Open or closed escrow account in Poland: which is safer

A closed escrow account protects your money most directly: the bank pays the developer only after the notary has transferred ownership of the apartment to you. An open account releases money stage by stage, after the bank checks each stage, and in return your payments are covered by the Developer Guarantee Fund (DFG). Both are legal. What matters most is that you pay only into the account named in your agreement.

Since July 2022, every developer selling apartments under the Developer Act must open a housing escrow account (mieszkaniowy rachunek powierniczy) for each project, or for each stage it sells separately, and choose one of the two types.

Open and closed accounts compared

With a closed account the developer has to finance the whole construction from its own money or loans until the final deed. That is why open accounts are more common in practice.

When does the bank pay the developer from an open account?

Only after a construction stage in the schedule is finished and the bank has checked it, and no earlier than 30 days after the agreement. Money for the last stage is paid only after the deed transferring ownership.

The bank does not simply forward your payments. Before each payout it checks, among other things, that:

1. the developer owns the plot or holds it in perpetual usufruct, or has the owner’s consent to register buyers’ claims;
2. no bankruptcy or restructuring proceedings have been opened against the developer, using the company register (KRS) and the National Register of Debtors (KRZ);
3. the developer has a building permit, or has notified the works without objection from the authority;
4. the money paid out so far was spent on this project;
5. a person appointed by the bank with building qualifications confirms the stage is finished, from the site log (dziennik budowy) and documents showing actual progress.

If any of these checks fails, the bank stops payouts and gives the developer a deadline to fix the problem. Some items, such as unpaid taxes or debts to contractors, are checked only on the basis of the developer’s own statements, so the control is strong but not complete.

You pay in step with construction too: each payment falls due after the stage it covers is finished, and the developer must tell you on paper or another durable medium that the stage is complete.

What does the Developer Guarantee Fund pay back?

Payments made into an open account, if the developer goes bankrupt and the project is not continued, or if you lawfully withdraw from the agreement and the developer does not repay you within 30 days. For both account types, it also pays what the Bank Guarantee Fund does not if the escrow bank fails.

The fund is managed by the Insurance Guarantee Fund (UFG) and paid for by developers. It refunds payments made into an open account when:

• the bankruptcy court refuses to let the trustee continue the project, agrees to stop it, or does not decide within three months of the bankruptcy;
• the trustee or a restructuring administrator withdraws from your agreement;
• you lawfully withdraw from the agreement, for example because the prospectus was not delivered or the developer missed the transfer deadline, and the developer does not repay you within 30 days.

For both account types, if the escrow bank fails, the fund pays what the Bank Guarantee Fund does not. According to UFG, the law sets no upper limit on a refund. The Act caps the contribution at 1% for open and 0.1% for closed accounts. The rates in force are 0.45% and 0.1%, set by the 2022 regulation.

Open or closed escrow account: which is safer?

A closed account protects your money more directly: it stays in the bank until you own the apartment, so if the developer fails, it has not been spent. With an open account, your money finances construction under the bank’s stage-by-stage control. If the developer fails, the guarantee fund refunds you, but only after the events listed above, which can take time.

Choose the project first. The type of account is one factor among many, alongside the developer’s track record, the land register and the building permit. Our guide on how to check a developer in Poland covers the rest.

What to check before you pay

1. The account type, bank and account number. The development agreement must state them, together with how the money may be used and what the account costs. The prospectus states the type of protection too.
2. Pay only to that account number. Never pay into the developer’s ordinary account or in cash. If you paid a reservation fee, the developer must transfer it to the escrow account within 7 days of signing the development agreement.
3. Pay when a stage is finished. Wait for the developer’s notice that the stage in the schedule is complete.
4. Ask the bank for your statement. The bank records payments and payouts separately for each buyer and must give you the dates and amounts on request.
5. Watch for a change of bank. If the bank terminates the account, the developer has 60 days to open the same type of account at another bank and 10 days after that to inform you. You may suspend payments until you are informed. If no new account is opened in time, the bank returns the money to buyers and you may withdraw from the agreement.

How this relates to Havkey trust levels

Havkey does not yet show the escrow account type and bank on project pages, so the escrow account is not part of any trust level. Check it yourself in the prospectus and the agreement. What our levels do cover is described in how Havkey verifies developers and projects. To check the land register of the plot, see how to read a land register online.