Important facts about the amendment to the so-called Developer's Law

On July 1, 2022, the Law of May 20, 2021, on the Protection of the Rights of the Buyer of a Dwelling or Single-Family House and the Developer’s Guarantee Fund (Journal of Laws of 2021, item 1177, hereinafter: OchrNabDFGU) will come into force.

According to the wording of Article 5(5) of the OchrNabDFGU, the concept of a purchaser has been limited to a consumer, i.e. an individual who enters into a contract without a direct connection to a business or professional activity (e.g., individuals who acquire a premises or a house for the purpose of selling it later – a so-called flip or lease).

The most important change is that purchasers are also protected if they enter into an agreement with a developer to transfer ownership of an apartment or house upon completion of the building (Article 2(1) OchrNabDFGU).

In addition, the Developer Guarantee Fund is to be credited with contributions paid by developers, the amount of which will not exceed 1% of the price of a residential unit or single-family house (Article 49 OchrNabDFGU). In the event that the developer goes bankrupt and the trustee abandons the continuation of construction, or in the situation where the purchaser withdraws from the contract and does not receive a refund from the developer, the DFG will return to the purchaser the funds paid by the purchaser towards the price of the subject of the contract (Article 48 OchrNabDFGU).

There will also be a database of developers, purchasers, banks operating residential trust accounts, development projects and contracts between developers and purchasers (Article 50 OchrNabDFGU), which will be designed to support the handling of the process of recording payments and making disbursements from the DFG.

However, the document itself is quite momentous, as it affects the uniformity of insurance companies’ liquidation practice. It counteracts the issuance of obviously incorrect decisions by individual insurers.