Miniseries: Building Act - first month of effectiveness

The Building Act applies to all of us, not only if we embark on a construction project, but also if another activity is regulated in the territory, or other construction in the territory affects us.

The new Building Act (Act No. 283/2021 Coll.) will apply to the first group of buildings, namely reserved buildings, from the beginning of 2024. In the middle of the year (from 1 July 2024) it will apply to all other constructions. Thus, for most projects, the rules of the (old) Building Act No. 183/2006 Coll. will continue to apply during this "transitional period".

There is no need to recall or elaborate on the demanding legislative process or the postponement amendment or the substantive amendment that are associated with the new Building Act. However, there is still a great deal of uncertainty surrounding the application of the new law, as everything is new and requires practical testing of new procedures. In our contribution we would like to focus on what the Construction Act brings for the builders or other participants in the construction processes, on selected areas of the new legislation.

In today's piece we select the new regulation of planning contracts.

Planning agreements are legally binding arrangements between a municipality (region) and an investor (developer) for its participation in the construction of new or modification of old public infrastructure, or in other areas. Their purpose is to plan and implement sufficient infrastructure facilities for the municipality and to ensure their financing, as well as to provide support for the investment project and prepare the conditions for its implementation.

In terms of the legal instrument, the so-called innominate contracts pursuant to Section 1746(2) of Act No. 89/2012 Coll., Civil Code, have typically been used so far, as no other instrument has been regulated publicly for these situations. However, even in such circumstances, planning agreements have been approved by the courts as relevant, binding and enforceable instruments for regulating relations in the territory.

The new Building Act already deals with planning agreements in more detail (see § 130 et seq. of the new Building Act). Specifically, it classifies planning agreements as public law agreements, thereby determining their legal nature and procedural regime.

According to the Act, a planning contract is therefore a public law contract concluded between a builder and a municipality, a municipal district of the capital city of Prague or a region or an owner of public infrastructure, the content of which is a mutual obligation of the parties to provide each other with cooperation in the implementation of the project specified in the contract and to proceed with its implementation in the agreed manner. At the same time, the planning agreement may also contain the regulation of the rights and obligations of persons in the area of private law.

The planning agreement may contain an obligation of the municipality (city) to provide the developer with assistance to carry out the project or to take steps to issue planning documentation in favour of the developer's project or an obligation not to take any action that would make it difficult or impossible to carry out the project for an agreed period of time.

The builder undertakes, in contrast, to participate in the construction of public infrastructure or other structures or measures induced by the project, to assume the costs of the construction of public infrastructure or public utility structures or measures induced by the project, or to provide monetary or in-kind consideration for the enhancement of the land through the issuance of planning documentation.

Please note the specific type of planning agreement in relation to the zoning plan. Pursuant to Section 81(3) of the new Construction Act, an area or corridor may be defined in the zoning plan in which decision-making in the territory is conditional on the conclusion of a planning agreement. In such a case, the zoning plan shall determine the basic content of the planning agreement, the conditions and the time limit for its conclusion, which shall not be longer than 6 years from the entry into force of the zoning plan.

As can be seen from the outlined content of planning agreements, they can actually strengthen the position and security of the developer in the implementation of his project. At the same time, they can help municipalities to implement the necessary infrastructure structures and thus contribute to the development of the area in question. It may also be possible to address the environmental or social needs of municipalities related to the developer's project through planning agreements.

The parties to a planning agreement must be aware that the building authority will not take into account their objections if they conflict with the planning agreement to which they are parties (Section 190(2) of the new Building Act). A similar principle is also reflected in the appeal procedure (Section 226(2) of the new Building Act).

The general regulation, the Administrative Code (Act No. 500/2004 Coll.), is to be applied in the alternative to public contracts and the process of their conclusion. The planning agreement is subject to approval by the council of the relevant local authority.

An important difference from the old planning agreements as private law arrangements is the review of public planning agreements and the resolution of disputes arising from them in the public administration.

The regional authority is competent to review the compliance of a planning agreement concluded by a municipality with legal regulations and to decide on disputes arising therefrom; in the case of municipal districts of the capital city of Prague, the Municipality of the capital city of Prague is competent; in the case of a planning agreement concluded by a region or the capital city of Prague, the Ministry of Regional Development is competent.

In view of the newly set rules, we recommend that detailed attention be paid to planning agreements on the part of both municipalities and investors.