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A Christmas Gift From The Czech Government – Will The New Czech Building Act Speed Up The Construction Permitting Process And Help Boost Residential Construction?

The Czech government has published draft of the new Building Act as a major tool to speed up the construction permitting process in the Czech Republic. The Czech Ministry of Regional Development set a deadline until Christmas 2019 for any comments or objections to the prepared draft bill. The bill was prepared not long after a complex amendment to the existing Building Act had entered into force on 1 January 2018 that also had the aim of accelerating the permitting procedure. In our view there is still quite a lot of work to be done on the draft bill in order for it to be workable in practice and to solve more problems than it will cause and therefore have submitted our comments on the bill.

Current situation

Construction permitting process is extremely lengthy in the Czech Republic; and the Prague residential construction is especially affected. This is a particularly hot issue as the capital city is in need of housing and, since 2015, the unsustainable housing situation in Prague has led to an increase in the average price for a square meter of a newly built apartment by 68%, making housing inaccessible and unaffordable to most Prague residents. The reasons for this are not only the lengthy permitting process but also construction costs and other economic factors.

The last complex amendment to the existing Building Act tried to address the acceleration of the permitting procedure. Although the Amendment introduced some good changes intended to speed up construction, it contained number of deficiencies and received a lot of criticism.

What can we expect?

The draft bill is brand new and overall quite short compared to the current Building Act from 2016. One of the means to achieve a simpler and swifter permit procedure is to have a single building permitting process replace the existing zoning and building permits. A big goal of the new legislation is to bring digitalization not only to zoning planning but also to the permitting procedure. The complex regulation of so-called “planning contracts” could be practical if they are applied transparently and would bring a more definite legal framework to the current dealings between developers and municipalities when cooperating on development projects.

The government has said that building permits under the new legislation would be issued in one year instead of the current average of four to five years. It is questionable, under the current wording of the draft bill, whether that can be realistically achieved. It would be good news for the developers and other builders – on its own it would probably not increase the necessary residential development but it may attract new investors as the return on their investment could be realized more quickly.

At the moment the planned legislative revolution in building law is bringing a lot of uncertainty to the market. Many projects are now being accelerated in order to apply for permits under the current Building Act.

When can we expect the change?

Since the legislation process is still in its early stages, we will have to wait for the final wording of the bill to fully evaluate whether it will meet expectations. It is currently planned that as a whole the Building Act should enter into force on 1 January 2022, with some parts effective already during 2021. This timetable will depend on number of factors, including the unpredictable legislative process, which usually takes longer than the government plans. Nevertheless the new Building Act will surely, sooner or later, become a reality and it is high time that the lives of developers and builders are made easier and not more difficult. Developers will certainly appreciate if the permitting process could be more smooth and transparent.

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 2

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About this Author

Markéta Topinková's Senior Associate real estate, corporate finance, corporate law, public procurement
Senior Associate

Markéta Topinková's primary focus is in the areas of real estate, corporate finance, corporate law and public procurement. She joined Squire Patton Boggs in 2008 after working at a major Prague-based law firm for three years.

During her legal career, she has also gained experience in litigation and arbitration. As the Czech Republic Life Sciences coordinator for the firm, Markéta helps clients with her knowledge and experience in providing legal services to companies in this sector, including, in particular, advising in connection with clinical trials. Markéta advises both Czech...

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