Is the perpetual usufruct transformation the best capital investment?
Pursuant to the assumptions of the draft law adopted by the government, concerning the transformation of the right of perpetual usufruct of land built for housing purposes, new owners will be obliged to pay the transformation fee equal to the annual fee for perpetual usufruct, in force on the day of transformation (i.e. on 1 January 2019, in accordance with the current assumptions). Such a fee should be paid for 20 consecutive years. Perpetual usufructuaries of State Treasury land will be able to take advantage of significant allowances, if they decide to make the one-off payment of the entire amount during the first six years of transformation. Communes will be able to determine the amount of possible allowances at their own discretion, so they will be facultative.
It is easy to calculate that, for example, in the case of the annual fee of PLN 1,500, the total fee for transformation of perpetual usufruct (excluding any increases) will amount to PLN 30,000. The situation changes significantly, if we consider the allowances provided for in the draft law for perpetual usufructaries of land owned by the State Treasury. For example, if the land owner decides to pay the entire fee in the first year after the transformation, he will pay only 40% of the total amount, which, according to the aforementioned example amounts only to PLN 12,000 of the total transformation fee. He will save PLN 18,000. In the case of payment of the entire fee in subsequent years from the transformation, the value of the allowance decreases by 10% each year (i.e. in the second year, we can expect 50% allowance, in the third year – 40%, in the fourth year – 30%, in the fifth year – 20% and in the sixth year – 10%). It is easy to calculate that the most cost-effective option for new land owners will be to pay the entire transformation fee in the first three years after the transformation of perpetual usufruct into ownership.
Perpetual usufructaries of transformed lands should treat the possibility of using the aforementioned allowances as the form of deposit of own surplus capital. In the current situation of interest rates on banking products (deposits at the level of approximately 1.3 – 1.7% after taxation), the investment of surplus capital held into the one-off repayment of perpetual usufruct transformation can give measurable and much more profitable savings in the perspective of the remaining 19 years, for which it would be necessary to pay the transformation fee. The one-off payment of the entire amount will also allow you to avoid the risk of possible increases in the fee during the period of 20 years of repayment of the land transformation into ownership.
It is worth noting that the service and commercial premises will also be transformed, but only into buildings where the residential function dominates (e.g. shops, banks, post offices, pharmacies, medical facilities, gyms, etc.).