STEP 1

Calculating your budget

To calculate the all-in cost of purchasing an apartment in Poland, you should account for purchasing costs of between seven and eight per cent, which includes three per cent agency fees, two per cent tax (essentially, the Polish equivalent of stamp duty), 1.2 to 1.6 per cent court fees (land registry) and approximately 1.5 per cent notary fees. There are also minimal translation costs to be taken into account, as well.

Court fees and tax are paid on the final contract, payments to the notary are normally split between the two contracts and timing on the payment of the agency fees is usually negotiable.

However, it is advised that payment to the agent should not be made until the signing of the final contract.

STEP 2

Finding an agent

Unlike the more developed markets in the EU, estate agencies in Poland tend to be smaller and more fragmented, particularly in the smaller cities.

At the moment, there isn't a great deal of marketing on the internet, so it's difficult to look for Polish properties from overseas. It is possible to find contact details of the main agents over the internet, though.

STEP 3

Finding a property

Customer service is generally poor and often little is done to help the buyer find the right property. It always helps to spend time sourcing properties but this is particularly important in Poland.

Because the market is fragmented, it is still possible to discover properties that are very reasonably priced. For example, older generations will still call on a friend who owns a family-run agency to sell their property for them, which means that the property may not get the same market exposure as properties sold through the better publicised agencies.

Moreover, in Poland it is virtually unheard of to get an independent valuation of your property, and some of the sleepier back street agents are less aware of market values than perhaps they should be. Nevertheless, as the market matures and agencies expand, this is likely to change.

In some of the larger Polish cities, there are an increasing number of English- speaking property consultants who provide advice and offer bespoke services to help people find properties. For a small fee, they arrange viewings with a number of different agents, who use search criteria that has been predetermined by the investor.

For those who don't have the time to do the searching themselves, this can be an effective way of finding the right property with very little hassle. Consultants should also be able to provide you with an insight into the developing market, too.

STEP 4

Buying a business/ apartment/buy-to-let

Prior to EU accession on May 1st 2004, permission was required by a foreign investor from the Ministry of Internal Affairs and Administration to purchase any property in Poland other than a self- contained residential apartment. Since then the barriers have been lowered: as Poland is a member of the EEA (European Economic Area) either an individual or a company can purchase real estate, or shares in companies that own real estate in Poland without permission.

If you are a foreigner from outside this zone, then permission is still required. There are also exceptions to the rule concerning purchasing land and second properties which are not residential apartments.

Although most private foreign investors purchasing residential property for personal use and buy-to-let purposes tend to do so as individuals, the favoured approach in acquiring commercial real estate is via an investment vehicle in the form of a Polish limited company.

STEP 5

The contract

The property system in Poland is in many ways similar to that of the UK, if not quite as sophisticated. After finding a property and agreeing the price, in order to get the property taken off the market, you will need to enter a pre-agreement. This is a legally binding contract signed at the notary office that commits both the buyer and the seller to completing the transaction. When buying a residential apartment, a deposit of 10 per cent is put down at this stage and a date set for the final contract on which the purchase will be completed.

The time between the preagreement and final contract is rarely greater than three months, unless the property is being redeveloped. These agreements can be modified according to the circumstances of the purchase. Often, both parties will stipulate severe financial penalties should either party fail to fulfil their requirements. It is possible to complete the entire transaction quickly by missing out the pre­ agreement stage of the process and entering into the final contract immediately, although this is normally only the case for cash purchasers. It is common practice for the notary or a legal representative to check the title of the property at the courts shortly before such contracts are entered.

The final contract, also signed in the presence of a notary, is the point at which the final payment is made, contracts are exchanged and the courts instructed to transfer the ownership title on the property into the buyer's name. The buyer's copy of the final contract is the equivalent to the deeds in the UK.

When buying commercial real estate the process is essentially similar, although greater legal assistance is normally required.

STEP 6

Securing a mortgage

Although it's possible to secure a mortgage in Poland, most lenders will not lend to foreigners. As with borrowing in the UK, you will need backdated proof of income. Banks also consider disposable income-related factors such as dependant children and credit card debt in order to calculate how much they will lend against the value of the property. Some banks will lend up to 80 per cent of the value (80 per cent loan, 20 per cent deposit) if you meet their criteria.

Lending rates are more expensive than in the UK, partly owing to the lack of competition in the market and partly because of the bad debt situation in Poland. Buy-to-let mortgages are not yet available.

Because of the difficulty and cost of borrowing in Poland, most private investors finance their purchases by remortgaging their UK properties. However, there are specialist UK lenders that will lend money secured against Polish property. Although you're effectively borrowing the money from a Polish lender, such companies administer the paperwork from the UK making the process more manageable.

It is also possible for companies to borrow money in Poland or indeed, for companies set up in Poland for investment purposes to do so. Again, this market is undeveloped and the number of potential lenders limited.

The information provided by the lenders can be inconsistent and seeking help to set up a company and arrange finance for the company may save a lot of time and effort.

STEP 7

Arranging a survey

In Poland, a homebuyer survey is not as integral a part of the purchase process as it is in the UK. Surprisingly few Poles have any sort of survey done when purchasing a property. As a result, there are no licensed surveyors. However, you can commission a report from a licensed builder, which typically comes in the form of a one or two page summary and costs around ^45, including translation.

STEP 8

Title services

Poland, like the UK, has a dedicated department which looks after the register of every property in the country. The fees for transferring the registered owner on a property are calculated by a complicated matrix, which typically works out at about 1.2 per cent of the total cost for an apartment costing around ^50,000.

Caution should always be exercised, however, when confirming the status of the title of a property in Poland — much more so than in the UK. There are a number of complex reasons for this relating to the Second World War and the ensuing 50 years of communist rule.

When the Nazis invaded Poland in 1939 they confiscated property and possessions from the Jewish people, many of whom were later massacred in the Holocaust. After the war ended, Poland was annexed behind the Iron Curtain and came under the control of the Soviet Union; housing was decentralised, which meant that it became state owned, complicating the current ownership situation further. /

One of the most common questions from foreign buyers wanting to invest in Polish real estate is, 'Could a displaced Jewish family, or a relative of a Holocaust victim, lay claim to my property at some point in the future?' There is a very remote chance that this could happen, but it's a situation that becomes increasingly unlikely as time passes.

The law surrounding this is very complicated but as a rule, if you are buying an apartment, then it is almost impossible for anyone to reclaim it due to the nature of shared ownership. If there is a potential claim over a building that has been split into apartments, then the government is most likely to resolve the problem by paying compensation to the claimant rather than entering a complicated legal battle that would have to involve the owners of all the apartments in the block.

More caution should be aired with regards to entire buildings, which are typically called kamienicas (or townhouses).There are still kamienicas that are considered not to be 'clean', meaning that you may not be fully protected by the law from claims if you purchase them. Such buildings, although they may contain apartments, will still typically have one title to the building.

It is essential to get the register of the building checked thoroughly by a good lawyer or notary. They will look at the history of the transactions of the building and the documentation associated with it and deduce whether there are any risks associated with its title.

It's also recommend that foreign investors avoid purchasing apartments that are not hipoteczne. This word actually means 'mortgage' but it describes apartments that have their own independent registry number at the courts. In the case of the buildings that have only one registry number but are split into apartments, it is possible to buy a flat that has a 'community ownership', whereby you are purchasing a share in the building in which the apartment is located.

Although 'community-owned' flats sell for quite a lot less money than hipoteczne apartments, potential legal complications make this type of investment more risky for an overseas buyer.

STEP 9

Completing the sale

The sale is completed when the final contract is signed. At this point the keys should be handed over .

STEP 10

Taxes

Poland has a double taxation treaty with the UK so you won't be taxed twice for any tax that you pay in Poland. It is recommended that a bank account is opened prior to entering the purchase process.

Most notaries have escrow accounts (or client accounts) that can be used to transfer money into and are not accessible other than by the client's authority.

STEP 11

Renovating a property

Many properties in Poland have been neglected for years and more often than not, buying a property here will involve some redevelopment. For example, developers in Krakow are currently buying old, neglected buildings, creating architects' plans for apartments and selling them off-plan before the work begins. In this case, a larger deposit and even some instalments may be required during the progress of the work. All such details are mapped out in the pre-agreement. A similar format may be used for buying a unit in a new build development.