The state of epidemic and the construction process | In Principle

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The state of epidemic and the construction process

The coronavirus epidemic is generating new problems for parties to business transactions: restrictions on business operations, supply disruptions, limited availability of staff and materials, changes in the operation of public bodies and post offices. The downtime they cause has effects not only on civil-law grounds. In addition, there is the issue of expiry of administrative permits. Do the existing regulations, and the new Anti-Crisis Shield, offer any solution?

Most activities undertaken as part of the construction process are subject to strict regulation, the most restrictive form of which is the need to obtain a permit or position of an authority in the form of an administrative decision. Additionally, many such decisions are issued for a specific period. Thus if the decision or position of the authority expires, the investor loses its rights under it.

Time-limited nature of rights

A building permit decision may expire in situations listed in Art. 37(1) of the Construction Law (discussed below). An investor commencing or resuming construction works on the basis of an expired building permit is treated as a person performing work without a permit required by law.

A time restriction is also applied in the case of carrying out works not requiring a building permit but subject to notification. Pursuant to Art. 30(5b) of the Construction Law, if construction works are not commenced within three years from the date of commencement specified in the notification, the works can only be commenced after a new notification.

Some construction projects, e.g. construction of manufacturing plants, require additional environmental decisions. Such a decision should be obtained even before beginning the procedure with the architectural and construction authority. The environmental decision must be enclosed with the application for a construction permit or with the notification, and the application or notification must be submitted within six years after the environmental decision became final.

Effects of expiry of deadlines

A building permit expires by operation of law at the end of the three-year period provided for by law for the commencement of construction works, or in case of a break of more than three years. It is similar in the case of works covered by a notification: after three years, the rights resulting from the notification expire by operation of law. The investor does not have the right to commence construction works, and all construction works carried out despite the expiry of these periods are deemed works carried out without a permit, or without the required notification, as the case may be.

Expiry of the six-year duration of an environmental decision renders the decision useless for the investor, as it can no longer serve as the basis for obtaining a building permit or making a notification.

Possibility of extending or reinstating time limits

It may be asked whether the applicable laws provide investors with instruments protecting against the loss of administrative rights due to forced suspension of activity by many businesses. The question in particular is whether the current state of epidemic (or the previous state of epidemiological threat) could be considered a circumstance causing interruption or extension of time limits for undertaking certain activities during the development process.

From an analysis of the applicable law we may conclude that expiry of the construction permit decision (or the effect of failure to object to a notification) occurs regardless of whether the construction did not start or was interrupted for reasons attributable to the investor, or was due to external factors, such as force majeure. Therefore, the substantive-law time limit, the expiry of which results in loss of the rights contained in these permits, cannot be extended. Nor can it be reinstated under Art. 58 and the following articles of the Administrative Procedure Code.

Also with regard to environmental decisions, the parliament did not provide for a general possibility to suspend the validity” of the decision. However, by way of exception, the addressee of the decision may request an extension of up to 10 years if the conditions for implementation have not changed. In order to extend the validity of an environmental decision, the applicant must apply well in advance, to enable the public authority to issue a decision extending the validity of the environmental decision before the end the six-year period. As in the case of a building permit, the six-year time limit is a substantive-law time limit, and its expiry renders proceedings to extend it moot.

Solutions provided in the Anti-Crisis Shield

In recent days, the parliament has worked intensively on an amendment to the Anti-Crisis Act of 2 March 2020. In Art. 15zzr, the amendment refers to the running of time limits under administrative law. The final wording of this provision was determined taking into account the Senate’s amendment in its resolution of 31 March 2020.

Under Art. 15zzr, “During the period of a state of epidemic, the running of time limits provided for by administrative law:

  1. compliance with which is a condition for obtaining legal protection before a court or other authority,
  2. for a party to take actions shaping its rights and obligations,
  3. statutes of limitations,
  4. for which failure to comply with the time limit causes expiration or modification of rights in rem or claims and liabilities, or defaults,
  5. strict time limits, noncompliance with which entails negative consequences for the party pursuant to statute,
  6. for entities or organisational units subject to entry of actions in the relevant register, time limits for actions required to be filed with the register, as well as time limits for performance by such entities of obligations arising out of regulations governing their systems of operation,

shall not start, and when started shall be suspended for that period.”

This provision does not explicitly address the flagged problem of the time limit for validity of administrative decisions. Clear conclusions are also not provided by the explanatory memorandum for the amending act.

Time limits defined by the parliament as strict, which in the context of administrative proceedings are understood to be time limits for which failure to meet the deadline results in negative procedural consequences for the party, are suspended. On the other hand, the amendment relates to administrative-law time limits, i.e. not only procedural time limits, but also time limits resulting from substantive provisions. It should be considered whether substantive time limits in force during the development process which cannot be reinstated can be considered strict time limits within the meaning of Art. 15zzr(5) and can be claimed to be suspended.

A more persuasive approach seems to be that the commencement of construction works is an action by the party, performance of which shapes its rights arising under the issued construction permit or notification of the intention to commence construction works. If works are not undertaken by that deadline, the party loses the right to carry out works legally. Thus Art. 15zzr(2) would justify suspension of such time limits.

As the parliament has not explicitly resolved the issue of suspension of substantive time limits in the construction process, we recommend that investors make efforts to carry out even relatively minor works, confirmed by an entry in the construction log, as a precaution, to prevent expiry of the permit to conduct construction works.

Olga Połowianiuk, attorney-at-law, Construction practice, Wardyński & Partners