PeliPartners analysis: Draft Urbanism Code - new rules for initiating a Zonal Urban Plan by private investors

The procedure for initiating zonal urban plans (PUZs) by private investors, whether individuals or legal entities, is subject to a major reform in the draft Urbanism Code currently under parliamentary debate, according to an analysis by the law firm PeliPartners.

“The draft Urbanism Code comes with a number of provisions that grant incentives to investors, such as the elimination of the legal obligation to draw up PUZs in certain areas – central areas, industrial areas/parks, etc. – or the possibility to increase the urban planning indicators POT and CUT based on grounded reasons to a maximum of 30% of the initial value, only once, outside protected areas, compared to the current 20% limit. However, as far as the procedure for initiating a PUZ is concerned, the changes are substantial and the new provisions may raiseserious challenges for investors,” explains Ioana Waszkiewicz, Senior Associate at PeliPartners.

The new procedure focuses on coherent and unified urban development, abolishing the practice of single plot PUZs – by establishing a regulatory area and a study area for PUZ documentation – and regulating the investments required to build public infrastructure for new projects proposed by investors. At the same time, some responsibilities will be taken over by investors, or several investors in an area will have to reach an amicable agreement for the urban development of the area. “We want to be optimistic, but the reality is that the potential for abuse of rights is high both from neighbouring owners and from unprofessional investors, and the courts are not currently prepared to deal with cases that require town planning expertise – at the moment there is no authorised judicial expert in the field of town planning,” say the authors of the analysis.

Procedural novelties

According to the draft Ubranism Code, investors applying for a PUZ will have to carry out an opportunity study which, in addition to presenting the investment itself, will also include a presentation of the economic and social consequences for the locality, as well as an action plan for phasing the investments in the private project and the investments in the necessary infrastructure. This action plan will set out the cost categories to be borne by the investor and the cost categories to be borne by the local public authority.

After consideration by the Technical Commission for Land Planning and Urban Development, the next step will be to issue an endorsement for initiation of the PUZ by order of the Mayor, which will establish the regulatory area and the study area of the PUZ, the functional categories of the development, any easements, restrictions or prohibitions, urban planning indicators – minimum and maximum limits – and, as a novelty compared to the current procedure, the necessary public interest facilities and the action plan outline for the implementation of the project, including public interest facilities.

The above provisions refer to two new documents that will be subsequently drawn up as part of the PUZ documentation, namely the public investments programme and the implementation action plan, which will set out the investments, the estimated value, possible sources of funding, the phasing of the investments, the stage of their implementation at the time of completing the project and the parties responsible for implementation. The endorsement for initiation of the PUZ will be an administrative deed which may be challanged in court.

Urban development costs

In order to carry out investments of public utility, the provisions of the Urbanism Code indirectly lead to the conclusion that private investors will have to make the necessary land available to the authority free of charge, as is already the case in practice. Thus, the Code stipulates that the PUZs initiated by private investors may not contain proposals involving expropriation procedures, but that urban development or urban restructuring contracts may be negotiated with the local authority, relating to the financing from private funds of the necessary infrastructure – transport, technical and sanitary, educational, social, health, cultural and environmental infrastructure necessary for the area on which the PUZ has a direct impact – or the transfer of land by the initiator of the PUZ documentation.

Moreover, in three cases of PUZs initiated by private investors, local taxes for land development will be established for the initiators of the PUZ. These cases are: (i) extension of the urban (intra-murros) area, (ii) functional reconversion and (iii) modification of the urban indicators provided for by the General Urban Plan (PUG).

“Certainly the obligation to implement infrastructure for large-scale residential projects was a necessity, and the establishment in the PUG of the development directions of the city would give predictability to investors. In the end, however, it seems that the authority will pass on a large part of the costs to investors anyway through local taxes for land development,” the law firm points out.

Postponement of the initiation endorsement

The draft Urbanism Code proposes the possibility for the local authority to postpone the issuing of the initiation endorsement, with reasons, in order to correlate it with existing programmes and projects of public interest at local authority level. The authority will even be able to establish a grid for prioritising PUZs “in relation to the benefits to the public interest established by the action plans proposed at the level of the opportunity studies”.

At the same time, it is proposed that the local authority will be able to reject a request for an increase in urban development indicators if there is a lack of sound technical justification or if the increase leads to too high costs for the local authority.

Investor collaboration – lack of dispute settlement mechanisms

In order to coordinate the intentions to prepare a PUZ, the list of requests for the initiation of PUZs will be published on the official website of the competent authority. The authority will be able to send a request to investors in a given area to collaborate, in accordance with the law, in the preparation of a single PUZ documentation.

There are other provisions which indirectly compel investors in a given area to cooperate. Thus, the PUZ regulatory area will be made up, according to the proposed new regulations, of at least the buildings generating the urban planning documentation, directly adjoining buildings and those located on the opposite line. Although it is not clearly stated in the draft Code, in the case of an increase in the urban development indicators POT and/or CUT, it seems that the regulatory area should cover the entire territorial reference unit (UTR) in which the plot is located, since the rule allowing such an increase refers to “the re-establishment of urban development regulations at the level of the territorial reference unit”.

Investor cooperation is in principle a positive concept, as private investors are generally more open and quicker to react than the authorities. At the same time, however, uncertainty is created as to the fate of a project by the lack of criteria for the collective project and the lack of dispute settlement procedures. Therefore, possible abuses of law by neighbouring owners have the potential to block private projects – apart from the length of a court case, the current practical problem is the lack of judicial experts in the field of urban planning, and such cases will not be resolved without expert reports.

At the same time, the PUZ establishes obligations regarding the technical and public infrastructure and action plans that will have to cover the entire regulated area. More clarity is needed on the possible allocation of these costs to owners in the regulated area who are not also co-initiators of the PUZ. These owners cannot be forced to develop at a particular time and incur urban development costs that are normally the responsibility of the local authority.

Separate from the above provisions, the Urban Planning Code in its current form provides that in order to accelerate „private investments of public interest”, the authority may become a co-initiator of a PUZ with one or more private investors, in which case the initiation process will be subject to the simplified rules of an authority-initiated PUZ. Based on this proposal in the Urbanism Code, a practical solution to the blockages that can arise between owners in an area would be to compel the authority to take over the preparation of the PUZ in such situations.

Unclear transitional provisions

With regard to procedures for preparing urban planning documents started before the entry into force of the future Urbanism Code, the draft stipulates that they remain subject to the law in force at the time of their initiation, with the exception of the procedures on integrated endorsement. The lack of clarity stems from the way the draft defines the date of initiation of the procedure as “the date on which the administrative act based on which the procedure is initiated is brought to the attention of third parties” – it is not clear here whether the draft refers to the urban planning certificate or the opportunity endorsement, nor what procedure for bringing third parties to the attention of third parties was envisaged – public consultation or any other form of bringing the project to the attention of third parties.

The current legislative solution which establishes that a project is considered to have started on the date of obtaining the urban planning certificate is much clearer and could be taken over in the Urbanism Code.

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