Cities without plans

The lack of a local master plan makes it impossible, or at least renders it extremely difficult, to implement many investment projects

There is another obstacle for investors. Due to the expiration of many local master plans enacted before January 1st 1995, investment opportunities have been drastically limited. Such situations have taken place in many major Polish cities, including Kraków. These expirations are the result of Article 67 of the Outline Planning Law of 7 July 1994, which is still in force today. Members of Parliament working on the new act, have obviously forgotten about this article, under which many local master plans enacted before January 1st 1995 expired on January 1st this year.
Such a situation has arisen in municipalities where, since 1994, no study of the conditions and directions of outline planning have been enacted, no works concerning the preparation of the local master plan have been undertaken, and there have been no amendments to the local master plans in accordance with the statute.
This unprecedented situation has affected a number of investors and developers and may lead to serious complications with municipal urban policies and the additional expenses necessary to restore land reserves, (appropriated in the expired local master plans for public purposes), which will be even more harmful to the municipalities.

With or without the plan
It is true that the lack of a local master plan does not exclude the possibility of developing real property. However, investment opportunities are drastically limited and the risk related to the investment is higher than in cases where investment development of real properties is included in the local master plan. The opposite idea, according to which the lack of the local master plan improves an investor and municipality's position, and lends more flexibility to establishing the manner of managing a real property, will not be accepted in practice. This is because of the cautious and conservative attitudes of the architectural authorities.
When there is no local master plan, localizing a number of investments may only be established as a result of an individual administrative proceeding. An outline planning decision is issued as a result of the hearing. In such a case, the outline planning decision is issued under the general provisions and its issuance requires many individual alignments to be made (such as by the Heritage Conservator, the Minister of Health or the Mining Office). In this procedure, both an administrative hearing and supervisory proceedings, conducted by the relevant Voivode, are compulsory. The procedure prolongs the time necessary to issue the outline planning decision. It also gives the administrative authorities more freedom to interpret the relevant provisions of law. In addition, the lack of a local master plan makes it impossible for the municipality to create a compact urban and outline development policy.
It is also worth mentioning that if there is no local master plan, it is impossible to establish the outline planning conditions for certain investment projects, such as: commercial centres and regional or national roads.

The financial effects of the local master plans' expiration
For the municipalities, it is important that the local master plans, which expired on 1 January this year, described the land reserves for the implementation of public projects (including the construction of new roads). After the local master plans expired, there were and continue to be no formal obstacles to owners of the real properties to use the land for other purposes. To restore the described reserves, it will be necessary to enact new local master plans. However, this is not the final task. The municipalities will be obliged to pay compensation to the owners of the real properties, located in areas where limitation in use of the real properties will be restored and where the limitations decrease the market value of the real property. As for public investments, municipalities and other public investors must calculate higher compensation for the owners and the higher costs of acquiring lands, which were released from the limitations and as such will be developed.
The most important factor for owners of real properties and for investors, may be a decrease in the value of the former due to their attractive zoning in the local master plans. There is no doubt that the greatest losses may be suffered by the owners of the real properties, appropriated for housing or trade and service centres.
In such situations, the owners of real properties, which were released from the limitations in use, should be satisfied. Nowadays, the owners of such real properties may count on rising interest from investors and, as a consequence, on the rising value of such properties.

Unknown future
At the beginning of January this year on the territory of some municipalities, the local master plans enacted before January 1st 1995 had not expired. This does not mean that they will not expire in the next 10 months with the rest of the plans (which had not yet expired in the manner described above). Some of the municipalities delayed the moment of expiration of the old local plans by undertaking hurried resolutions for studies of conditions and directions of outline planning and resolutions on preparation of the local master plan. Pursuant to the act, such plans will expire on January 1st 2004. Taking into account the lengthy procedures of enacting local master plans and examining appeals, it should be considered that in many Polish cities, old plans will expire before new ones (which the municipality started working on in December last year) come into effect. However, the scale of this problem is difficult to estimate. The risk of local master plans, (including those in municipalities where they are still in force and were enacted before 1995) expiring should be kept in mind by investors.
The uncertainty of investors is intensified by the fact that to issue the outline planning decision, applicable provisions of the law are those in force at the moment of issuance of the decision, not those in force at the moment of filing the motion. It may occur that on the day of filing the motion under the local master plan, the investment project was possible, but it is no longer possible after the local master plan expires. The act did not foresee such a situation. Therefore, it does not answer the question as to what should be done with such a motion. It seems however that the architectural administration will suspend the procedure of issuing decisions until the new local master plan, the character of which is hard to foresee, is enacted. In most cases, it will probably cause the investor to resign from the investment in the planned locality.

Deus ex machina
One solution may be the intervention of the legislator. At present, the Senate is still working on the Outline Planning Law. The project provides for the local master plans enacted before 1995 to be again prolonged. We do not know what shape the new Act will take, and as a result, for how long the old plans will be prolonged. The most appropriate solution seems to be prolonging the old plans indefinitely, so that they will be binding until new ones are in force. If such a provision were to be enforced, the issue of compensation for the owners of the real properties appropriated for public purposes, would need to be regulated.
The above considerations on the negative effects of the local master plans' expiration, prove the thesis that any local master plan, even one enacted before 1 January 1995, is better than no plan at all.
The issue of the plans which expired will presumably be left unsolved. However, there is a chance that the legislator will prolong the local master plan retroactively, i.e. from January 1st this year (restitution). Both proposals raise doubts, but they are socially and economically justified. Despite the final solution of those issues, huge interest from municipalities in these issues is anticipated, owing to the fact that they should be interested in the quick enactment of new local master plans, in order to maintain or increase the investment attractiveness of the real properties located within their boundaries.

Andrzej Chełchowski, Konrad Marciniuk
The authors are legal counsels in the Law Office of Miller Canfield Paddock and Stone