Supreme Audit Office (Najwyższa Izba Kontroli, NIK) on the sale and letting of land by municipalities

Breaches of laws and regulations leading to shortcomings in tender procedures, failure to ensure a fair valuation of land being sold, and a lack of transparency in property management – these are just some of the irregularities identified by NIK during its audit of selected municipalities. The most common causes of the irregularities were: misinterpretation of the Real Property Management Act and a failure by staff at the audited entities to exercise due diligence when taking action relating to the sale and letting of land, as well as ambiguous legislation.

Real property management is a responsibility of the local authority, whilst starosts (mayors of cities with district (poviat) status) carry out government administrative tasks in relation to real property owned by the State Treasury. The rules governing the management of such properties and those owned by local government bodies are set out in the Property Management Act. 

The day-to-day management of the municipality’s real property falls within the remit of the municipality’s executive body. Matters going beyond the scope of day-to-day management fall within the remit of the local council, which may adopt rules governing the acquisition, sale and encumbrance of real property, as well as its lease with/without the right to collect proceeds.

The main objective of the audit conducted by NIK between 2 December 2024 and 30 May 2025 was to verify whether municipalities had sold and let land correctly and reliably between 2019 and 2025 (up to 30 May). A total of 14 municipal offices were audited, including seven voivodship capitals: Bydgoszcz, Katowice, Kraków, Lublin, Łódź, Olsztyn and Wrocław, as well as seven cities that do not have this status: Częstochowa, Giżycko, Piotrków Trybunalski, Toruń, Wałbrzych, Zakopane and Zamość.

Type of irregularity

The tasks relating to the sale and letting of real property in the 14 municipal offices audited were not carried out in a fully correct and reliable manner. The most significant irregularities identified during the NIK audit concerned breaches of the provisions of the Real Property Management Act and the Local Government Act, the Council of Ministers’ Regulation on the manner and procedure for conducting tenders and negotiations for the sale of real property, as well as the principles of sound financial management. This resulted in a number of negative consequences for municipal offices audited, including, amongst others:

• by foregoing the opportunity to sell the City of Lublin’s attractive properties at a profit in favour of exchanging them with estate agents (some of which were sold to developers on the very same day). Before giving their consent to the swap, the members of the council were unaware that the counterparties were estate agents, and that the valuation reports for two of the 17 plots had been commissioned by the estate agents, not the Mayor. As a result, the contracts benefited the estate agents, who sold the properties to developers at a higher price, and the owners of the properties purchased from them, as they avoided having to compete with other bidders in a tender. The potential amount lost by the City of Lublin from these two transactions alone amounted to PLN 395 thousand. An analysis of the location of the land under review revealed that 12 plots were situated in the immediate vicinity of properties already owned by subsequent purchasers (developers). Therefore, they could have been sold through a competitive process (tender), and the transaction prices could have exceeded the valuation;
• allowing resolutions that are inconsistent with the law to remain in force. In nine towns/cities (Wrocław, Wałbrzych, Bydgoszcz, Kraków, Zakopane, Lublin, Giżycko, Piotrków Trybunalski and Łódź), draft resolutions were submitted to city/town councils proposing that they assume powers reserved for the municipal executive body, or no action was taken to amend them. The general nature of the Act’s provisions regarding local legislation significantly increased the risk of irregularities;
• significant shortcomings in tender procedures (Wrocław, Bydgoszcz, Kraków, Zakopane, Giżycko, Olsztyn, Piotrków Trybunalski and Zamość) and non-tender procedures (Lublin, Zamość, Bydgoszcz, Zakopane, Piotrków Trybunalski, Wałbrzych and Wrocław), consisting, amongst other things, in a failure to comply with the principle of selling property by tender and the use of the non-tender procedure instead, which may result in the court declaring the concluded contracts null and void;
• failure to ensure a reliable valuation of the properties being sold (Częstochowa, Bydgoszcz, Zamość, Kraków, Zakopane and Lublin), which created a risk that the properties were undervalued;
• a lack of transparency in the management of property in all the municipal offices examined, and breaches of the principle of openness regarding the sale of public property.

Reasons for the irregularities

The main causes of the irregularities identified were: incorrect interpretation of the provisions of the Real Property Management Act and a failure on the part of staff at the audited entities to exercise due diligence when taking action regarding the sale and letting of land, as well as ambiguous provisions, open to arbitrary interpretation, governing the content of resolutions on the rules for the sale and letting of land, and the grounds for selling land in order to improve the development conditions of neighbouring land.

With the exception of one case (where a plot of land that had been unjustifiably designated for religious purposes was sold), land was sold for construction purposes in accordance with the adopted spatial planning documents. The terms of contracts for the sale or letting of public property were consistent with the outcomes of the proceedings. In fact, they also safeguarded the interests of the towns/cities.

Key findings of the audit

Although the audited offices had set up dedicated units and assigned them specific tasks relating to real property management, two of the offices had not drawn up any plans for the use of their property portfolios at all, whilst two others had drawn them up with delays ranging from seven months to almost two and a half years. In one town, despite this requirement, no plans had been drawn up for the implementation of the State Treasury’s property management policy, which, in the opinion of the Supreme Audit Office, was unlawful. The remaining irregularities concerned breaches of the principles of sound property management, mainly the inclusion of overly general provisions in resource utilisation plans, as well as delays in drawing up these plans and submitting them to voivods for approval.

Irregularities were identified in four local offices regarding the recording of properties forming part of the municipality’s property portfolio and those granted under perpetual usufruct. The misconduct included, amongst other things, the failure to include in the records information regarding the intended use of the property, claims made against the property, and ongoing administrative and court proceedings.

Irregularities in the wording of draft resolutions were found in eight offices and concerned, amongst other things:

• the inclusion in 20 draft resolutions of individual provisions granting consent to the sale of real property by tender or without a tender, which constituted a breach of the division of powers laid down in the relevant legislation;
• the draft resolutions on the rules for the sale of real property specified the form and procedure by which the property was to be sold, which contravened the law and led to the city/town council assuming powers reserved for the executive body;
• the introduction, in one instance, of a draft resolution on the rules governing the sale of real property, providing for a general exemption from the rule requiring the sale of real property by tender;
• provisions in draft resolutions concerning the rules for the sale of real property, granting general authorisation to waive the requirement to conduct a tender procedure for the conclusion of lease contracts for a term exceeding three years or for an indefinite period, which constituted an overreach of the powers of the city/town councils.

Similar irregularities, including instances where the city/town council encroached upon the powers of the executive bodies, were also observed in the letting of property in six municipal offices.

The executive bodies failed to take action to repeal or amend the provisions of the city/town council’s resolutions that were inconsistent with the Real Property Management Act, which constituted a breach of duty. In two cases, voivods lodged appeals seeking to have resolutions on the rules for the sale of property declared invalid. According to NIK, the provisions of the Act granting the relevant municipal council exclusive authority to determine the rules governing the management of real property are very general; they do not contain clear and unambiguous guidelines for the enactment of local legislation and, in their current form, make it difficult to correctly draft resolutions on the rules for the sale of real property. This results in numerous cases where they are declared invalid by supervisory authorities and administrative courts. As part of their supervisory role over the activities of municipalities between 2010 and 2025, voivods issued 790 final supervisory decisions declaring local council resolutions invalid in whole or in part. These rulings were most often justified on the grounds of a lack of a proper legal basis, exceeding the scope of statutory delegation, failure to publish in the Official Journal, infringement of the freedom of contract, the erroneous classification of resolutions as internal management acts, or the use of ambiguous and unclear wording.

Before giving their consent to the sale or letting of a real property, the members of local councils should be provided with comprehensive and accurate information by the local authority’s executive body regarding the land in question and the method and procedure for its sale or letting. Irregularities in this regard were found in two entities and concerned the provision of inaccurate information regarding who was interested in the properties being sold in exchange, as well as a failure to disclose the intended use of the plot being sold.

The property valuations (valuation reports) were carried out by qualified property valuers. In almost half (43%) of municipal offices irregularities were identified, including the failure of the town/city executive body to arrange for a property valuation and the acceptance of valuations prepared by parties interested in acquiring the property; the confirmation of the validity of valuation reports in a manner inconsistent with the law; failing to verify the valuation report thoroughly and failing to take into account current market data used in the valuation.

In three entities, it was found that rent rates had not been adjusted for inflation, which was unprofessional. The amount corresponding to the loss of rental income resulting from the decision not to implement comprehensive rent regulation amounted to PLN 1.3 million.

The regulations require the competent authority to draw up and publish a list of properties intended for sale or letting. Numerous irregularities were found in this regard in 13 offices. These included, amongst other things: a failure to draw up lists; the absence of required elements in their content; the unreliable publication in the local press of information regarding the display of the list in the locations specified by law; or the complete absence of such publication.

In the offices audited, there was a tendency to move away from the principle of selling or letting the property through a tender process. Of the 14 offices audited, only 1.3% of contracts of lease with the right to collect proceeds were awarded through a tender process, whilst only 0.5% of contracts of lease without the right to collect proceeds were concluded in this manner. For example, in Lublin, out of 10 tenders audited, only one bidder submitted a bid in nine of them. He submitted a single bid, and as a result, the purchase price was only 1% higher than the starting price.

Irregularities were identified in the tender-based sale of public property at eight municipal offices. The illegality or unreliability concerned, amongst other things:

• failure to meet deadlines that would have allowed the property sale procedure to continue without the need to draw up a new list (six cases);
• failure to introduce tender conditions for spouses participating in the tender (25 cases);

In seven offices (50% of those audited), 61 irregularities were identified in the sale of property and one in the letting of property without a tender. These related to the criteria of legality, reliability or economy and concerned, amongst other things:

• the conclusion of contracts for the sale of real property without a tender, despite there being no grounds for waiving the tender procedure;
• failure to safeguard the town’s interests in the report of the negotiations in the event that the other party withdraws from the contract;
• failure to document the outcome of negotiations with lessees.

The financial impact of the identified irregularities totalled PLN 2.3 million and resulted from the misappropriation of funds or assets in three municipal offices. Two cases involved the sale of property for over PLN 1 million, and one involved the letting of property for PLN 1.3 million.

Notices and recommendations

Following the identification of irregularities, NIK issued notices to the Office of Competition and Consumer Protection (UOKiK) and the Central Anti-Corruption Bureau (CBA) to investigate whether anti-competitive agreements had been concluded or whether there had been an abuse of a dominant position in relation to the fact that only one bidder had submitted a tender in four tender procedures, and the exchange of 17 properties, which potential loss to the city/town. 

These irregularities led to 97post-auditrecommendations and two proposals de lege ferenda concerning the inclusion in the Local Government Act of the criteria which the local council should follow when adopting a resolution on the principles of managing public property, and to clarify the wording regarding the impossibility of developing a property or a part thereof sold without a tender by specifying objective and verifiable circumstances determining the impossibility of developing the property or a part thereof as separate property.

The Minister for Finance and the Economy set out his position on the report on the audit findings, casting doubt on the proposals de lege ferenda contained therein. In his opinion on the Minister’s position, the NIK President noted that the findings made during the audit justify the Minister taking appropriate action to implement them, which is undoubtedly in the public interest.

The recommendations submitted to the executive bodies of local government authorities concerned:

• taking steps to ensure that the costs of preparing the real property for sale, whether through a tender process or without a tender procedure, are included in the sale price;
• the inclusion in draft resolutions of local government decision-making bodies of clear criteria for the granting of discounts;
• reviewing the current resolutions of the city/town councils concerning real property management and checking whether they contain any provisions that infringe upon the division of powers between local government bodies.