Are we about to witness a renaissance of newly concluded urban development agreement? The new Building Act introduces a comprehensive set of rules governing this type of contract.
Urban development agreements are a building-law concept that harbors endless possibilities for practical use. According to the new Building Act, they are public-law contracts between the principal (a property developer) and the community (i.e., a municipality, but possibly also a municipal district, an administrative region, or the owner of public infrastructure). The substance of such an agreement is the commitment to mutual assistance with respect to the implementation of a development project. The urban development agreement may also contain private-law rights and obligations.
Urban development agreements are the tool of choice if a developer seeks changes to the zoning plans needed for the realization of their project, or as a part of the effort to establish a connection to technical infrastructure which lacks the requisite capacity, or in order to expedite permitting procedures.
Under the old Building Act, the scope of rights and obligations which a municipality could contract under an urban development agreement was somewhat contentious. In order to define the limits of such rights and obligations, one made reference to the exercise of the municipality’s sovereign planning powers within its territory. The new Building Act resolves this “framework” for urban development agreements in Sec. 131 (1) and (2) by listing examples for the rights and obligations which municipalities may contract. These include cooperating on changes to land-use plans (as mentioned above), or self-restriction with respect to rights related to the submission of petitions, opinions, or remedies in the relevant permitting procedures (always assuming that the project for which permission is sought complies with the arrangements made in the urban development agreement).
Another important new set of rules concerning urban development agreements has to do with their review for compliance with the applicable laws and regulations, and with the resolution of disputes arising from such agreements. Under Sec. 132 of the new Building Act, these competencies are newly put into the hands of the competent regional government (for urban development agreements made by municipalities). If the case escalates so that a judicial review is sought, such matters will newly be referred to the administrative courts.
The new Building Act also introduces the notion of an urban development agreement which works as a condition precedent to the municipality’s decision-making, if so stipulated in the land-use plan for a given territory. The municipality must define the basic contents and terms of such agreement, and specify a time period during which the agreement is to be made (i.e. not more than 6 years in the case of the zoning plan, as per Act. 81 (3); and not more than 5 years in the case of what is known as the regulatory plan, as per Act. 86 (3)). These time periods have been chosen such that they do not become quasi-construction bans.
The new Building Act thus defines the urban development agreement and specifies the rights and obligations to which a municipality may commit in such an agreement. In so doing, it largely confirms what has already been established practice. In addition, it introduces the legal institution of a development agreement as condition precedent. Through this institution, municipalities will be able to manage development within their borders in accordance with the local specifics and their concrete needs and goals.