Deregulation vs Legal Certainty: A Real Estate Perspective

In recent years, two opposing forces have come into increasing conflict within Poland’s real estate and construction sector. On the one hand, there are ongoing and well-founded complaints about the length and complexity of administrative procedures, even in the case of simple investments. On the other, public interest, spatial order, and the protection of third-party rights demand regulation and oversight.

Over the past two decades, we have seen gradual progress in deregulating certain aspects of the construction process. A clear example of this is the steady expansion of the types of projects that no longer require a building permit. These simplifications have been particularly noticeable in the context of residential real estate. However, this process cannot continue indefinitely. In the case of complex developments, especially those with a significant impact on neighbouring properties, there must be a pre-construction review to ensure all legal and planning requirements are met. Importantly, third parties who may be affected must retain the right to participate in these proceedings.

At present, the system strikes a relatively balanced compromise between projects that require full permits, those that merely require notification, and those exempt from formalities altogether. Yet, this is only one side of the deregulation debate.

The Moving Goalposts of Urban Planning

Another highly contentious issue is spatial planning. Unfortunately, Poland has undergone multiple waves of radical changes to planning law. The 1994 law was overhauled in 2003, and now, just a year and a half ago, yet another major reform has reintroduced ‘general master plans’ in place of the previously used ‘master plans’. The entire country is currently rewriting these, with an initial deadline set for the end of the year, which may be extended.

Such continuous overhauls in planning regulations contribute to a legal environment that is unstable and hard to navigate. From the perspective of real estate investors, this shifting legal landscape is far more burdensome than the existence of a fixed regulatory framework. What is needed is not further deregulation but rather more efficient execution and enforcement of the existing legal structure.

Delays Undermining Investment Certainty

What consistently proves most frustrating for investors is the sheer length of such procedures – waiting for permits, administrative decisions, or appeal outcomes. In some recent cases we advised on, the appeals process alone, whether launched by neighbours or by the investor, has dragged on for close to a year. These delays can bring projects to a complete standstill, affecting financing, leasing, and even sale.

Even more dramatic is the time required to adopt local master plans. In major urban areas, particularly Warsaw, this process can take over 10 years. By the time a plan comes into force, it often no longer reflects current market needs. These outdated and overly detailed plans can obstruct necessary development, an example being shopping centres that were planned 15 years ago and now sit on land better suited for residential or mixed use.

Ironically, it is now often the local master plan itself, created through a lengthy process, that blocks investment. Meanwhile, the previously criticised outline planning system has proven to be a more flexible, pragmatic tool in many cases, allowing investors to respond to real-time needs without harming spatial order or third-party rights.

Legal Proceedings and Their Burden

Legal uncertainty is further compounded by slow court proceedings, particularly regarding real estate. Issues such as reprivatisation and perpetual usufruct fee updates take years to resolve. In Warsaw, it is not uncommon for court hearings to be scheduled more than 12 months in advance. This creates significant financial uncertainty, especially when fees, such as the 3% annual perpetual usufruct fee for commercial properties, cannot be determined or passed on to tenants.

A Word of Caution on Deregulation

Not all deregulation is beneficial. Poland’s legal culture, history, and administrative mentality often struggle with ambiguity, leading to literal interpretation and a fixation on detail. A prime example is the deregulation of the real estate agent profession in 2014. While it opened up the market, it has also led to a surge in unprofessional intermediaries. Many agents now act for both parties in a transaction, demanding commission from each, which raises serious ethical concerns.

From a legal standpoint, such behaviour would be unacceptable in other regulated professions. It highlights the risks of deregulation without appropriate safeguards and oversight.

Conclusion

While deregulation has brought about some positive changes, especially in simplifying small-scale investments, its benefits are limited when not accompanied by efficient enforcement and institutional competence. Constant legal changes, excessive delays, and the unpredictable application of the law all undermine investor confidence.

The key to a healthy real estate environment is not perpetual reform but a stable legal framework, transparent procedures, and the timely execution of existing rules.

For expert advice from a seasoned professional, contact Head of Construction Przemysław Kastyak.