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02.07.2019

How to buy an apartment – ten steps to getting your own flat

Are you considering buying an apartment from a developer or perhaps an aftermarket one, wondering how to choose the right flat for you? Do you want to learn more about what you should focus on when buying an apartment? We prepared a guide for you that will help you at various stages of buying your own flat, since it covers ten key aspects, starting from choosing the market, apartment and developer, through development agreement, financing your purchase, to the walkthrough of the premises after construction and turnkey finishing options.

1. Decision – primary market or aftermarket?

The first step of the journey towards becoming an apartment owner is making the decision whether to get it from the primary or secondary market. The latter option has its benefits, including the ability to start living there right away after the purchase, since it is already built. In many cases, the commercial and service infrastructure in the closest vicinity of your new apartment will also be better developed, particularly in the very beginning. 
On the other hand, however, buying an aftermarket flat often means:
the need for an overhaul or a renovation;
the risk of various problems popping up, kept secret by the previous owner;
various real estate agency fees, up to 2-4% of the total value of the apartment; 
tax on civil law transactions (2%). 
What are the costs of purchasing an apartment from a developer? The tax on the purchase of an apartment is paid by the developer, which means that you do not have to add it to the total, and the notary fees on the development agreement are shared between the buyer and the developer. 
Buying an apartment from the primary market also means that you can be sure that all the walls and systems are brand-new, they have years-long warranties and that they will hold up to the standards for years to come. In addition, the recent Development Act makes sure that the investment will be safe, as well as provides a number of other benefits. What is more, when you purchase your apartment from the developer early enough, you can often adapt it to your needs at a low cost thanks to the ability to introduce your own changes to the apartment. 

2. Selection – how to choose an apartment?

Another important step is to choose an apartment that will meet all your needs – both current and future ones. First, you need to estimate your budget and financial capacity, then identify and determine your needs, as well as key aspects of your new living place. Below, you can find a list of key factors, which you should take into consideration when choosing your new apartment. 
Location. You should take into consideration the time it takes to get to your most important points of interest in the city, which you frequently visit, as well as the proximity of useful venues (schools, recreational and medical facilities). You should decide whether you prefer proximity to the heart of the city, or rather the quiet of the outskirts. 
Usable area and number of rooms, which might depend not only on your budget, but also on the size of your family and plans for the near future. For example, singles usually settle on studios or two-room flats, while three-room and bigger apartments are usually purchased by families with children. 
Floorplan that best corresponds to your lifestyle – you need to decide whether you want, for example, a living room with a kitchenette or a separate kitchen, a bathtub or just a shower in the bathroom and so on. 
Location of the apartment in the building. South-facing windows ensure the highest amounts of sunlight for the longest time. If you are an early bird, choose east-facing bedroom windows, but if you like sleeping in, west-facing windows will be a better choice. Another aspect that is up to you is the floor number. Usually, apartments on higher floors, which ensure better view of the surrounding area, are more expensive. 
Additional spaces, such as a balcony, a loggia, a terrace and a garden are attractive places to spend your free time. A storage unit and a garage or parking space outside might also prove to be useful.
Before buying an apartment from a developer, it is also worth your while to ask about amenities in the neighbourhood, such as common spaces, playgrounds, fence and CCTV, bike and pram storage rooms, planned service establishments.

3. Check the property before purchase 

What to check before buying an apartment from a developer? First and foremost – the legal status of the land (ownership or perpetual usufruct) where the building is erected. Once you have obtained the land register number, you can do it yourself in the Electronic Land and Mortgage Register (EKW) system, maintained by the Ministry of Justice (https://ekw.ms.gov.pl). 
In the case of ownership, the owner of the land only has to pay a real estate tax. Until recently, perpetual usufruct was connected with an additional fee which had to be paid annually; however, starting on the 1st of January 2019, a new law entered into force, which enabled conversion of perpetual usufruct into ownership for land developed for housing purposes. This requires paying a conversion fee, which can be paid in full or in annual instalments. The annual fee is the same as the perpetual usufruct fee; however, the act envisions favourable discounts for people paying the fee in full in one payment, up to 90% of the total amount. 
Before buying an apartment from a developer, you should also check easements on the property. In the majority of cases, you will be dealing with easements for utilities (electricity, gas, water, etc.) which provide them with the right to maintain and repair their installations. If the property is encumbered with any mortgage, the developer must ensure that the property can be entered without encumbrance in a newly-established and separate Land and Mortgage Register. 
Finally, before buying an apartment from a developer, check the land use plans, including for adjacent plots. By doing so, you will not be surprised by a skyscraper popping up next to your building in future. You can do it free of charge through the Geoportal, run by the Ministry of Infrastructure and Construction (http://mapy.geoportal.gov.pl). You can also find information about investments under construction within a radius of 1 kilometre from the property in the prospectus attached to the development agreement.

4. How to check the developer and choose a reliable one?

In order to make sure that the developer is reliable, you need to verify some basic information about the company, such as its registered office, legal situation of the properties belonging to the company and the method of financing the property where you want to buy an apartment. In addition, it is worthwhile to give the financial statements available on request a thorough read. What are some other ways to check a developer? First of all, you should consult the National Court Register, where you will find out whether a developer is reliable, or whether the company is insolvent, in debt, in bankruptcy or liquidation. 
Another important aspect is verifying whether the information contained in the prospectus are consistent with the Land and Mortgage Register of the plot where the building is erected, in particular whether:
the developer is indeed the owner/perpetual usufructuary of the property;
the prospectus mentions all the mortgages listed in the Register.
The prospectus is a comprehensive document that must be provided by the developer to the agreement, containing the most important information about the developer, the entire investment and the property in question. 
The prospectus also contains information about the escrow account type – a special bank account, which can be open or closed, used for settlements between the developer and the buyer – you in this case. According to the aforementioned Developer Act, the payments for your apartment are collected on an escrow account and the bank only transfers the funds to the developer when they meet their contractual obligations – otherwise, you will get your money back. In the case of an open escrow account, the funds are transferred to the developer in instalments, upon completion of subsequent stages of the construction process. Closed escrow account means that the developer will receive all the funds only after the construction is completed and the ownership rights are transferred to the buyer. 

5. Development standard and ‘shell and core’ apartment? What does it mean?

Development standard is a technical description, which specifies the scope of finishing and the type of materials used in the apartment, building and common areas. 
Shell and core apartments usually have plastered walls, cement floors, anti-burglary entrance doors, electrical equipment and ICT installations, as well as all utilities (water and sewage, electrical installation, central heating with radiators, gas lines and low-current systems) already in place. 
However, the development standard is just a general term and its meaning may vary depending on the developer. This is why it is worth checking what the developer offers by default and what you will have to pay extra for. The same applies to the term “higher development standard”, which is supposed to mean better equipment installed in apartments. A higher development standard might encompass, for example, a video intercom, roller blinds in windows and awnings on terraces. 

6. Financing your apartment – development agreement and loan.

Loans remain one of the most popular forms of financing an apartment purchase. Below, you will find a step-by-step guide regarding taking out a loan for purchasing an apartment from a developer. 
You can apply for a loan after selecting a flat and signing a development agreement. 
First and foremost, you need to verify your creditworthiness with the bank and apply to be pre-approved for a loan. You can work with a loan adviser, who can take care of it for you.
Then, sign a development agreement and your loan will be paid out in 45-60 days’ time. 
In the case of a mortgage loan, make sure to enter the mortgage in the land and mortgage register of the property as soon as possible. Until then, you will have to pay loan instalments increased by the cost of the so-called mortgage bridging insurance. 

7. Development agreement, preliminary agreement and reservation agreement with the developer

When buying a flat from a developer, you do not necessarily have to sign a development agreement. When the building has already received an occupancy permit, you purchase an apartment on the basis of a preliminary agreement with the developer. It is also signed when you buy a parking space or a storage unit. 
A development agreement is signed when the building does not yet have an occupancy permit. It obliges the developer to erect a building, separate the apartments and transfer the ownership right to the apartment to the buyer in return for payment of the agreed amount. Both the preliminary agreement with the developer, as well as the development agreement precedes the conclusion of the final agreement, which actually transfers the ownership of the apartment from the developer to the buyer. Both agreements also allow for starting the loan procedure. 
The final agreement can be signed only after the commissioning of the apartment has been completed. At that point in time, you can then apply for a mortgage entry in the land and mortgage register established for your apartment, because only then the ownership was formally transferred from the developer to you. 
Before signing the development agreement, you can also sign a reservation agreement. It is not obligatory; however, it guarantees that the selected apartment will wait for you until the date of signing the development agreement. In some cases, you will need to pay a reservation fee, which should be refunded if you do not sign a development agreement. 
The fees for signing the development agreement are shared by the developer and the buyer. Since they are signed in the form of a notarial deed, development agreements are connected with notary fees. Apart from that, the parties also cover the costs of land and mortgage registers and excerpts from the notary deed, which are fixed. The cost of the development agreement varies, because the notary fee depends on the price of the property. 

8. What does final acceptance of the apartment look like?

According to the Developer Act, the technical commissioning of the apartment is carried out by the developer and the buyer after the developer obtains the occupancy permit for the building. What should you pay attention to while accepting your apartment from the developer? First and foremost, point out all defects, such as cracks in walls and floor surfaces and their uneven finish, incorrect installation of windows and window sills, as well as problems pertaining to utilities and access to drains. 
You can hire a professional, who will help you find the issues with your apartment, which you can note in the acceptance report. The developer has 14 days from the date of signing the report to respond to the reported defects in writing, providing substantive justification for not accepting the defects. In addition, the developer has the obligation to repair the accepted defects within 30 days from the signing the report, unless they provide a justified reason for postponing the date of repair, such as waiting for the delivery of materials from the manufacturer. 
Some developers also allow the so-called pre-commissioning, where the buyer can inspect the apartment before commissioning in order to fix all the defects at the earliest possible stage. Keep in mind that pre-commissioning is not covered by the Developer Act.
Technical acceptance of the apartment and handover of keys are two different things, which might, but do not necessarily have to take place at the same time. The handover of keys, or in other words, handover of the apartment, should be specified in the development agreement and should usually take place after signing the final agreement. In practice, developers often agree that the buyer can take the keys to the apartment immediately after its technical acceptance. 
During the apartment handover, both parties draft a report including meter serial numbers and readings. Starting from the moment the keys are collected from the developer, the buyer is responsible for any damage caused to the apartment, as well as for covering the required fees and payments. 

9. Turnkey finish – is it worth it?

Some developers offer the so-called turnkey finish for an additional fee. The cost of finishing a new apartment with this option might seem high, which is why many people decide to finish their apartments themselves or hire contractors. 
Turnkey finish has a number of advantages: 
speed, convenience, less effort and time required; 
lower VAT rate on materials (8% instead of 23%); 
custom design, developed with an interior designer; 
warranty on the completed finishing works and technical supervision until all works are completed.
It is true that doing things yourself gives you a better choice of materials; however, good turnkey finish offers enable you to choose your materials from a diverse catalogue, usually offering a number of finishing packages at different price points. What is more, buyers often underestimate the final cost of finishing a newly-built apartment, and the actual cost is noticeably higher than their initial estimates. 
The contract for turnkey finish is usually concluded with a separate company recommended by the developer, which enables you to get more favourable offer than from a completely unrelated entity. However, you should keep in mind that the developer bears no responsibility for the actions of the finishing company and you should settle all claims directly with them. 

10. Property management and use of the apartment bought from a developer – what about the rent?

Starting with the final agreement, the developer decides how to manage the property. The first possibility is entrusted management, which is entered in the land and mortgage register and takes over the management of a common property. The second is appointed management, usually made up of apartment owners. In this case, no management company is entered in the land and mortgage register. The estate may also be administered by a selected manager, with no participation of any management company. 
Regardless of the chosen method of property management, at the point of concluding the first final agreement, a housing community is established, made up of apartment owners. This community has the right to vote and make all decisions pertaining to the maintenance of the building. 
Rent for an apartment purchased from a developer is based on the needs of the building. The preliminary calculation of the rent is made only after the developer chooses an administration company and depends on the decision of the housing community. The rent for an apartment purchased from the developer includes:
contributions to the maintenance of common areas; 
utility charges (such as water supply);
renovation fund and other measures to be decided by the housing community.