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Developers Face Instability and Complexity in the Legal Landscape

REAL ESTATEDevelopers Face Instability and Complexity in the Legal Landscape

The construction and development industry had another year of significant changes in 2023, both in terms of economic and legal business environment. After a weak year in 2022, when rising inflation and the cost of money hit both entrepreneurs and consumers, and the number of new building permits and sold apartments dramatically plummeted, the above-mentioned economic factors started to improve in the last quarters.

In 2023, the availability of mortgage loans also increased. The sales of apartments were greatly influenced by the mid-year governmental program “Secure Loan 2%”, which allowed about 50,000 credit contracts with state funding in 2023 and 2024. However, the whole corpus was exhausted before the end of 2023, injecting a significant amount of cash into the market. Most developers ended the year with surprisingly good sales results.

Looking at the legal conditions, instability, frequent and sudden changes in legal regulations often done at whim were common. This term is adopted to describe legislative changes made without meeting basic standards, done at high speed, without real consultations and by adding last minute changes unrelated to the law being introduced, making it opaque. The over-supply of legislation and its poor quality has been criticized for years.

Developers had to watch out for two laws related to planning issues. The poor quality of norms regulating spatial planning has a more severe, negative impact on running a business (as well as other areas of social life) than frequent changes in construction law (especially in terms of technical conditions).

The act facilitating investments in housing and accompanying investments also known as ”developer’s law” was changed several times in 2023. Initially, the bill aimed at facilitating the development of some underutilized areas in cities. Unfortunately, in practice, it didn’t work well mainly because local authorities treated its solutions with caution. But then, a change requiring parking space for every dwelling was added, causing a standstill of many projects. This absurd solution is still in place and discourages investment.

The second key legal change in 2023 was the amendment to the Spatial Planning and Management Act, which shortens the duration of the aforementioned “developer’s law”.

One of the major obstacles in the developer’s activity is the lack of building plots. The coverage of local plans is inadequate, their approval takes forever, and replacing them with zoning permits has many flaws and is becoming increasingly unavailable. A thorough amendment in this area was needed. The final act, unfortunately, is greatly impoverished compared to the original assumptions, but in my opinion, it goes in the right direction.

Marcin Nosiński, BCC expert in construction law, public procurement law, and real estate.

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