Planning Agreements with Municipalities: Key Terms to Protect Your Project

Mgr. Klára Megová
Mgr. Klára Megová
3.6.2026 | ARROWS law firm

A planning agreement is not just a formality – it is a strategic tool that defines the rules of the game between your company and the municipality. Poorly structured terms risk a building moratorium, an amendment to the zoning plan to the detriment of your project, or the project being blocked altogether. In this article, you will learn what a well-drafted agreement must include, how to protect your interests, and why it is better to entrust its preparation to experts to avoid unnecessary costs.

Fotka zobrazuje právníky diskutující o tématu plánovací smlouvu.

Quick summary

  • A planning agreement is a public-law instrument regulated by the new Czech Building Act, enabling a municipality and a developer to mutually set out rights and obligations in the area.
  • The new Czech Building Act unified the rules: without a clear agreement, in certain cases you may not obtain a permit for the project, or the municipality may later be reluctant to take over the completed infrastructure.
  • A critical risk is systemic bias, which may lead to the permit being annulled. It is essential to draft the agreement so that it does not raise suspicion that the developer is “buying” the authority’s decision.
  • Without knowledge of the legal details and the links to the Czech Building Act and the Administrative Procedure Code, you risk wasted investments in infrastructure or the project being blocked.

What a planning agreement is and why it matters

Until recently, municipalities and developers entered into various unnamed cooperation agreements whose enforceability was questionable. The new Czech Building Act clarified this situation and, in Section 130 et seq., explicitly regulates the planning agreement. It is a public-law agreement with a different nature than standard commercial contracts.

While an ordinary private-law contract is governed by the Civil Code and disputes are resolved by civil courts, a planning agreement is subject to the regime of the Administrative Procedure Code. Disputes arising from it are decided by the superior administrative authority (typically the Regional Authority), and its compliance with the law may be reviewed in supervisory review proceedings.

This brings fundamental advantages as well as risks. The Building Authority must take the agreement’s contents into account, but if the agreement is drafted contrary to the law, it is invalid from the outset or voidable. Proper drafting requires deeper knowledge of the Czech Building Act, the Administrative Procedure Code, and the case law of the administrative courts. When setting up a planning agreement and the related steps in permitting proceedings, it may be useful to rely on experience in development and construction law.

Two basic types of situations for entering into an agreement

The new Czech Building Act distinguishes between situations where the agreement is a condition for decision-making in the area and where it is concluded voluntarily.

Conditional agreements – designated in the zoning plan

In this case, the municipality sets, in the zoning plan, the conclusion of a planning agreement as a condition for decision-making in the area. This condition prevents speculation and ensures that the developer contributes to the public infrastructure that the project will necessitate.

The condition to conclude a planning agreement applies for a maximum of 6 years from the effective date of the zoning plan (or its amendment), unless the zoning plan sets a shorter period. In the case of a regulatory plan, this maximum statutory period is 4 years. If the agreement is not concluded within the set period or no application for a permit is filed, the condition expires by operation of law and the area becomes developable even without this agreement.

Please note that even if the condition expires, the municipality may use other instruments (e.g., a building moratorium) if the infrastructure capacity in the area is insufficient. Therefore, negotiating with the municipality is always preferable to waiting for the period to lapse. The practical impacts of municipalities’ requirements (e.g., for off-street parking) are also discussed in more detail in the article Current requirements for parking spaces in development projects: Optimising solutions for statutory cities and avoiding sanctions.

Voluntary agreements – an ad hoc solution

The second type is concluded when a project requires an amendment to the zoning plan or the construction of infrastructure that the municipality does not own or cannot fund, but the zoning plan did not explicitly set the agreement as a condition.

Flexibility is key here, but so is legal certainty. Both the developer and the municipality must be sure that the investment in utilities or roads will subsequently be taken into account (e.g., transferred to the municipality). Without an agreement, there is a risk that the developer will build utilities on someone else’s land and the municipality will refuse to take them over for administration.

Related questions on the types of planning agreements

1. Which situation is more advantageous for me as a developer?
An agreement designated in the plan provides a clear framework—you know it cannot proceed without it, but you also have a clear time limit. A voluntary agreement allows room for a more creative solution, but requires greater willingness on the part of the municipality to negotiate.

2. What happens if the municipality designates the agreement in the plan but we do not conclude it within the time limit?
The condition falls away after 6 years under the new Czech Building Act. The area is theoretically developable, but you still must demonstrate that infrastructure is secured within the permitting proceedings.

3. Can I try to circumvent the statutory condition?
If the condition is validly included in the zoning plan, the Building Authority cannot issue a permit for the project without submission of this agreement.

Contents of a planning agreement: What it must include and what is prohibited

The law defines the content requirements only in broad terms; there is significant room for negotiation, but the boundaries are set by the public interest and legality. In practice, it therefore pays to have contractual mechanisms and a negotiation strategy addressed in advance within contracts and negotiations.

What the municipality may undertake (and what it may not)

The municipality acts in two roles: as a self-governing authority (property owner, political leadership) and as a holder of public power. In a planning agreement, these roles must be separated.

The municipality may undertake:

  • That it will provide cooperation in the proceedings on the permit for the project.
  • That it will take steps within its independent competence to procure an amendment to the zoning plan (e.g., discussion in the municipal council). If the zoning plan amendment affects your rights, the procedure described in the text How to challenge a zoning plan amendment in court may also be relevant.
  • That it will establish easements or sell or lease the land needed for the construction.
  • That for a certain period it will not initiate zoning plan changes to the detriment of the project.

The municipality cannot undertake:

  • That the municipal council will approve the zoning plan amendment (councillors vote freely; the outcome of the vote cannot be guaranteed).
  • That the building authority will issue the permit (the building authority performs state administration, and the municipality cannot instruct it how to decide).
  • That it will waive the right to raise objections in cases where the construction would endanger the lives or health of residents.
Related questions on the contract content and legal limits

1. Can I enforce, in an agreement with the municipality, that it will not change the zoning plan?
Yes, the municipality may undertake that for a certain period it will not initiate a plan change that would frustrate your project. If it breaches this, it is liable for damages.

2. What if the municipality promises to build a school and then does not do it?
If the obligation is clearly defined in the contract (deadline, penalties), it is enforceable. In the case of a public-law contract, performance can be enforced under the procedure set out in the Czech Administrative Procedure Code.

Specific content: What the municipality undertakes and what the developer undertakes

Let’s go through what these contracts typically contain in practice. The obligations must be balanced and proportionate.

Municipality’s obligations
  • Property dispositions – consent to locate the construction on municipal land, future transfer of land under roads.
  • Cooperation in the process – active participation in discussing the zoning plan amendment.
  • Taking over infrastructure – an undertaking to take over newly built roads, public lighting, or water mains into municipal ownership after final approval.
Developer’s obligations
  • Financing or construction of public infrastructure – roads, sidewalks, parks, utilities.
  • Financial contributions – an increasingly common model where the developer pays the municipality an amount calculated according to a methodology.
  • Transfer of land – donating land under public infrastructure to the municipality.

All obligations must have a deadline and a clearly defined consequence of breach (contractual penalty, withdrawal from the contract).

Critical risk: Systemic bias

Although the new Building Act has adjusted the structure of building administration, most building authorities have remained integrated into municipal offices. This continues to generate the risk of so-called systemic bias. If a municipality has an enormous economic interest in the project, suspicion may arise that the officials of the building authority are not impartial—for example, if the municipality receives tens of millions from the developer or a key facility free of charge.

Case law of the Czech Supreme Administrative Court shows that if the municipality’s interest in the outcome of the proceedings is too intense and the contract is extremely one-sided, the court may annul the issued permits due to the authority’s bias.

How to minimise the risk:

  • The contract must not appear as “buying a permit”.
  • The developer’s contributions must be proportionate to the induced costs of public infrastructure (the principle of proportionality).
  • The contract should be concluded transparently, ideally on the basis of approved general principles for developers.

Timeline and deadlines

Concluding the contract is a process, not a one-off act of signing.

When to start negotiations

Ideally in the preparatory phase of the project (the study phase), before submitting an application for the project permit or for a zoning plan amendment. At this stage you have the greatest negotiating leverage.

How long it takes

A realistic estimate for concluding a high-quality planning agreement:

  • 1–2 months: initial meetings, presentation of the project.
  • 2–3 months: legal drafting of the text, comments, negotiations on the amount of the contribution.
  • 1–2 months: approval process within the municipality’s bodies.

In total, plan for approximately 6 months. Acceleration is possible, but often at the expense of the contract’s quality.

Risks and penalties

How ARROWS helps (office@arws.cz)

Failure to issue the project permit: The building authority suspends the proceedings because the project is not in line with the zoning plan.

Negotiating the contract: We will prepare a contract that meets the statutory requirements for issuing the permit and unblocks the process.

Permit annulled by the court: The court annuls the permit due to systemic bias caused by an inappropriately drafted contract.

Risk analysis: We will assess the contract through the lens of the Supreme Administrative Court’s case law and adjust it to minimise the risk of allegations of bias.

Invalidity of the municipality’s obligations: The municipality refuses to take over the newly built sewerage system; you must pay for its operation and maintenance.

Enforceability: We will set precise conditions for the future transfer of assets and secure them with a contractual penalty.

Wasted investment in the project: You pay for project documentation for a zoning plan amendment, but the municipal council ultimately does not approve it.

Investment protection: We will incorporate mechanisms into the contract for reimbursement of costs or other compensation within the limits of the law.

Security instruments: So the contract is not just paper

A contract without sanctions is only a gentlemen’s agreement. In development practice, stronger guarantees are necessary.

Bank guarantees and security deposits

Municipalities often require the developer to provide a financial security deposit or a bank guarantee to secure performance of its obligations. It is crucial to set the drawdown conditions correctly so that the municipality cannot abuse the guarantee over a trivial breach.

Contractual penalties

They must be proportionate and balanced. If the developer pays a penalty for delay in construction, the municipality should also face a sanction if it unjustifiably delays providing cooperation or taking over the completed works. Note that enforceability of penalties against public authorities is specific, but possible.

Easements (servitudes)

For utilities routed across municipal land, it is necessary to agree a contract on a future contract to establish an easement for utility networks. Without this title, the building authority will not issue the project permit.

Compatibility with other regulations

A planning agreement does not exist in a vacuum. It must comply with:

  • Administrative Procedure Code (Section 159 et seq.): A public-law contract must not conflict with legal regulations or the public interest.
  • Municipalities Act: The contract must be approved by the relevant municipal council. Without this approval clause, the contract is absolutely void.
  • Tax regulations (VAT): The transfer of infrastructure to the municipality has tax implications. It is necessary to assess whether this constitutes a free-of-charge supply, or whether it is an induced investment related to the developer’s economic activity.

Practical steps: From first contact to signing

  1. Preparation: Analysis of the zoning plan, identifying the municipality’s requirements, and contacting an attorney.
  2. Negotiations on the project: Presenting the study to the municipality’s leadership and the first draft of the terms.
  3. Contract draft: Legal wording addressing details such as deadlines, penalties, and the conditions for transferring utility networks. At this stage, ARROWS advokátní kancelář, a Prague-based law firm, eliminates provisions that are disadvantageous for the client.
  4. Approval process: Discussion in the municipal council and municipal assembly.
  5. Signing and effectiveness: Signing the contract and attaching it to the application for the project permit.

Where mistakes are usually hidden

  • Vagueness of obligations: “The developer will contribute to the development of the municipality” is legally unenforceable.
  • Missing approval clause: If the contract lacks confirmation of approval by a municipal body, the contract is invalid from the outset.
  • Omission of VAT: The contract does not address whether the amounts are inclusive or exclusive of VAT, and who will account for the tax upon the transfer of infrastructure.
  • Ignoring the new Building Act: Using old terminology or references to repealed provisions may cause interpretation issues.

Conclusion

A planning agreement is key to successfully obtaining a project permit and ensuring the long-term stability of the project. The new Building Act provides it with a clear framework, but it also brings stricter requirements for procedural correctness. A poorly drafted agreement may lead to invalidity, court disputes, or allegations of corruption or bias.

The attorneys at ARROWS advokátní kancelář have long focused on construction law and development. We are familiar with the methodologies of major cities, the case law of the administrative courts, and we know how to set up relationships with a municipality so that they are proper and safe for both parties.

If you are preparing a development project, do not underestimate the negotiation phase with the municipality. The cost of expert legal assistance in the tens of thousands of Czech crowns is negligible compared to the risk of jeopardizing an investment worth millions. Contact us at office@arws.cz for a non-binding consultation regarding your project.

FAQ 

1. Do I have to enter into a planning agreement with the municipality?
If it is a condition in the zoning plan, then yes—it is necessary to obtain the permit. In other cases it is voluntary, but often essential for practical connection to infrastructure or for amending the zoning plan.

2. What is the validity period of the condition in the zoning plan?
Under the new Building Act, it is 6 years from the effective date of the zoning plan or its amendment, unless the plan sets a shorter period.

3. Can the municipality change its mind after signing the contract?
A public-law contract is binding. The municipality may amend or terminate it only in cases provided by law, and by following the procedure under the Administrative Procedure Code, not arbitrarily.

4. How much will I typically pay in contributions?
This is individual and depends on the location. Some cities have fixed rates (e.g., CZK 800–2,500 per m² of gross floor area), while elsewhere it is subject to ad hoc negotiations on specific infrastructure costs.

5. Am I at risk of having the permit revoked because of the contract?
If the contract contains obligations that unlawfully bind the building authority to a specific outcome, or is manifestly disproportionate, it may be challenged and annulled, which would also jeopardize the subsequent project permit.

Notice: The information contained in this article is of a general informational nature only and is intended for basic guidance based on the legal situation as of 2026. Although we strive for maximum accuracy, legal regulations and their interpretation evolve over time. We are ARROWS advokátní kancelář, an entity registered with the Czech Bar Association (our supervisory authority), and for maximum client protection we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of regulations and their application to your specific situation, it is necessary to contact ARROWS advokátní kancelář directly (office@arws.cz). We accept no liability for any damages arising from the independent use of the information in this article without prior individual legal consultation. 

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