In this article we tackle two major questions for any real estate investor when taking a decision regarding a future real estate project: to what extent is it permitted to erect buildings on land plots designated as green areas upon their acquisition or upon securing those plots for the future project? And what about when a reconversion of such land plots from green areas into other functions, such as commercial, residential, industrial etc., occurred at some point in the past?
These questions pose themselves as land plots of a certain magnitude, suitable for real estate investments, are more and more scarce, and such suitable plots, once identified, usually originate from restitutions done on the location of (previous) parks and/or other types of green areas located within the city limits of localities (intra muros).
What does the law say? The applicable legislation (i.e. Law no. 24/2007 on regulating and administration of intra muros green areas (Law on Green Areas)) neither contains a clear definition of the green areas, nor distinguishes between public green areas and privately owned ones, or between the built/furbished green areas as such and the plots bearing this function on the basis of the approved town planning (urban) documentations of a respective municipality.
There is a clear interdiction to build on such plots which derives from the legal ban of re-designating the functionality of the land plots identified as green areas (provided for in the Emergency Government Ordinance no. 195/2005 on the protection of the environment), legal ban stipulated under sanction of absolute nullity of the administrative deeds not observing this reconversion ban.
What happens in practice? The most usual situation in practice is that, when such land plots are traded, they are no longer designated as green areas in the applicable town planning documentations, whereas a reconversion took place in the past through a zonal town planning documentation (Rom. Plan Urbanistic Zonal, PUZ). In Bucharest, such town planning documentations are the district coordinating PUZs (District PUZs) which were approved by Decisions of the General City Council of Bucharest Municipality (DGCCBs).
As these DGCCBs are currently being challenged in court, and they were also suspended for 12 months by the newly installed administration of the Bucharest Municipality, the validity of the building permits already issued for certain real estate projects is to be examined.
Effects of the suspension of the District PUZs in Bucharest. At a first glance, a building permit procedure initiated before the suspension of the District PUZs may be continued as such without any further issues (as this is also expressly provided for in the suspension deeds themselves) and successfully finalized, with the issuance of the building permit for the respective real estate project.
Nonetheless, the validity of the District PUZs is questionable from the perspective of the reconversion of the green areas contained therein, since at the request of any interested party a court of law may rule for the annulment of the DGCCBs as they were issued without observing the reconversion ban.
Effects of the annulment of the reconversion administrative deeds upon the building permits. As per the relevant dominant case law, the annulment of a town planning documentation (PUG (General town planning documentation, in Rom. Plan urbanistic general) or PUZ) that represents a so-called normative administrative deed has repercussions on the individual administrative deeds (e.g. building permits) issued on the basis of the administrative deed declared null and void. Yet such court decisions annulling a normative administrative deed are generally mandatory and effective only for the future, as per Art. 23 of the Law no. 554/2004 on administrative disputes. Therefore, their annulment should in principle no longer impact the individual administrative deeds issued based on the annulled normative administrative deed.
Nevertheless, the correct interpretation of Art. 23 mentioned above in view of Decision no. 10/2015 of the Supreme Court is that as long as there is a pending court dispute on the validity of the individual administrative deed (of the building permit), until the final court decision on the validity of the normative administrative deed (PUZ) is reached, the latter court decision impacts the validity of the individual administrative deed disputed in the former court case.
Therefore, should a building permit issued for a real estate project not be contested in court until the final court decisions in the litigations having as object the annulment of the District PUZs are reached, such building permits remain valid and undisputable.
Recommendations for investors. When assessing the opportunity of acquiring land plots which, at some point in time, were designated as green areas, and afterwards were reconverted in areas with other functionalities, investors may consider the remedies and recommendations listed below. These are nonetheless to be analyzed together with lawyers specialized in town planning law and administrative disputes.
Such remedies, subject to an exhaustive analysis of the specific characteristics of each particular case (e.g. date and type of reconversion, date of initiation of the building permitting procedure for the real estate project envisaged by the investor, existence or imminence of a court dispute for the annulment of the administrative deed of reconversion), may be:
(i) should the land plot be currently designated as green area, the (partial) annulment of the PUG/PUZ by which the land plot was designated as green area from a town planning perspective and the reinstatement of the initial urban situation before that PUG/PUZ may be considered, followed by the initiation of a permitting procedure on the basis of a new urbanism certificate, which is to be issued after the former town planning situation is reinstated. In this context, it should first be verified from a town planning/technical point of view, which was the previous town planning regulation – prior to PUG/PUZ in question (insofar such a regulation existed), since the cancellation of the PUG/PUZ would lead to the applicability of the previous town planning provisions. Insofar as the respective land was classified as green area from a town planning perspective also prior to the PUG/PUZ in question, such an approach would be devoid of the intended effect and its initiation would not make sense); and
(ii) in case the reconversion administrative deed was not disputed in court, the procedure for obtaining the building permit for the envisaged real estate project may be initiated, and minimal construction works may be started (e.g., site organization works, excavation works) on the basis of the issued building permit, whereas the lapse of the deadlines for disputing the building permit by third parties should be awaited so that the actual construction works should begin once it becomes clear that the building permit was not disputed in court.
Moreover, it is advisable to (re)negotiate the contractual terms with the seller of the land plot for the acquisition thereof by the investor, or at least for the payment of the purchase price or of a significant part thereof to be delayed until after the expiry of the timeframe in which the building permit may be contested by third parties.
Also recommended for the investors is to analyze the opportunity of purchasing such land plots, currently (or were at some point in the past title chain) designated as green areas, by considering a potential delay in finalizing the construction works and opening the respective real estate projects to the public. When making such an analysis, the loss of profit that may be triggered by the delay, as well as the risks caused by a potential annulment of the building permit issued for the real estate project should be thoroughly assessed.
The recommendations are also sustained by the fact that the draft law no. 668/2018 for amending the Law on Green Areas (the Draft), which is still under legislative procedure, actually maintains the reconversion ban together with the clarification of the notion of green areas and of the classification of the different types of the newly defined green areas.
Moreover, the Draft expressly stipulates that land plots designated as green areas, which were restituted or transferred into the private property of natural of legal persons before the Law on Green Areas entered into force (exactly the land plots addressed in this article) shall be administered by their owners in strict observance of the legal provisions. The private owners must ensure the permanent and free of charge access of the public to the green areas in exchange of an indemnification to be paid by the competent local public authority, which equals the value of the usage of such land plots. Non-observance of this obligation is drastically sanctioned with the initiation of the expropriation procedure for public utility cause.
By Roxana Dudau, Associate Partner, Radu si Asociatii