On May 20, 2021, after four years of the legislative process, the Sejm passed the Act on the protection of the rights of the purchaser of a residential premises or a single-family house and the Developer Guarantee Fund. This legal act does not amend the existing development act, but introduces completely new, much more extensive content.
In the rhetoric of the Office of Competition and Consumer Protection (UOKiK) indicating that the introduction of the obligation to pay contributions to the DFG will not increase housing prices, the office did not pay any attention to the fact that the Fund is not only about paying a contribution on each payment to a housing trust account. The new obligations for banks introduced by the Act, especially regarding recording payments to the DFG, will result, as banks have already clearly declared, in increasing prices for financial instruments offered on the real estate market, mainly in the field of maintaining trust accounts.
First of all, the Act requires developers to open housing escrow accounts at the time of commencement of sales, now understood as publicizing information on the commencement of the process of offering residential premises or single-family houses as part of a specific development project or investment task and the readiness to conclude development contracts with buyers. They will have to be maintained in accordance with the adopted act until the date on which the rights from the last development agreement are transferred, which will generate additional costs.
Before making a payment from escrow accounts to the developer, the bank will be obliged to verify whether the developer is not in arrears with taxes and ZUS contributions, real estate taxes, and whether he has settled due and undisputed monetary liabilities to contractors and subcontractors, and whether he has paid the due contribution to the DFG. All costs of these inspections are to be borne by the developer – which, in addition to other proposed changes, may translate into an increase in investment costs.
The bank’s new control powers are very broad and may also lead to blocking the disbursement of funds by banks in unjustified (or difficult to demonstrate) situations. For example, it is enough that the contractor fails to pay the subcontractor and the subcontractor informs the bank maintaining the escrow account that the developer is obliged to pay the contractor’s debt. The bank will not analyze whether these receivables are due or not and will simply withhold the payment
Another cost generator
The last thing that will constitute a cost generator in the DFG’s bureaucratic machine is the registration obligations of developers towards the Fund. The Office of Competition and Consumer Protection has planned to create an entire system for DFG called the Developer Guarantee Fund Register. Both developers and banks will have to report to this Register virtually all data regarding ongoing investments within seven days.
The examples presented show that the number of factors increasing investment costs is huge. The act primarily reduces the risks of banks, but increases them significantly for entrepreneurs who will have to deal with new regulations, which are often unclear and legislatively questionable.
It is worth considering the purpose of increasing the position of banks and their direct control and ability to economically block the implementation of investments.