Peter Bartošík (source: Jana Liptáková)
Current legislation and processes around the granting of construction permits for new buildings has been far from optimal for some time, according to lawyer Peter Bartošík.
They allow for municipalities to exert political influence over new developments, as well as causing problems with staff turnover at construction authorities after each municipal election, which in turn often leads to significant understaffing of those same authorities. Meanwhile, the complexity of the process to obtain a building permit in Slovakia means the time between land acquisition and the start of construction work can be as much as five years for some projects.
But with new building legislation due to come into effect from April next year, the situation should soon take a turn for the better, the lawyer says.
The Slovak Spectator spoke to Bartošík, a co-founder of the Bartošík Šváby law firm, about the new legislation, the differences between Slovak and other countries’ real estate laws, and more.
How does Slovak real estate legislation differ from that in other European countries?
The most important difference is that in most European countries, there is a rule that the building yields to the land. In Latin, this rule is called superficies solo cedit, or the surface yields to the ground in English. In other continental jurisdictions, any structure that is built on land automatically becomes the property of the landowner. In Slovakia, the ownership of a building and land can be divided. This, of course, can cause a lot of legal problems. Another difference is the form of the land register, which in Slovakia does not have the same type of binding nature as it has in other countries. Therefore cadastral data can be challenged in court proceedings. This again creates a degree of legal uncertainty.
Is there anything that is specific to Slovak legislation on real estate rentals?
There are special regulations on leases of non-residential premises in Slovakia. In principle, most commercial real estate is pursuant to the law on the lease of non-residential premises. This law is very old: it was adopted more than 30 years ago, and is very rigid. It limits, to a very great extent, the conditions under which a lease can be terminated or the conditions applying to an agreement regarding the termination of a lease agreement. It also puts restrictions on what type of premises can be leased at all, and sets out what lease agreements should contain. Of course, lawyers and participants in legal relationships have become accustomed to the rigidity of this law and have found ways to live with it while respecting their business interests. But rigidity in the case of commercial real estate rental is not entirely appropriate. Contractual freedom in this area would more suit the business environment in general.
Could you give an example of a situation where a well-drawn up contract can help clients avoid problems?
Contractual arrangements, unless they create a title – such as a real estate purchase contract – are primarily of a preventive nature. This means that the parties agree on rules of conduct for the future, so that if they forget them or are not sure of them, they can open a written document and return to their agreement. This means that the very existence of a contract is a very good tool so parties know how they should act. The obvious examples where good regulation of contractual rights and obligations helps parties are leases of commercial premises and contracts on works. This is because the majority of the rights and obligations of tenants, whether they are in office buildings or shopping centres, or the rights and obligations of contractors and clients in sophisticated contracts on work, cannot be inferred from the law and therefore the right contract has the potential to save participants money. A good example is when a lease without a proper contract is terminated, and the landlord is thus not entitled to any lost rent or compensation for damage caused by the early termination of the lease.
What do you think of current building legislation, and new legislation to replace it that will become effective as of April 1, 2024?
The current legislation is very old – it dates back to 1976. It is not only obsolete and complicated, but in some cases even inflexible. As a consequence, current permitting processes are excessively long in Slovakia, making new housing in big cities, but indeed everywhere in the country, scarce, pushing prices up. On top of that, these lengthy procedures do not add quality to what is actually being built. The whole of society pays a price for these lengthy and inflexible procedures, but does not receive any value in return. As this affects everyone in Slovakia, the goal of the new building legislation is certainly commendable. In my opinion, this new building legislation will be beneficial. Of course, given the huge change that will take place in the whole permitting process, it will take some time for it to be fine-tuned so that all the processes work properly, and for everyone involved to learn how the new building legislation should be applied.
Is your law office also preparing for the new legislation?
Proceedings started before the new laws come into force will be completed according to the old regulations currently in force. Along with some clients who are developers we are looking at whether it would be better for them to commence permitting procedures under the current legislation and processes, which are lengthy, but are known, or wait until the new laws come into effect, even though it is not yet clear exactly who will implement them and how long those processes will last. At the moment, for large development projects it takes three, four, or even five years from the time land is acquired to the start of construction work. In many countries, the process is calculated in months and not years.
What are the most important changes the new building legislation will bring?
There are three very important changes: the first is the digitalisation of the entire process of obtaining building and related permissions; the second is reduction of the current two-or-morestage process of granting a development permit and a building permit to a onestage process. This, procedurally and legally, is the biggest change brought about by the new laws. But from my point of view, the most important change is the return of construction sector administration to the state [i.e. central government] and the removal of relevant competencies from municipalities. This change, at least in Bratislava, could be very positive, because in practice it has been shown that changes of political leadership at city or borough level often cause repeated disruption in building authorities’ operations every four years, after municipal elections. This included often almost complete re-staffing of the relevant construction authority.
What were the consequences of this?
This instability led to significant understaffing of building authorities in general and their subsequent inability to act within the deadlines set by law. The professionalisation of building authorities can, in conjunction with the digitisation of files and processes, ensure that processes are much smoother, that under-staffing and staff turnover will significantly decrease, that there will be professionals at building offices and that the rules will be clear to everyone. For those consuming building permits – mostly developers – the most important thing is the predictability of the process and professionalism.
There are some fears that under the new legislation municipalities will lose the ability to influence what is built on their territory.
From a certain point of view, this is true. But, in my opinion, the legislation put in place so far has simply not worked well. Municipalities should not, as has been the case, have a political influence on building permits. There are many examples of mayors who say publicly that they will not allow such and such construction. What they are really saying is that they are not going to act in accordance with the law and, in fact, to exercise their derivative public authority as they are supposed to. When one takes this argument ad absurdum, it is the same as if a policeman were to say ‘I will not fine blondes, because that is my belief’. Therefore, depoliticising permitting processes can be positive. Under the new legislation municipalities can and will still be able to regulate construction activities on their territory, mainly through master plans and detailed zoning plans.
The new legislation should put a stop to the legalisation of illegally-constructed buildings. But will this really happen?
This regulation is a step in the right direction. Once it has been fine-tuned, it will certainly make some people think twice about investing hundreds of thousands of euros in a building that can be pulled down, perhaps at their own expense. Also, enforceability of the law in this respect will be better than it is at present. Currently the process to pull down an illegal construction is very complicated for the relevant building authority. This again has to do with the staffing and professionalism of building authorities. Local building authorities are currently overwhelmed with applications for zoning and building permits, and understandably they have far less capacity to deal with sanctioning activities and complicated administrative procedures related to getting rid of illegally constructed buildings. It is worth mentioning that the new legislation contains provisions that allow existing illegal buildings, or illegal structures whose construction began before April 2024. Given the large number of illegal buildings in Slovakia at present, it will take several years to complete proceedings on the legalisation of existing illegal buildings. Only then we will see what effect the new laws have on new illegal buildings.
What are the biggest problems in the adoption of legislation related to real estate or permitting processes in Slovakia?
These issues are not specific to real estate or permitting processes. The main problem is that new laws are passed without experts and affected bodies being able to comment on them. State administration and ministries push through bills via proposals by individual MPs rather than via standard legislative procedures because that would be difficult politically. This makes it impossible for the proper legislative process to be carried out – there is no interdepartmental review; nor do the affected entities and experts have the opportunity to comment on these bills. This is a practice that every parliamentary opposition challenges, but when they eventually get into power, they use it. This applies to all legislation, including legislation related to the real estate sector. Another problem is the marginal interest shown by the state in problems faced by professional owners of commercial real estate like shopping centres, office buildings and, in future, rental apartments. The law on the lease of non-residential premises is obsolete but we do not see any interest on the part of the Justice Ministry to consider whether the current legislation is fit for the 21st century and what kind of changes are needed.
What problems do your clients most often come to you with?
Mainly legal audits of ownership relations to real estate. In the case of development, these are many types of contracts and processes necessary for a project to be successfully completed – different types of contracts on works, with architects, designers, construction contractors etc., and subsequently lease agreements and purchase contracts. Then there are issues related to defects, lawsuits concerning the quality of work carried out, and lawsuits regarding payment for various work and the existence, or not, of claims for contractual penalties.
Can you give a specific example?
We had a very interesting arbitration dispute concerning cracks in horizontal reinforced concrete structures on a certain large, important building. We had to gather expert evidence to identify exactly how those cracks occurred, and who was responsible for them. During such disputes, our work becomes multi-disciplinary, because we need to understand what those experts are saying, and we need to understand what rules and norms apply in the case of a reinforced concrete structure. This is very interesting.
