The end of perpetual usufruct will soon become a reality. On 7 July 2023, the Sejm rejected the Senate’s amendments to the act on the termination of the perpetual usufruct. The Act will enable entrepreneurs, natural persons, housing cooperatives, and communities to buy out the land. The Act will now be presented to the President for signature.
What is perpetual usufruct? Which entities can benefit from land ownership based on the new regulations? What is the deadline for requesting land ownership? What are the payment rules for obtaining land ownership? In which cases is land ownership not possible? We present answers to these questions below.
Table of Contents
- What is perpetual usufruct?
- The end of perpetual usufruct in 2023 – entities that can obtain land ownership
- The end of perpetual usufruct in 2023 – deadline for requesting land ownership
- The end of perpetual usufruct in 2023 – payment rules for obtaining land ownership
- The end of perpetual usufruct in 2023 – the lack of the possibility to convert land in perpetual usufruct into full ownership
What is perpetual usufruct?
A perpetual usufruct is a legal form that allows natural persons or legal entities to use property for a specified period in exchange for payment. The perpetual usufructuary has the right to use the property, he also bears the costs of its maintenance. However, he does not have ownership rights. Meanwhile, the owner of the property receives payment from the perpetual usufructuary. It can be in the form of an annual rent or a one-time payment.
The main characteristics of perpetual usufruct include:
- Specified duration. The perpetual usufruct agreement is made for a specific period and always has a fixed termination date.
- Payment. During the period of perpetual usufruct, the usufructuary pays fees for using the property. Their amount depends on the location and size of the property.
- Restrictions on use due to legal regulations and contractual terms. The perpetual usufructuary cannot sell the property but can lease it. He can also transfer the right of usufruct to another person.
- Possibility to transfer to other individuals. A new perpetual usufructuary takes over the obligations and rights arising from the perpetual usufruct agreement.
The end of perpetual usufruct in 2023 – entities that can obtain land ownership
The new model for buying out land property introduced by the provisions on the abolition of perpetual usufruct will be available to:
- Natural persons
- Cooperatives and housing communities
- Residents of housing estates.
The end of perpetual usufruct in 2023 – deadline for requesting land ownership
The amendment added episodic provisions to the Act on Real Estate Management regarding claims for the sale of land property to its perpetual usufructuary. They define e.g. the deadline for the perpetual usufructuary to request the sale of land property in his favour. It amounts to 12 months from the date of their entry into force.
The end of perpetual usufruct in 2023 – payment rules for obtaining land ownership
The amendment introduces provisions to the Real Estate Management Act that specify the payment rules for obtaining land ownership. According to them:
1. In the case of a one-time payment – it is 20 times the amount calculated as the product of the current annual percentage rate for perpetual usufruct and the value of the land property on the day of the sales agreement.
2. if the price is paid in instalments – it is 25 times the amount calculated as the product of the previous annual percentage rate for perpetual usufruct and the value of the land property on the day of the sales agreement.
Local authorities can adopt the same principle or negotiate the price with the buyer. Yet, the price cannot exceed the market value of the land property.
Moreover, the competent authority may grant a discount of 90% on the price of land property owned by the State Treasury and sold to a natural person who:
- has a moderate or severe disability or is under 16 years old.
- resides with the aforementioned individuals and is their legal guardian or statutory representative.
- is a member of a large family as defined by the Polish Act on the Large Family Card
The provisions on the abolition of perpetual usufruct allow entrepreneurs to settle the value of the land within the available limit of de minimis aid.
The end of perpetual usufruct in 2023 – the lack of the possibility to convert land in perpetual usufruct into full ownership
According to the amendment, the right to request the sale of land property in favour of its perpetual usufructuary does not apply:
- to undeveloped land properties;
- if the land property was granted perpetual usufruct after 31 December 1997;
- if the perpetual usufructuary has not fulfilled the obligation specified in the agreement for granting perpetual usufruct of the land property;
- to lands located within ports and marine harbours as defined by the Act on Ports and Marine Harbours;
- if the land is used as a family allotment garden, as defined by the Act on Family Allotment Gardens;
The impossibility of converting land to full ownership also applies to State Treasury lands entrusted to:
- The National Agricultural Support Centre,
- Military Property Agency
- The National Forests Holding
- national parks
- The State Water Holding – Polish Waters
Pursuant to the provisions on the abolition of perpetual usufruct, it is not possible to conclude a contract for the sale of land subject to proceedings to terminate the perpetual usufruct agreement.
The latest amendment to the Real Estate Management Act provides for the abolition of perpetual usufruct by converting it to full ownership upon the request of the perpetual usufructuary. The perpetual usufructuary will be able to demand the sale of the land property in his favour. The period for submitting the application will be 12 months from the entry into force of the amending act.
Public authorities will not be able to refuse the sale of the land to the perpetual usufructuary who submits the application on time. The aim of the amendment is to eliminate the annual payments for perpetual usufruct. It will also help to avoid the uncertainty arising from its temporary nature. The Act will now be presented to the President for signing. The new provisions will come into effect 30 days after the date of publication.