A 400 sqm apartment on the 50th floor of a skyscraper for PLN 5,000? It sounds unrealistic, and that’s exactly the price at which one Polish investor is selling the rights to his apartment, and could earn nearly PLN 100 million.

This is, of course, an epic flip. A lot has already been written about this transaction. However, questions about its legal and economic basis are rarely raised. And that’s a pity, because they are not clear. After all, how is it possible that:

1. an individual, with the help of a website, can legally collect more than 100 million zlotys, when in a similar situation companies have to bear the high costs of a public offering and be subject to supervision by the FSA?
2. shares in the property together cost 5 times more than the property itself, when in most cases it is difficult to find a buyer of shares in co-ownership even for a minimal price?
3. the seller of the premises can maintain control over its management anyway, despite selling it to several thousand co-owners?

The answer lies in a legal institution that has been around for centuries. The epic flip opens a new chapter in the application of this institution and provokes the question, can other property owners repeat such a transaction? If so, can an epic flip work well as a form of real estate sale, or rather as a scheme to raise capital for investment?

The transaction itself of selling thousands of real estate rights resembles the concept of tokenizing real estate using blockchain. In the case of an epic fillip, however, investors acquire a real right and at the same time a security for investment. In this case, can the shared ownership market replace the capital market or bond issues?

You can read about it in the latest publication by Piotr Frelak, which appeared on Mondaq.

The text is available here.