No more “zoning decisions” for everyone – legal changes are coming

For years, zoning decisions on land development conditions were used as a tool for “testing the market” – inexpensive, flexible and available to almost anyone interested in a plot of land. The upcoming legal changes will bring this stage to an end. The legislator is moving towards greater planning discipline, limiting speculation and linking zoning decisions more closely to an actual legal title to the property.

The most important change is that only a person holding the right to use the property for construction purposes will be able to apply for a zoning decision on land development conditions. New decisions will be valid for only five years and will have to comply with the municipal general plan. According to the explanatory memorandum to the government bill amending the Spatial Planning and Development Act, the changes are intended to prevent land from being “blocked” by third parties and to curb the artificial inflation of plot values, with a view to organising the investment process and reducing neighbour disputes in response to requests from local governments.

However, not everyone will welcome these changes with enthusiasm. The planned spatial planning reform strikes at the foundations of the existing strategy of many development companies. The key change – the requirement to hold the right to use the property for construction purposes already at the stage of applying for a zoning decision – fundamentally changes the rules of the market game.

Key effects for the development sector:

1. The end of cost-free “potential testing”: Developers will lose the ability to apply en masse for zoning decisions for land they do not yet control. The previously common practice of “checking” several plots at once in order to select the one with the best parameters will become impossible without first securing a legal title, for example under a preliminary agreement.
2. The need to tie up capital earlier: To apply for a zoning decision, the investor will first have to reach an agreement with the owner. This increases investment risk: funds will have to be committed to land options or advance payments without certainty that the final zoning decision will be consistent with the business plan.
3. Greater importance of preliminary agreements: Precise declarations by landowners authorising developers to use the land for construction purposes will become standard. Without such consent, the preparatory process will not even begin.
4. Time pressure due to validity limits: The introduction of a five-year validity period for zoning decisions means the end of “banking” projects. A developer will no longer be able to hold obtained development conditions for a decade while waiting for more favourable market conditions. The investment will have to proceed efficiently or the document will expire.
5. Less competition for zoning decisionsss competition for zoning decisions: So-called “cleaners” and speculators who blocked land by obtaining zoning decisions solely to resell the project at a profit will disappear from the market. For reliable developers, this means fewer parallel administrative proceedings concerning the same land.

The changes in the law do not close the door to investment, but they do require a different approach. Faster decisions, earlier securing of legal title and close cooperation with landowners will become key elements of competitive advantage. Those who adapt the fastest will succeed in a more orderly market.