Poland - Unlawful practices of developers
Refusing the right to withdraw from the agreement following the change in essential contract terms (e.g. an apartment price) is the most frequent practice of developers questioned by UOKiK. Last year the President of UOKiK issued 22 decisions on irregularities in standard forms of agreements made by undertakings offering new apartments to consumers.
Developers, housing cooperatives and social housing associations – i.e. developers offering apartments, have the same obligations towards consumers. In order to protect the rights of weakest market participants, the Office inspects, on a regular basis, standard forms of agreements applied by real estate market companies.
Last year the President of UOKiK issued 22 decisions on development companies, imposing 13 fines of total value amounting to PLN 680,769. To compare, in 2011, developers were issued 46 decisions and imposed fines of total value exceeding PLN 1 million. It is positive that 15 undertakings have voluntarily committed to cease or just have ceased the practices challenged by the Office.
The most frequently questioned practices
The basic problem was the application, in standard forms, of provisions the same as those entered in the register of prohibited clauses. Last year the Office questioned 135 of such provisions (269 in 2011). The contract terms challenged by the office were mainly aimed to deprive a consumer of their right to withdraw from a contract following a change of essential contract terms, e.g. price, area or flat layout.
Peter-House, a company seated in Warsaw, is one of developers applying such clauses. The undertaking’s standard form of agreement contained, inter alia, clauses obligating a consumer to purchase an apartment if its area was different up to 5 % from that assumed in the architectural flat plan, or upon changing the apartment price due to VAT rate. However, under the law, whenever an undertaking changes essential contract terms, including price or area of the apartment to be purchased, a consumer should have the right to withdraw from the contract bearing no costs.
For violating collective consumer interests, the President of UOKiK imposed on Peter-House a penalty amounting to PLN 12,826. It is positive that the undertaking ceased to apply the questioned misconducts. The decision is not final, the company appealed to the court.
Furthermore, the President of UOKiK challenged these provisions which released entrepreneurs from the liability for handing over apartments in due time. Przedsiębiorstwo Budownictwa Ogólnego in Iława may serve as an example here - in the standard form of agreement it applied a non-exhaustive list of prerequisities, defined as other weather circumstances – that might release the company from liability for the investment delays. As a result, the entrepreneur enabled himself to avoid paying contractual penalties in case of any changes of deadline for commission of the apartment for use. According to law provisions, a standard form should contain a clear and exhaustive list of allowable reasons to postpone a deadline to finish an investment. The President of UOKiK ordered to cease the abusive practices and imposed upon the company a fine amounting to PLN 8,429. The decision is legally binding, the undertaking did not appeal to the court.
Another unlawful practice questioned by the Office was the application of provisions hindering a consumer the contract withdrawal, e.g. reserving a right to long-lasting detaining of money on an undertaking’s account, without returning due interests to a consumer or determining grossly high penalties for severing the contract. Such practices were applied by the company Sol & Art Projekt Koszykarska from Kraków, who reserved, inter alia, that in case a consumer terminates the apartment purchase agreement, he or she would be bound to pay contractual penalty equal to 5 % of total sale gross price. According to the Office, the penalty a consumer would be threatened with for severing the agreement was grossly excessive. Under the law, restitution or contractual penalty should only compensate the undertaking’s costs that may have been borne due to severing the contract by the consumer, i.e. remuneration for employees involved in negotiations with a consumer and expenses related to drawing up the agreement. It is positive that the undertaking bound himself to change the clauses questioned by the President UOKiK.
Observance of new provisions
Within the conducted inspections the Office also examined whether the undertakings observe the provisions of the Act on protection of rights of purchaser of an apartment or a single house. As a result, the Office contested the practices by “Family House”, seated in Poznań consisting in reserving in a standard form of contract, that in case of severing the contract due to the consumer’s fault, the entrepreneur may deduct contractual penalty up to 8 % of total amounts of advance payments already effected by the purchaser, however not less than PLN 5,400. Consequently, the company could freely decide on the amount of contractual penalty and the consumer was not provided with full information on all financial obligations he or she could be imposed in case of failing to execute the contract. However, under the provisions of the Act on protection of rights of purchaser of an apartment or a single house, if an agreement between a developer and a consumer provides contractual penalties, it should also provide the amount thereof. For applying practices violating collective consumer interests the President of UOKiK imposed upon Family House, a company seated in Poznań, a penalty amounting to PLN 103,689. It is positive that the undertaking ceased to apply practices challenged by the President of UOKiK. The decision is not legally binding, the company appealed to the court.
Inspections of undertakings offering apartments to consumers will be continued this year. The Office is also planning to publish a report on application of the Act on protection of rights of purchaser of an apartment or a single house.
Assistance for consumers
Practical information regarding agreements with developers is available in the service of UOKiK, in questions and answers section. Consumers may obtain free-of-charge assistance in pursuing their claims at poviat and municipal consumer ombudsmen at municipal or poviat starost offices, or at 0 800 007 707, from Monday to Friday, from 9.00 a.m. to 5.00 p.m. Moreover, consumers may get free-of-charge advice in local branches of the Polish Consumer Federation and at e-mail address: porady@dlakonsumentów.pl operated by the Association of Polish Consumers.