On 19 September 2020, an amendment to the Construction Law came into force, making it harder to attack building permits and occupancy permits. Among other things, the parliament decided that a five-year limit should be introduced for declaring a building permit invalid, from the date the decision entered into legal circulation, thus limiting the discretion of the public administration in assessing the validity of the permit. However, Art. 37b of the Construction Law, introducing this limit, has begun to raise doubts among some commentators, which may lead to the perpetuation of what we believe to be an erroneous interpretation of the new provisions and undermine their intended purpose. Therefore, it is necessary to oppose the view that this provision does not apply to decisions issued before the amendment.
The basic legal acts regulating the construction process in Poland are:
- Spatial Planning and Development Act of 27 March 2003
- Construction Law of 7 July 1994.
The first act defines the scope and methods of proceeding in allocating land for specific purposes and establishing the principles for development and construction on plots of land.
The second act regulates the design, construction, maintenance and demolition of structures, and sets the rules for operation of public administration bodies in these fields.
As a rule, conducting construction works requires a building permit, whereas commencement of occupancy of a structure requires an occupancy permit. These decisions are closely related to each other, and setting aside the building permit cannot leave the occupancy permit unaffected.
The change in the Construction Law had been long awaited by market participants, in particular developers, but also other property owners, as final building permits could be, and sometimes were, set aside after a considerably long time, which undermined the principle of trust in the permanence of decisions and led to losses, often through no fault of the injured parties.
The purpose of the amendment to the Construction Law which entered into force on 19 September 2020 was to ensure the durability of building and occupancy permits, which is emphasised both in the justification of the draft amendment and in the interpretation issued by the Deputy Minister of Development, Labour and Technology at the request of the Polish Association of Developers. This objective should be borne in mind when interpreting doubtful provisions.
We have encountered the view that it is impossible to apply Art. 37b of the Construction Law to building permits issued prior to entry into force of the amendment. In justification of this position, commentators cite both the transitional provisions, in particular Art. 27 of the amending act, as well as the judgment of the Supreme Administrative Court of 16 December 2020 (case no. II OSK 2658/18).
In our opinion, neither the cited provision nor the judgment justifies such a conclusion.
At this point, it should be noted that each case must be examined individually, taking into account all the factual and legal circumstances. Despite similarities, every case is different, and the details may determine whether administrative or judicial rulings made in that case may be applicable to other cases.
When a building permit decision may be declared invalid
Until 19 September 2020, there were no specific provisions regarding setting aside of final building permits (there were only provisions regulating the possibility of amending a building permit and specifying the prerequisites for expiration of the decision). This issue was governed by the Administrative Procedure Code, in particular provisions concerning resumption of proceedings (Art. 145 and following) and declaration of invalidity of an administrative decision (Art. 156 and following).
Given the subject of this inquiry, we will focus on declaration of the invalidity of the final decision issuing a building permit.
Under Art. 156 §1 of the Administrative Procedure Code, a decision shall be declared invalid if it:
- Was issued in breach of the rules of jurisdiction
- Was issued without a legal basis or in gross violation of law
- Concerns a case already decided by another final decision or a case tacitly resolved
- Was addressed to a non-party
- Was unenforceable on the date of issuance and its unenforceability is permanent in nature
- Would give rise to a punishable act if carried out, or
- Contains a defect rendering it null and void by operation of law.
Art. 156 §2 of the code introduces limitations on the declaration of invalidity of a decision. A decision cannot be declared invalid on the grounds set forth in §1(1), (3), (4) or (7) if 10 years has passed since delivery or announcement of the decision, or if the decision has produced irreversible legal effects.
A decision granting a construction permit is not regarded as a decision producing irreversible legal effects. Thus, it could not be declared invalid if the requisite time has passed, despite the existence of the grounds referred to in Art. 156 §(1), (3), (4) or (7) of the code.
Judgment by the Constitutional Tribunal introduces the prerequisite of a “significant lapse of time”
In this respect, the situation was changed by the judgment of the Constitutional Tribunal of 12 May 2015 (case no. P 46/13), which partially declared Art. 156 §2 incompatible with Art. 2 of the Polish Constitution. Pursuant to the judgment, that provision ceases to apply to the extent that it does not exclude the possibility of invalidating a decision issued in gross violation of law when a considerable time has elapsed since issuance of the decision and the decision was the basis for acquisition of a right or expectancy.
In light of this judgment of the Constitutional Tribunal, the authorities refrained from pronouncing the invalidity of “building” decisions when a significant period had elapsed since their entry into legal circulation. However, to our knowledge this practice concerned only decisions that were more than 10 years old, and was limited to one of the grounds indicated in Art. 156 §1(2) of the Administrative Procedure Code, namely that the decision was issued in gross violation of law.
Amendment clarifies what lapse of time is “significant”
In view of the expectations of investors and the case law favourable to those expectations, pursuant to Art. 1 of the Act of 13 February 2020 Amending the Construction Law and Certain Other Acts, as of 19 September 2020, Art. 37b(1) was added to the Construction Law, with the following wording: “A decision on a building permit shall not be declared invalid if 5 years has passed from the date of its delivery or announcement.”
The amending act contains transitional provisions, including Art. 25, 26 and 27, which read as follows:
For matters regulated by the act amended in Art. 1 [i.e. the Construction Law], initiated but not completed before the date of entry into force of this act, the provisions of the act amended in Art. 1 shall apply in their prior wording.
Within 12 months of the date of entry into force of this act, the investor may attach to the application for a building permit decision or the application for approval of a construction design or the construction notification a construction design prepared pursuant to the provisions of the act amended by Art. 1 in its prior wording.
1. For construction projects executed on the basis of a construction design prepared in accordance with the previous regulations:
1) in cases referred to in Art. 25 and 26,
2) for which a final building permit decision was issued or an effective notification was submitted before the date of entry into force of this act,
the provisions of the acts amended by Art. 1–4, Art. 6, and Art. 8–24 shall apply in their prior wording.
Which decisions are covered by Art. 37b of the Construction Law?
With regard to the preparation of construction designs and the construction process, application of transitional provisions is not controversial. However, with respect to the declaration of invalidity of a building permit decision, commentators on the Construction Law present a whole range of views, including extreme positions.
On one hand, it is said that Art. 37b applies only to final building permit decisions issued under the amended legislation after 19 September 2020 (or even after 19 September 2021). On the other hand, it is claimed that this provision applies to all decisions in respect of which invalidation proceedings are pending after 19 September 2020.
When analysing the issue of application of Art. 37b of the Construction Law, one must bear in mind the essence of the proceedings seeking a declaration of the invalidity of an administrative decision.
Pursuant to established case law (judgment of the Supreme Administrative Court of 18 June 2020, case no. I OSK 2447/19):
In a case seeking pronouncement of the invalidity of an administrative decision, the authority initiates proceedings in a new case in which it does not rule in a subsequent instance, but reviews the decision as a supervisory body. The proceedings to declare a decision invalid are treated as new proceedings in the matter and are conducted in accordance with Art. 157–159 of the Administrative Procedure Code. The purpose of these proceedings is to examine a given decision for gross noncompliance with the law, as referred to in Art. 156 §1 of the Administrative Procedure Code. An essential feature of these proceedings is that the body deciding on the invalidity is not bound by the relief sought by a party.
At the same time, the authority shall rule only on the invalidity of the decision or its noncompliance with the law. However, it is not competent to decide on other issues concerning the merits of the case, as the subject matter of the proceeding is to determine whether the administrative decision subject to supervisory review is vitiated by a defect and whether the negative prerequisites listed in Art. 156 §2 of the Administrative Procedure Code exist. In other words, under the supervisory procedure, the explanatory proceeding essentially boils down to an assessment of what has been done under ordinary proceedings.
Bearing the above in mind, one must conclude that the expression “for construction projects” used in Art. 27 of the amending act clearly indicates that the parliament had in mind one of the two proceedings, i.e. proceedings seeking a building permit (and not proceedings seeking declaration of invalidity of a building permit), and refers to the rules for preparation of design documentation, also recognising the necessity to provide a transitional period for designers to adapt to the new regulations.
The prior rules for preparation of a construction design apply when:
- The building permit was issued before 19 September 2020
- Building permit proceedings were initiated but not completed prior to 19 September 2020.
These rules can also be applied when building permit proceedings are initiated by 19 September 2021.
Judgment of the Supreme Administrative Court from 2020 referred entirely to prior law
However, with respect to the judgment of the Supreme Administrative Court of 16 December 2020 (case no. II OSK 2658/18) cited by commentators as justification for their position, it should be pointed out that the proceedings concluded by that judgment concerned a building permit issued in 2014, and its invalidity was finally resolved by a decision of the Chief Inspector of Construction Supervision in 2017. As a result, the proceedings for declaration of invalidity were initiated and concluded before the amendment came into force.
The review of the activity of public administration bodies in the cited case was carried out by the Province Administrative Court in Warsaw in 2018, and then by the Supreme Administrative Court on 16 December 2020. Thus, it had to be, and was, carried out according to the law in force as of the date of the decision by the Chief Inspector of Construction Supervision in 2017. Therefore, the courts could not have directly applied Art. 37b of the Construction Law, which was not in force at that time.
However, this does not change our assessment that Art. 37b of the Construction Law should also be applied to cases closed with the issuance of a building permit before 19 September 2020, in respect of which proceedings seeking a declaration of invalidity were not initiated before that date. There appear to be no common-sense arguments justifying the protection of decisions issued after the amendment came into force while depriving decisions issued before that date of such protection.
On the other hand, Art. 37b of the Construction Law may provide guidance for public administration bodies and administrative courts when examining building permits issued prior to entry into force of the amendment, in respect of which proceedings for declaration of invalidity were initiated before 19 September 2020, and considering whether a significant lapse of time has occurred in a given case and, consequently, whether to maintain the building permit in legal circulation.
(As a rule) a significant lapse of time is now 5 years
The judgment of the Constitutional Tribunal issued on 12 May 2015 is still in force. It indicates that it is inconsistent with the Polish Constitution to declare decisions issued after a considerable period of time invalid. Therefore, the passage of time since the decision was made may be relevant. Before the amendment entered into force, the benchmark was 10 years. Currently, taking into account Art. 37b of the Construction Law, it seems that the time limit may be even shorter, i.e. 5 years.
To sum up, if the proceedings to declare a building permit decision invalid were initiated before 19 September 2020 and were not completed by that date, Art. 37b of the Construction Law will not be directly applicable.
However, in the case of the proceedings initiated on or after 19 September 2020, the adjudicating authorities should decide the case taking into account Art. 37b of the Construction Law, regardless of whether the challenged decision was issued before or after the amendment came into force.
Nevertheless, investors who cannot directly invoke Art. 37b of the Construction Law may still try to invoke the cited decision of the Constitutional Tribunal and a considerable lapse of time, which from today’s perspective should be deemed to mean 5 years from the entry of a given decision into legal circulation.
However, each case should be examined individually, and whether there has been a significant lapse of time and whether this should be relevant to the outcome of the case depends on the circumstances of the case and the discretion of a given public administration body.
Michał Gliński, attorney-at-law, Iwona Kasperek, real estate specialist, Real Estate Practice, Wardyński & Partners