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Real Estate Development New So-Called "Development Fee"

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In Slovakia, a new Act No. 447/2015 Coll., on Local Development Fee (the "Act") introducing a new one-time local fee for development (the "Fee") shall become effective as of 1 November 2016.

The Fee shall apply to buildings, which were permitted by a building permit issued as of 1 November 2016. The Fee can be established by a generally binding regulation of the municipality in its territory, a separate part thereof or a separate cadastral area on a voluntarily basis. This Fee will then become the income of the municipalities' budget. Even though the new Act is not in force yet, this new legislation is highly disputed among the entrepreneurs as it is seen as a burden preventing one from further investing into real property.

The aim is to help municipalities to collect funds for new infrastructure, local roads, parking spaces, childcare, school, healthcare and social facilities, parks and other public amenities. However, in the construction business these extra costs mean another financial and administrative burden increasing the overall costs not only for building and construction companies but also for residents. The experts predict a significant increase of prices of real estate and also a negative impact on administration in smaller towns. For example, if the municipality imposes the Fee in the rate of EUR 30 per m2, the overall Fee for an industrial park with the area of 10,000 m2 will amount to EUR 300,000. 

AMOUNT OF THE FEE 

The municipalities shall have the right to impose a new Fee in the amount of EUR 10 up to EUR 35 per m2 of the above-ground building floor area. For the purposes of the Act, the floor area of the above-ground part of the building shall mean the sum of the floor areas of all rooms in the above-ground floors of the building. Also different rates of the Fee may be introduced by the municipality for residential buildings, buildings used for agricultural production or industrial buildings and buildings used for storage, etc. The Fee will be paid as a one-time fee. 

SUBJECT MATTER OF THE FEE 

The subject matter of the Fee are buildings in the territory of the municipality, for which a valid building permit has been issued. The Act explicitly regulates the exceptions from the Fee such as family houses with a floor area less than 150 m2, small buildings, extensions of a building with a floor area up to 25 m2 or a built-in garage and parking spaces of an existing building, etc. 

SUMMARY

As already mentioned above, the obligation to pay the Fee shall be established by the validity of the building permit.  

According to the Act, the municipalities can introduce or change the Fee rate only as of 1 January in a calendar year, thus the first Fee can be introduced on 1 January 2017 for the first time in the respective municipality.  

By Michaela Stessl, Country Managing Partner, and Daniela Koncierova, Associate, DLA Piper

Last modified onWednesday, 27 July 2016 13:41
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