Perpetual usufruct vs. ownership of land

How does perpetual usufruct (użytkowanie wieczyste) of land differ from owning it? What are the rights and obligations of an owner and of a usufructuary? How does it affect the legal position if you sell the property? The answer is in our latest post!

• What does land ownership give you?
• How can an owner dispose of their land?
• What is perpetual usufruct of land?
• How do you move from perpetual usufruct to ownership of the land?

What does land ownership give you?

Ownership of land is the default and the most advantageous right. It allows you to dispose of both the land and the buildings standing on it far less restrictively than under perpetual usufruct. Of course, the owner is still bound by the rules set out in statutes. However, they can collect the fruits of ownership and dispose of the property.

How can an owner dispose of their land?

• Collect income (for example, a fee for entering the property)
• Give the property away
• Sell the property
• Develop the land (in line with the letter of the law)
• Establish limited property rights
• Encumber it with a mortgage

An important point is that the owner of land does not have to pay an annual fee (although they still pay property tax on the buildings located on their land).

What is perpetual usufruct of land?

The fundamental difference between ownership and usufruct is… the agreement granting the land in perpetual usufruct. It contains provisions that somewhat limit the usufructuary's power and clearly identify the owner, who is usually the State Treasury or the city/municipality. However, if we put up a building on the land we use, we become the owners of that building (even though the land does not belong to us). We will also have to pay a so-called annual fee, which is a percentage of the value of the land.

An interesting fact (and one worth noting) is that, despite its name, the right of perpetual usufruct is usually granted for 99 years, with the option of extension.

READ ALSO – BEFORE YOU BUY A BUILDING PLOT..

How do you move from perpetual usufruct to ownership of the land?

The answer is: you don't. In July 2018 the Polish Sejm passed a new act on transforming the right of perpetual usufruct of developed land for residential purposes into ownership of the land, under which all perpetual usufructuaries of land with residential buildings on it will become its owners. This involves an obligation to pay a transformation fee over a period of 20 years.

However, the Sejm provided for a discount for those payers who decide to pay the amount as a single lump sum. The discount is as much as 60% (provided the fee is paid in the first year after the transformation). With each following year (up to the 6th year after the transformation) the discount will be 10 percentage points smaller.

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