When buying property in Poland, the real estate purchase agreement (umowa sprzedaży) is a crucial document that outlines the terms and conditions of the transaction. This legally binding contract protects both the buyer and the seller by clearly defining their rights and responsibilities. To ensure a smooth and secure transaction, it’s essential to understand what should be included in the agreement. This article provides a detailed guide on the key components that a real estate purchase agreement in Poland should contain.
1. Identification of Parties Involved
The agreement must clearly identify all parties involved in the transaction:
- Buyer(s): The full legal name(s) and personal identification details (e.g., PESEL number for Polish citizens or passport number for foreigners) of the individual(s) or entity purchasing the property.
- Seller(s): The full legal name(s) and identification details of the individual(s) or entity selling the property.
If the transaction involves a legal entity, such as a company or a trust, the agreement should specify the entity’s legal name and the name and position of the person authorized to sign on its behalf.
2. Property Description
The agreement must include a precise and detailed description of the property being sold. This should cover:
- Physical Address: The complete address of the property, including street name, number, city, and postal code.
- Legal Description: A legal description of the property, which may include details such as plot numbers, boundary descriptions, and references to official land registry documents.
- Land and Mortgage Register Number: The number of the property’s księga wieczysta (land and mortgage register), which provides information about ownership, encumbrances, and other legal details.
This information ensures that there is no ambiguity about the property being sold.
3. Purchase Price and Payment Terms
The purchase price and payment terms are fundamental elements of the agreement:
- Agreed Price: The total purchase price of the property, expressed in Polish zloty (PLN) or another agreed currency.
- Deposit (Zaliczka or Zadatek): The amount of any deposit made by the buyer, which can be either a zaliczka (refundable) or zadatek (non-refundable in most cases if the buyer defaults).
- Payment Schedule: If the payment is to be made in installments, the agreement should outline the payment schedule, including the dates and amounts for each payment.
- Financing Contingencies: If the buyer is securing a mortgage, the agreement should include conditions related to obtaining financing. For example, the contract may stipulate that the sale is contingent upon the buyer receiving loan approval by a certain date.
These details ensure that both parties agree on the financial terms of the sale.
4. Closing Date and Transfer of Ownership
The closing date is when the property ownership is officially transferred from the seller to the buyer. This section should include:
- Closing Date: The agreed date for the transaction to be finalized and the property ownership transferred.
- Possession Date: The date when the buyer will take possession of the property, which is often the same as the closing date but may differ if the seller needs more time to vacate.
In Poland, the transfer of ownership occurs when the sale is finalized in the presence of a notary public, who records the transaction in the land and mortgage register.
5. Contingencies and Conditions
Contingencies are conditions that must be met for the sale to proceed. Common contingencies in a Polish real estate agreement include:
- Home Inspection Contingency: Allows the buyer to conduct an inspection of the property. If significant issues are found, the buyer may negotiate repairs or a price reduction or withdraw from the sale.
- Financing Contingency: If the buyer is obtaining a mortgage, this contingency protects them if they are unable to secure financing by a certain date.
- Legal Clearance Contingency: Ensures that the property has a clear title, free of any legal disputes or encumbrances. If any issues are found, the buyer may withdraw from the sale.
Each contingency should include specific deadlines and procedures for resolving any issues that arise.
6. Disclosure Requirements
In Poland, sellers are required to disclose specific information about the property’s condition and legal status. The agreement should include:
- Property Condition Disclosure: The seller must provide information about any known defects or issues with the property, such as structural problems, water damage, or issues with utilities.
- Encumbrances: Disclosure of any mortgages, easements, or other encumbrances that affect the property. This information is typically found in the księga wieczysta.
- Environmental Hazards: Any known environmental issues, such as contamination or proximity to hazardous materials, should be disclosed.
Accurate disclosures are essential to prevent disputes after the sale is completed.
7. Inclusions and Exclusions
The agreement should clearly state which items are included in the sale and which are excluded. This section typically covers:
- Fixtures: Items permanently attached to the property, such as kitchen cabinets, built-in appliances, and light fixtures, are usually included in the sale.
- Personal Property: Items that are not permanently attached, such as furniture or freestanding appliances, should be listed if they are included in the sale.
- Exclusions: Any items that the seller intends to remove from the property before the sale should be explicitly listed.
This section helps avoid misunderstandings about what will remain on the property after the sale.
8. Earnest Money and Default Clauses
Earnest money (zadatek) is a deposit made by the buyer to demonstrate their commitment to the purchase. This section should include:
- Earnest Money Amount: The amount of the deposit, typically held in escrow by the notary or another neutral party until closing.
- Forfeiture Conditions: Conditions under which the buyer may forfeit the earnest money, such as backing out of the sale without a valid reason.
- Return of Earnest Money: Conditions under which the earnest money will be returned to the buyer, such as if the sale falls through due to the seller’s default or failure to meet contingencies.
The agreement should also include clauses addressing what happens if either party defaults on the contract, including potential penalties or legal remedies.
9. Title Transfer and Notary Involvement
In Poland, the transfer of property ownership must be conducted in the presence of a notary public (notariusz). This section should cover:
- Notary Deed: Confirmation that the sale will be finalized with a notarial deed (akt notarialny), which is legally required for property transactions in Poland.
- Clear Title: A statement confirming that the seller will transfer a clear and marketable title to the buyer, free of any legal encumbrances.
- Title Insurance: The agreement may specify that the buyer will obtain title insurance to protect against future claims on the property.
The notary plays a crucial role in ensuring that the transaction is legally binding and properly recorded in the land and mortgage register.
10. Prorations and Closing Costs
The agreement should specify how certain costs will be prorated or divided between the buyer and seller at closing. This includes:
- Property Taxes: Property taxes are typically prorated based on the closing date, with the seller responsible for taxes up to the closing date and the buyer responsible thereafter.
- Utilities and Fees: Any prepaid utilities or homeowner association fees should be prorated accordingly.
- Closing Costs: The agreement should outline who is responsible for various closing costs, including notary fees, registration fees, and legal fees. In Poland, these costs are often shared between the buyer and seller, but this can vary.
By clearly stating the division of costs, the agreement helps prevent disputes at closing.
11. Dispute Resolution and Governing Law
In case of a dispute between the buyer and seller, the agreement should include provisions for resolving the issue. This section may include:
- Mediation or Arbitration: A requirement that the parties attempt to resolve disputes through mediation or arbitration before resorting to litigation.
- Jurisdiction and Governing Law: The agreement should specify that the contract is governed by Polish law and that any disputes will be resolved in Polish courts.
Clear dispute resolution procedures help avoid lengthy and costly legal battles.
12. Signatures and Final Agreement
Finally, the agreement must be signed by all parties involved. This includes:
- Buyer(s): All buyers must sign the agreement.
- Seller(s): All sellers must sign the agreement.
- Notary Public: The agreement must be notarized by a notary public to be legally binding.
Once signed, the agreement becomes a legally enforceable contract, and both parties are bound by its terms.
Conclusion
A well-drafted real estate purchase agreement is essential for a successful property transaction in Poland. By including all necessary details—such as the identification of parties, property description, purchase price, contingencies, and closing details—the agreement ensures that the transaction proceeds smoothly and minimizes the risk of disputes. It is highly recommended that both parties seek legal advice when drafting or reviewing a purchase agreement to ensure that their rights and interests are fully protected.