2023 is undoubtedly a year of legal changes, both those long announced and those resulting from current events. The Act of 5 July 2018 on Facilitating the Preparation and Implementation of Housing Investments and Associated Investments (" Lex Developer ") has also been subject to numerous amendments. These numerous changes have made navigating these regulations quite challenging. Therefore, in today's article, we decided to summarize the changes and take a look at what was ultimately included in the Lex Developer and what (to the great relief of many observers in the development industry) the legislature ultimately abandoned.
The Act of January 26, 2023, amending laws to eliminate unnecessary administrative and legal barriers (referred to as the "Deregulation Act"), which amended, among other things, the so-called Lex Developer, was intended to increase the availability of land for the construction of new apartments. The adopted solutions were intended to facilitate investment in areas that were previously occupied by currently unused shopping centers or office buildings (as we wrote about in #151 ). The amendment also introduced additional restrictions, including a requirement of 1.5 parking spaces per apartment (except in city center developments), which could have the side effect of increasing prices per square meter. The amendment was widely commented on and criticized by experts, who pointed out its weaknesses and suggested directions for improvement. Due to the noticeable need for change, these provisions, since their entry into force on 12 May 2023, have been the subject of numerous amendments (as many as 3 in recent months, the last of which was on 17 August 2023).
One of the key changes improving the aforementioned regulations was the final abolition of the aforementioned requirement of 1.5 parking spaces per apartment. This provision sparked considerable controversy in the community, as such excessive standards could have contributed to a significant increase in apartment prices and certainly called into question the profitability of a significant number of planned investments. The increase in apartment prices would result from a reduction in the usable floor area (UFA), as a larger portion of the building's total floor area would have to be dedicated to parking spaces to meet the requirements of the introduced changes. This will therefore represent a return to the status quo prior to May 12, 2023, as prior to that date, these standards were established by local authorities (municipal councils), which had the best understanding of the parking space needs that should be met in a given community.
Another step in the right direction is to reduce the ceiling for retail and service space to 2.5% (from the original 5%) . The lower ceiling of 5% was inappropriate for small investments, where it is much more difficult to locate services like grocery stores. Unfortunately, the upper ceiling for this indicator has not been increased from 20% to 40% . This change would certainly allow for greater flexibility in investment design, especially since there is a clear trend of combining residential, service, and retail functions, such as buildings combining apartments and a shopping mall.
What has also remained unchanged from the regulations in force since May 12, 2023, is, of course, the simplification of the conversion of land designated for commercial development (specifically, commercial facilities with a sales area exceeding 2,000 m²) for use in this manner or as office buildings. Such developments can be more easily converted to residential purposes, regardless of the land's intended use in the local zoning plan or, importantly, in the study of conditions and directions of spatial development. Previously, i.e., before May 12, 2023, the requirement of non-contradiction with the study was limited only to lands previously used for military, manufacturing, railway, or postal services. In turn, after the entry into force of the Act of 7 July 2023 amending the Act on spatial planning and development and certain other acts (hereinafter referred to as the " Amendment "), a residential investment or an accompanying investment will be able to be implemented regardless of the existence or provisions of a local spatial development plan, provided that it is consistent with the general plan of the commune and is not contrary to the resolution on the establishment of a cultural park.
The obligation to maintain biologically active space at a minimum level of 25% of the residential development area remains in place, with the figure for city center developments set at 12.5%. In connection with the deregulation act, a definition of both of these terms was introduced into the lex developer act. However, the Amendment changed them again, and from September 24, 2023, they will be understood as:
1) biologically active surface – as a biologically active surface within the meaning of Art. 2, point 28 of the Act of 27 March 2003 on spatial planning and development;
2) Downtown development – the area of downtown development defined in the general plan of the commune (we wrote more about this definition #146 ).
It's worth noting that half of the area designated as biologically active space, in accordance with the Deregulation Act and the Amendment, is to be designated for public use, not just for residents of a given estate. This obligation can be met by taking into account the infrastructure already in place on the date of the application for the location of a residential development in a given area. Such assumptions were abandoned in the case of downtown developments, where such a requirement does not have to be met.
The amendment also changes the definition of an accompanying investment, which from September 24, 2023 will be understood as "an investment in the construction, change of use or reconstruction of: land utilities networks within the meaning of Art. 2 item 11 of the Act of May 17, 1989 - Geodetic and Cartographic Law (Journal of Laws [...]), public roads, railway lines, public transport infrastructure facilities, cultural activity facilities, care facilities for children up to 3 years of age, kindergartens, schools, day care facilities, primary health care outpatient clinics, facilities in which social welfare activities are carried out, facilities serving public benefit activities, sports and recreation facilities, public green areas referred to in Art. 2 item 25 of the Act of March 27, 2003 on spatial planning and development, buildings intended for commercial or service activities, provided that they serve the residents of buildings that are the subject of a residential investment."
Moreover, the Amendment introduces a provision allowing for the transformation, by operation of law, of land granted for perpetual usufruct into ownership on the date of commissioning a residential building constructed under the lex developer procedure – provided, of course, that the conditions for transformation resulting from the Act of 20 July 2018 on the transformation of the right of perpetual usufruct of land developed for residential purposes into the right of ownership to this land are met.
The lack of an extension of the lex developer until the end of 2030 should certainly be viewed negatively. We would like to remind you that the Act, originally adopted in 2018, provided for the expiry of its validity on January 1, 2028. In the course of the recent legislative changes – i.e. the Amendment – the legislator also decided to shorten this period by 2 years, i.e. until January 1, 2026. Such a drastic shortening of the validity period of the Act seems too radical.
In recent years, there has been a noticeable increase in the number of investments implemented based on this act. Despite the initial reluctance to adopt its provisions, it is clear that cooperation between developers and local authorities has begun to improve, which has translated into an increase in investment projects implemented under this form. It is all the more regrettable that the legislature did not decide to extend the validity period of the lex developer. However, given the number of recent changes in this area, it cannot be ruled out that a rethink may also occur regarding its validity period, and we can expect another change.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of September 11, 2023
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