We can buy Poland!

UK developers or investors who want to acquire property in Poland, or to acquire shares in companies that own a freehold or a 99-year leasehold in real estate, have always had to apply for a permission. That permission, which is issued by the minister of internal affairs and administration, is known as an "MOI permit".

However, that law is about to be changed.

On 1 May, Poland will become a member of the European Union. After that, British and other European developers, under certain circumstances, will no longer have to obtain the MOI permit before they buy land.

The change will enter into force on 26 May, in the form of an amendment to the treaty of accession. The amendment says that, although a citizen of the European Economic Area (that is, the EU plus Iceland, Norway and Liechtenstein) will still be considered a "foreigner" in Poland, they will be released from the need to apply for an MOI permit.

Consequently, it will probably make no difference whether a company registered in an EU member state is controlled by an entity from say Saudi Arabia or the USA, as in both cases the company is regarded as an European, and as such, it will not be required to obtain an MOI permit. However, there will be certain exceptions to this rule.

First, an MOI permit will still be necessary for a transitional period of 12 years from 1 May 2004 in relation to the acquisition of agricultural land or woodland. There are exceptions to this rule, in that an MOI permit will not be necessary if an EEA citizen is acquiring agricultural property in the following situations:

• In certain provinces, if seven years have lapsed from completion of a ground lease and if the foreign national is personally conducting agricultural activity on the property.

• In certain provinces, if three years have lapsed from completion of a ground lease and if the foreign national is personally conducting agricultural activity on the agricultural property.

An MOI permit will also be required when an EEA citizen intends to acquire a second home – that is, property that is designated for residential use or for recreational and relaxation purposes, but which will not be the foreign national's permanent place of residence.

This rule applies for a transitional period of five years from 1 May 2004, again with certain exceptions:

• A foreign national will not need a permit if they have been a legal resident in Poland for at least four years.

• If the land is being acquired in order to carry out hotel and leisure activity.

After Poland joins the EU, citizens from countries that are not members of the EEA will still be expected to obtain an MOI permit.

An MOI permit will also still be required if a foreign national intends to acquire shares in a company that owns the freehold or a 99-year leasehold on Polish land if, as a result of such an acquisition, a foreign national buys the majority of the shares. Similarly, a permit will be required if a company is already controlled and an acquiring foreigner is not yet a shareholder of the company.

EEA citizens, however, will as a rule be released from the obligation of obtaining an MOI permit in such cases.

Under the Treaty of Accession's amendment, it is still not clear whether such a rule applies to agricultural property. That issue still needs to be clarified by Polish legal practice and doctrine.

The treaty's amendment makes the acquisition by foreigners of land in Poland much easier by limiting the restrictions on them, although permits will still be required in some cases in relation to agricultural property.

One thing is certain, however: the liberalisation of the law will make the business of developing in Poland a great deal easier for foreign investors.