On 16 August 2022 in a move that could impact investment in the Hungarian construction sector, the Hungarian government adopted a new government decree increasing the role of the National Architectural Planning Council (Országos Építészeti Tervtanács) in building permitting procedures.
As a result of the Planning Council's newly expanded powers, all building permits and other construction-related permit applications for developments of a certain size must be rejected by the building authority if the Planning Council does not approve the developments. This change is expected to significantly increase the uncertainty of investors regarding any building project under development.
Planning Council to review permitting plans of wide range of building projects
Pursuant to the new government decree, in addition to its existing powers to review the permitting documentation of certain building projects, as of 17 August 2022 the Planning Council will also review the architectural-technical permitting documentation of the following:
- public building projects;
- buildings exceeding 5,000 square metre useful floor area; and
- condominium buildings having at least six condominium units in one building plot and having a useful floor area of 1,500 square metres or more.
Regarding building projects meeting the above specifications, the building authority cannot accept any application for a building permit, conceptual building permit and continuation permit without the Planning Council's approval of the project's permit documentation.
The new measures will be applicable not only to new permitting procedures, but also to ongoing building permitting procedures in case of public building projects.
Significant uncertainty for investors
The recent changes will mean that investors will need Planning Council approval to obtain permission for projects and realise developments.
As a result, this will create considerable uncertainty for investors for real estate developments exceeding 5,000 square metres in floor area and residential condominium developments having at least six units exceeding 1,500 square metres.
In practice, the newly introduced requirement means that an investor will have to start a project, including land acquisition, project design and preparation of permitting plans and documentation, etc. while incurring significant project-preparation costs, with the possibility that the Planning Council may reject its application.
Furthermore, the decision of the Planning Council is not subject to objective criteria. The law grants the Planning Council discretion in deciding whether to support the application, and there is no effective appeal if an application is rejected.
For more information on this decree and the Hungarian construction industry, contact your usual CMS professional or local CMS experts.