REmarks #1 To be or not to be (residential)

22 February 2023
Recently, the real estate market has been watching carefully the repercussions following the refusal of the Warsaw city hall to confirm the independence of the premises completed as part of the recognised developer’s investment in the district of Wola.

The dispute in this case relates to the refusal to issue certificates of separation of the premises – a document necessary to establish their separate ownership. It is worth noting that the possibility of establishment of a separate ownership of premises is not limited in Polish legal system to residential premises exclusively. According to the relevant provisions of the act on premises ownership, premises for purposes other than housing may also constitute the separate real estate.

However, practical problems are generated by reference to the norms concerning residential premises to be applied accordingly in this respect. This applies in particular to the inclusion in the scope of this reference of the definition. A residential premise is a room or a group of rooms separated by permanent walls within a building and intended for permanent residence of people, which together with auxiliary rooms serve to satisfy their housing needs.

Accordingly, the aforementioned shall constitute also a definition for the premises of other purposes.

Different technical requirements apply to residential and commercial premises. The legislator naturally places special requirements on premises intended for housing. They should meet the needs for premises intended for a permanent stay of persons, be equipped, among other things, with a kitchen, sanitary facilities, adequate daylight and ventilation. A premises of this type may not have a floor area of less than 25 sq.m. Non-residential premises, depending on their type, should meet other, usually less restrictive, requirements.

The essence of the dispute, in this case, lies in the discussion of whether this is a case of hotel rooms or residential ‘micro-apartments’. This may be considered as possible attempt to circumvent the technical regulations for residential units.

The developer responds, however, that these units were never intended to be residential. It is reflected, in particular, in the amount of VAT applicable to their sale and the lack of permanent residency signalled to purchasers. In addition, they are trendy and often primarily a form of investment – they are rented out on a short-term basis just after purchase.

Condo-hotels (also known as apart-hotels) and institutional rental developments (so-called PRSs) – types of investments that have been popular in recent years, fit perfectly into the same legislative gap. In a condo development, once the units are separated, they are usually immediately made available by their purchasers to the operator, who ‘manages’ the entire facility so that it functions as a hotel.

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Weronika Własienko, Counsel

Paweł Wołosowicz, Associate