lawyer,i would look to the cost and decide.

do notary services varies?can anyone recommend one around torun area?

Charges for the services of the notary agents will generally be the same.

Some more observations,
I suppose you have already made doubly sure that you can actually build on the land -and that it is possible, if not already done, that the services such as water, gas, electricity etc are already attached to it, if not, you will have to factor the costs of bringing these to the land.

The design of the house has to be approved by the Town Architects office, which can take some time, and then finally, once you start building make sure that any contracts with the builders have time frames for finishing certain parts and any penalties.

Other than that, I wish you good luck with the purchase and the house.

While the official notary fees are set, you can usually negotiate a lower rate. Do ask around about notaries reputations as some are more thorough than others, but be aware that traditionally the vendor chooses the notary.

Who's liable for notary cost the vendor or me?
do they represent both me and the seller?


it is by the lake with planning permission to build one story+loft,30% allowance of the plot (2000m²).

water and electricity available

YES

Sorry - I've just realised I've been talking rubbish (I'm still scarred from a previous experience where the vendor chose the notary and it was the most painful process...) as it's the custom for the BUYER to choose the notary. Apologies for the confusion.


The buyer usually pays the notary fees, and often both parties decide to split the 2% transaction tax (stamp duty) but if not, the buyer pays. The notary doesn't represent anyone but draws up the contract in agreement with instructions from the buyer and on the basis of the original documents supplied by the vendor.

thanks


I'll call the vendor try to negotiate the fees.

any advice from anyone what do i check on the contract?

does planning permission expires after while,do i need it for signing the contract?

can anyone recommend a notary around torun area?

Deposit – In my experience a 20% 'zadatek' deposit is normal, but whatever the deposit amount is, it should reflect a balance between your perceived risk of the vendor or you backing out before the final contract. Let’s say the agreed price of the sale is 500,000PLN and you make a 10% deposit. If the vendor backs out you will get your deposit back, plus a 50,000PLN penalty from the vendor. So if the land is “hot”, and you think that there is a chance of the vendor getting a 600k offer prior to your completion next year then you would want to make a higher deposit to guard against this. On the other hand, a 90% deposit places a risk burden on you; if you are unable or unwilling to complete the deal, you lose everything. It is interesting to note that the vendor will spend the deposit money prior to the final contract. I also wonder if there is a maximum amount of time allowed by law between the pre and final contracts.

Fees – expect 2% CIT tax, notary fees of about 1 – 1.5% +22% VAT, and some court costs. The buyer is legally obliged to pay all of these costs, but you can negotiate to share the costs with the vendor.

Notary – The notary has a fairly straightforward job. They are responsible for checking the title, and land / registry documents, ensuring the owner is the owner and has the right to sell, drawing up the contract of sale, collecting taxes, entering new records into the books, and ensuring that both parties understand the contract and freely sign it.

Lawyer – technically not needed as the notary should represent both of your interests, but it all comes down to confidence in the notary. It doesn’t hurt to involve a lawyer, but it may be easier to find a trustworthy notary.

Contract – a very longwinded document to state a few simple facts about who is selling, who is buying and where the property is. Typically no surprises, unless you are buying off-plan.

Good Luck

Notary – They are responsible for checking the title, and land/registry documents,
...a little bit of addition here. The notary IS NOT responsible for checking the legal ownership of the land, nor any other encumbents on it (i.e. debts which may be secured against the land). It is up to the Purchaser to check this with the courts/ksiega wieczysta. This is what I had to do when I was buying a flat, (unless it is totally different when you're purchasing just land).

...'entering new records into the books', ...this is done at the Courts by the courts officials after the notary sends the official paperwork. Confirmation that this has been done is received straight from the Courts.

...'ensuring that both parties understand the contract and freely sign it'...If one party does not understand Polish, the notary may suggest an independent translator (paid for by the purchaser). The notary will not go through the contract word by word to explain everything. The purchaser and seller need to read the contract thoroughly before signing anything.

My understanding is that the notary is legally obliged to provide a sworn interpreter if one of the parties isn't fluent in Polish. And they also read the document through out loud, and in my experience, are happy to explain any questions as they go along.

Three problems...
...'legally obliged' means that they will suggest a sworn interpreter that they know (you will have to pay for this). In that position I would go with one of my own. They would need to know beforehand that one party does not speak Polish.

...I would need to understand what you mean by 'fluent in Polish'. The reason for this being, that even a normally-educated (i.e. without letters in front of their name) Polish person does not always understand the nuanses in a formal contract, so what chance does someone else have.

...sometimes you may not even have an idea what questions you should ask.

I'm trying to find a balance where i can pay maximum deposit so the seller can get on with his plans(building his house),but i'm getting confused maximum amount I'm allowed to pay as deposit.

I have read somewhere is 30%,I'm not sure if i'm able to pay more than that.

Can anyone confirm if the notary's fees are fixed according to the land value or varies from one to another?


I've read elsewhere that notary will ask from the vendor to prove the ownership,am I wrong?


At the completion day,the notary will ask the vendor to present a letter from the local council stating that there are no outstanding loans, debts or mortgages on the property.

can anyone confirm please.

What is the maximum period between the preliminary contract and the completion day?

is it very common to ask the vendor to share the cost of purchase(stamp duty,court fees,notary fees)?
you guys been very helpful thanks a lot.

>>>>I've read elsewhere that notary will ask from the vendor to prove the ownership,am I wrong?
Yes, but remember that a lot of land in Poland has passed down the generations and the paperwork (if it exists) does not always show the names of the actual owners. You could always ask them to show you the paperwork before you start the process.

There have been cases where properties/land has been sold by people who had no rightful title to it.
Generally, the purchaser pays all the costs. You can ask how much these will be beforehand (as they are set, depending on the value of the sale).

If there is such a letter, make sure that it is dated the day before, and not months before the sale.
Also, I am not as yet convinced, that anyone can build on land they do not fully own.

I'm not sure what you mean here!

the guy owned 5 plots,sold 2 already,he provided us with local authorities planning permission related to the plot.

This is a question your notary or lawyer will be able to answer definitively.


Yes, notarial fees are calculated based on the value of the land/property, but can be negotiated down. The PCC tax of 2% applies to the value declared on the notarial deed.


The notary is responsible for getting an up to date copy of the land registry document for the property and checking that the person selling the property actually has the right to sell the property based on what it says there (otherwise the contract is void and you have grounds to sue the notary).


This is something you can stipulate that is included in the contract but you should check with a lawyer what other things you should be asking for.


It's up to you and the vendor.


Is this a WZiZT or a Pozwolenie na Budowe. Anyone can apply for the former, whether or not they own the land or have any rights to it. However, only someone with legal title to the land can apply/be granted the latter. If you have the latter, make sure that the contract explicity states that that the vendor is signing over the rights to the land to the person buying it.

Look, I know what you're trying to do here but your deal isn't run of the mill and you really should invest the few hundred quid or so to get a good lawyer to work for you and protect your interests. Unravelling problems to do with property transactions is an expensive and lengthy process.

Translator - In this instance it is a non-issue if the person buying the land (your wife) and the vendor are native Polish speakers. If you wife is not fluent then the notary will require a sworn translator. (You must provide the translator) This translator's details will actually be entered into the notary act. If your wife is fluent, I don't think that the notary will allow a translator there just for your convenience as an observer. As the notary is required to read the entire contract out loud, word by word, a translator really drags down the process.

Notary Fees - Google around a bit and you can find an exact schedule of fees that the notary can charge. As the price of the transaction goes up the notary's percentage goes down. This can be negotiated down.

Debts - I'm not aware of any reason that you cannot get a letter from the town hall yourself about debts against the property. Any mortgage on the property should show up in the registry and should be evident to the notary.

Purchase Cost - I've never shared them, but have heard of the 2% CIT tax being split between parties

Title - Poland has a general public guarantee of the integrity of the land registry books and property transfers in "good faith" are considered valid. The notary has the burden of making sure that the transaction is valid.


Agreed. You need to have confidence in this transaction. Do you mind sharing about how much this land will cost?

Estate Agents in Poland get a lot of grief from the general public regarding their fees, integrity, work habits, and so on. In a situation like this a good agent would check all of the documents and debts themselves, arrange a notary, arrange a translator, help find a lawyer, and have direct answers for most of your questions. Well worth the money for a foreigner unfamiliar with the process. (No, I am not an estate agent)

Good Luck

>>>>>Yes, notarial fees are calculated based on the value of the land/property, but can be negotiated down. The PCC tax of 2% applies to the value declared on the notarial deed.

Make sure that the price quoted on your notarial deed reflects the 'true' value of the land. I have heard of occassions (and I'm talking property here - flats or houses) where the price quoted was half of the actual price of the property. The other half was paid over in cash to the seller without it being recorded in the paperwork. This was done in order to avoid the tax due on the transation.

I won't need a translator,my wife is polish and she will signing the deed.


yes the plot come with a planning permission.
the seller(an acquaintance) purchased over 4 years ago 5 plots out of 13,he had the plan to build his house on the plot I'm buying.

he decided to purchase elsewhere closer to his wife's hometown.


No I don't mind
the plot comes with a permission to build one story+loft on 30% allowance of the plot (2000m²).
with 45% loft angle,building restriction 30 meters away from the lake
water and electricity available,close to main road,10-15 minutes from torun.
price 55PLN psm.


I will do that.

I think I've sussed out what's going on here. You have to own something for 5 full years before you can sell it without being liable for tax on the profits.

Your friend needs to make sure, that the 5 years counts when the final contract is completed, and not when the deposit is paid. Need to check this up.

Do you know which one? WZiZT or Pozwolenie na Budowe? You should also check how long it's valid for.

I just got an answer from the vendor,it's a WZIZT.

Do I see these as negative thing or not big deal?


What is the downturn except paying more in Capital Gain (UK) if I decide to sell.

Two things: under Polish law, if you sell a property within a specified time (think it's 5 years) you will pay tax on the profits, unless you use the proceeds to buy another property.

second: how will the UK government (taxman) know that you bought and sold a property in Poland?

It is tax fraud, it is illegal, it is immoral. The vendor will do this to minimize his capital gains tax exposure and to reduce the amount he would pay to the estate agent. The buyer reduces the amount of CIT, notary and estate agent fees.

I understand that this is a fairly common thing to do with houses and apartments, as the value of such things involves some judgement, but land is land, and the market value is a bit more apparent to the notary and Polish Tax office. I advise against trying this.

Yes, you will increase your capital gains from both the Polish and UK perspective (assumming you are UK tax resident at the time of the sale). Under current Polish law you will pay 19% Capital Gains tax on the sale. There is a way to rollover the proceeds of the sale into another property without incurring CGT, but you must make a decleration to the tax office within a very short period of the sale, and you only have two years to do this. I don't think this applies to land sales though:

propertysecrets.net/blogs/reemerging_markets/capital_gains_ tax_in_poland_how_much_will_you_pay_/post-295.html

It's a good thing, provided that it allows you to build what you want! Check the terms carefully, and the expiry date too. The WZiZT is an outline planning permit and it gives the general conditions that any building(s) on the plot need to fulfill. The next step is to obtain a Building Permit which is issued on the basis of plans for a specific building - you should check if this is still needed where you are though as I've been hearing rumours of the law changing in the last few months but I don't know what the status is now.


You may face an unpleasant conversation with the Polish tax authority when they ask you why you paid less than their opinion of what the land is worth. This happened to us because there was a long delay between paying the deposit and completing the deal, during which time prices went crazy, and it wasn't too pleasant (the rise in value was nice though).

Yes I did check the terms,apart from restriction to build one story +loft which i can live with it since it will be holiday home.

the house must be 30meters away from the waterfront,i preferred little closer