News
Decisions on preparing and invalidating detailed spatial plans must be based on substantive considerations, not political sentiment
Decisions on preparing and invalidating detailed spatial plans must be based on substantive considerations, not political sentiment
The Supreme Court of Estonia recently issued a landmark ruling that provides important guidance to developers and local governments regarding the refusal of, or the invalidation of, detailed spatial plans. Sandra Kaas, co-head of the environmental law and spatial planning practice at RASK, who represented a real estate developer in the dispute, explains the background to the ruling.
In more densely populated areas, a detailed spatial plan is generally required for property development. An adopted detailed spatial plan provides the legal basis for designing buildings that require a building permit and the facilities that serve them. At the same time, a detailed spatial plan imposes construction and land use restrictions to protect the interests of neighbours and the public.
The number of detailed spatial plans adopted tends to fluctuate in line with the state of the economy. For instance, a significant number of detailed spatial plans for new residential areas were adopted during the global real estate boom of 2005–2007. However, not all of these plans have been possible to implement for practical reasons. Nevertheless, they remain in force to this day and contribute significantly to the value of various properties.
Vigorous planning activity has now forced some local governments to restrict population growth, as social infrastructure, such as schools and kindergartens, cannot keep pace with a sharp increase in the number of residents. Consequently, in recent years, a number of local governments have been actively reviewing long-running detailed spatial planning processes and plans, deciding to terminate proceedings and invalidate plans.
Although the Constitution protects a landowner's right of ownership, this right is not absolute. The actual limits and substance of the use of property depend on the restrictions set out in and on the basis of legislation. In the case of a plot of land, such a restriction is also the obligation to prepare a detailed spatial plan where required by law. In that case, the scope and substance of the right to use the property is defined through the building rights of the plot in the detailed spatial plan.
The possibilities for using a plot of land therefore always take shape together with the applicable restrictions, such as a detailed spatial plan, which determines what may be built on the plot and under what conditions. Importantly, these restrictions do not disappear when the owner changes. When a plot is sold, the obligations and restrictions arising from the detailed spatial plan transfer automatically to the new owner. This means that the new owner cannot start with a clean slate or use the land solely at their own discretion, but must take into account the plan already in force.
Such restrictions also affect the value of a plot of land. If construction or use possibilities are limited, this generally reduces the market value of the plot. Conversely, the more possibilities a plan provides, the higher the value of the plot may be. In sum, this means that a buyer must establish the value and possibilities of use of a property before purchase. Ownership is therefore never entirely unrestricted, but takes shape together with all applicable rules and restrictions.
The Supreme Court highlighted in its recent ruling a principle that has been less emphasised to date but is substantively very important: the use of a plot of land that the owner wishes to pursue and is still seeking also falls within the protection of the right of ownership. This means that where an owner wishes to obtain building rights through a detailed spatial plan or to alter the building rights of their plot – for example to erect buildings or develop the land in another way – this is in principle an interest falling within the protection of the right of ownership that must be taken into account in the planning proceedings.
At the same time, this does not give the owner the right to dictate the content of the plan. Local governments retain broad discretion and must balance various interests – public interests, the rights of neighbours and the objectives of spatial development. The owner's wishes are not automatically decisive, but must be fairly weighed. If a detailed spatial plan is not adopted in the manner the owner sought and the expected income is therefore not realised, neither the state nor the local government is required to compensate for that loss. Such income is not treated as the infringement of a vested right, but rather as an opportunity that did not materialise.
In practice, situations have arisen in recent years where planning proceedings have dragged on for more than ten years and the local government wishes to terminate them, citing changes in construction requirements or planning rules in the interim. Landowners are often given to understand that if the development intention has remained the same, it is possible to start the entire process over. In other words, the landowner is directed to submit a proposal to initiate new proceedings and to wait for its resolution in order to achieve the same objective. At the same time, it is well known that in larger cities, simply having detailed spatial plan proceedings initiated at all is an achievement in itself. It is therefore not right to direct landowners to abandon already-initiated planning proceedings without a substantive reason. Changes in the legal framework do not automatically mean that planning proceedings must be terminated and new proceedings initiated. It is often possible to continue processing a plan on the basis of the rules in force at the time the proceedings were commenced, adapting the solution as necessary to reflect changed substantive conditions or requirements.
The Supreme Court explained that once a detailed spatial plan has been adopted, it determines very precisely what may be built on the plot and under what conditions. This means that the owner's rights are no longer merely a hope or a plan, but a legally binding framework that the state and local government must also respect.
The invalidation of such a plan is therefore a considerably more serious interference for the owner. If a detailed spatial plan is invalidated against the owner's wishes, the owner loses their existing position – the position established by the plan – that is, the right to use the plot in the manner specified.
Such a decision must not be taken lightly. The invalidation of a detailed spatial plan must be based on considerably weightier grounds than those that might be sufficient for terminating proceedings for the preparation of a new plan that is still being sought, or for refusing to adopt a plan. A mere change in political preferences or a desire to restart proceedings is not sufficient.
In sum, the Supreme Court drew a clear line between two situations. On the one hand, an owner cannot demand that a detailed spatial plan to their liking be adopted. On the other hand, if a plan has already been adopted, it cannot simply be taken away without a compelling reason, as this would interfere with the owner's right of ownership. Such interference cannot be justified by a wholly unsubstantiated or merely hypothetical need for a new plan.
In addition, such a step may have real consequences for the state or local government. If the invalidation of a plan interferes disproportionately with the owner's rights, this may in certain cases give rise to an obligation to acquire the plot or to pay compensation.
The Supreme Court did not exclude the possibility that the invalidation of an old detailed spatial plan may be justified in genuine and clearly substantiated cases. In such a case, however, the local government must demonstrate why, in respect of that particular area, the public interest has changed to such an extent that it outweighs the landowner's rights.
General references to the public interest are not sufficient to justify the invalidation of a detailed spatial plan. The values and objectives on which the local government relies when invalidating a plan must be legally ascertainable, relevant and substantiated in respect of that specific area. Otherwise it is not possible to assess whether the interference with the right of ownership is necessary and proportionate.
It is therefore not sufficient to make formulaic and unsubstantiated assertions that the spatial preferences or political attitudes of the local government have changed over the years. An interference with the right of ownership cannot be justified by an abstract desire to build less than before or to leave areas generally undeveloped. Such needs must be reflected in planning and development documents of broader scope, in particular the spatial plan. This is also important in order to avoid arbitrary situations where one development is abandoned while another is nonetheless permitted to proceed.
The Estonian planning system is hierarchical precisely because it replaces arbitrary or shifting political will with a structured and procedurally controlled decision-making process. Every spatial use decision undergoes public proceedings and thorough consideration. In the course of planning proceedings, it is established whether and on what basis changes are warranted and how conflicting interests – such as those of the public and the landowner – might be reconciled. Public and private interests cannot simply be set in opposition; they must be weighed in fair proceedings and the right balance of interests ensured.
The Supreme Court emphasised that developing a plot in accordance with an adopted detailed spatial plan does not need to be justified by the public interest. The right of ownership serves primarily private interests. Accordingly, if a developer remains interested in implementing an old plan and doing so would not harm the public interest or the rights of another person, there is no need in a democratic society to obstruct the implementation of the plan merely on the grounds that it is old.
In more densely populated areas, a detailed spatial plan is generally required for property development. An adopted detailed spatial plan provides the legal basis for designing buildings that require a building permit and the facilities that serve them. At the same time, a detailed spatial plan imposes construction and land use restrictions to protect the interests of neighbours and the public.
The number of detailed spatial plans adopted tends to fluctuate in line with the state of the economy. For instance, a significant number of detailed spatial plans for new residential areas were adopted during the global real estate boom of 2005–2007. However, not all of these plans have been possible to implement for practical reasons. Nevertheless, they remain in force to this day and contribute significantly to the value of various properties.
Vigorous planning activity has now forced some local governments to restrict population growth, as social infrastructure, such as schools and kindergartens, cannot keep pace with a sharp increase in the number of residents. Consequently, in recent years, a number of local governments have been actively reviewing long-running detailed spatial planning processes and plans, deciding to terminate proceedings and invalidate plans.
The possibilities for using and the value of a plot of land take shape together with the applicable restrictions
Although the Constitution protects a landowner's right of ownership, this right is not absolute. The actual limits and substance of the use of property depend on the restrictions set out in and on the basis of legislation. In the case of a plot of land, such a restriction is also the obligation to prepare a detailed spatial plan where required by law. In that case, the scope and substance of the right to use the property is defined through the building rights of the plot in the detailed spatial plan.
The possibilities for using a plot of land therefore always take shape together with the applicable restrictions, such as a detailed spatial plan, which determines what may be built on the plot and under what conditions. Importantly, these restrictions do not disappear when the owner changes. When a plot is sold, the obligations and restrictions arising from the detailed spatial plan transfer automatically to the new owner. This means that the new owner cannot start with a clean slate or use the land solely at their own discretion, but must take into account the plan already in force.
Such restrictions also affect the value of a plot of land. If construction or use possibilities are limited, this generally reduces the market value of the plot. Conversely, the more possibilities a plan provides, the higher the value of the plot may be. In sum, this means that a buyer must establish the value and possibilities of use of a property before purchase. Ownership is therefore never entirely unrestricted, but takes shape together with all applicable rules and restrictions.
The owner's sought use of the property falls within the scope of the right of ownership, and unjustified termination of the preparation of a detailed spatial plan may interfere with it
The Supreme Court highlighted in its recent ruling a principle that has been less emphasised to date but is substantively very important: the use of a plot of land that the owner wishes to pursue and is still seeking also falls within the protection of the right of ownership. This means that where an owner wishes to obtain building rights through a detailed spatial plan or to alter the building rights of their plot – for example to erect buildings or develop the land in another way – this is in principle an interest falling within the protection of the right of ownership that must be taken into account in the planning proceedings.
At the same time, this does not give the owner the right to dictate the content of the plan. Local governments retain broad discretion and must balance various interests – public interests, the rights of neighbours and the objectives of spatial development. The owner's wishes are not automatically decisive, but must be fairly weighed. If a detailed spatial plan is not adopted in the manner the owner sought and the expected income is therefore not realised, neither the state nor the local government is required to compensate for that loss. Such income is not treated as the infringement of a vested right, but rather as an opportunity that did not materialise.
In practice, situations have arisen in recent years where planning proceedings have dragged on for more than ten years and the local government wishes to terminate them, citing changes in construction requirements or planning rules in the interim. Landowners are often given to understand that if the development intention has remained the same, it is possible to start the entire process over. In other words, the landowner is directed to submit a proposal to initiate new proceedings and to wait for its resolution in order to achieve the same objective. At the same time, it is well known that in larger cities, simply having detailed spatial plan proceedings initiated at all is an achievement in itself. It is therefore not right to direct landowners to abandon already-initiated planning proceedings without a substantive reason. Changes in the legal framework do not automatically mean that planning proceedings must be terminated and new proceedings initiated. It is often possible to continue processing a plan on the basis of the rules in force at the time the proceedings were commenced, adapting the solution as necessary to reflect changed substantive conditions or requirements.
An adopted detailed spatial plan gives the landowner a considerably more certain and strongly protected position than development possibilities that are still being considered
The Supreme Court explained that once a detailed spatial plan has been adopted, it determines very precisely what may be built on the plot and under what conditions. This means that the owner's rights are no longer merely a hope or a plan, but a legally binding framework that the state and local government must also respect.
The invalidation of such a plan is therefore a considerably more serious interference for the owner. If a detailed spatial plan is invalidated against the owner's wishes, the owner loses their existing position – the position established by the plan – that is, the right to use the plot in the manner specified.
Such a decision must not be taken lightly. The invalidation of a detailed spatial plan must be based on considerably weightier grounds than those that might be sufficient for terminating proceedings for the preparation of a new plan that is still being sought, or for refusing to adopt a plan. A mere change in political preferences or a desire to restart proceedings is not sufficient.
In sum, the Supreme Court drew a clear line between two situations. On the one hand, an owner cannot demand that a detailed spatial plan to their liking be adopted. On the other hand, if a plan has already been adopted, it cannot simply be taken away without a compelling reason, as this would interfere with the owner's right of ownership. Such interference cannot be justified by a wholly unsubstantiated or merely hypothetical need for a new plan.
In addition, such a step may have real consequences for the state or local government. If the invalidation of a plan interferes disproportionately with the owner's rights, this may in certain cases give rise to an obligation to acquire the plot or to pay compensation.
The invalidation of an old detailed spatial plan may be justified in genuine and clearly substantiated cases
The Supreme Court did not exclude the possibility that the invalidation of an old detailed spatial plan may be justified in genuine and clearly substantiated cases. In such a case, however, the local government must demonstrate why, in respect of that particular area, the public interest has changed to such an extent that it outweighs the landowner's rights.
General references to the public interest are not sufficient to justify the invalidation of a detailed spatial plan. The values and objectives on which the local government relies when invalidating a plan must be legally ascertainable, relevant and substantiated in respect of that specific area. Otherwise it is not possible to assess whether the interference with the right of ownership is necessary and proportionate.
It is therefore not sufficient to make formulaic and unsubstantiated assertions that the spatial preferences or political attitudes of the local government have changed over the years. An interference with the right of ownership cannot be justified by an abstract desire to build less than before or to leave areas generally undeveloped. Such needs must be reflected in planning and development documents of broader scope, in particular the spatial plan. This is also important in order to avoid arbitrary situations where one development is abandoned while another is nonetheless permitted to proceed.
The Estonian planning system is hierarchical precisely because it replaces arbitrary or shifting political will with a structured and procedurally controlled decision-making process. Every spatial use decision undergoes public proceedings and thorough consideration. In the course of planning proceedings, it is established whether and on what basis changes are warranted and how conflicting interests – such as those of the public and the landowner – might be reconciled. Public and private interests cannot simply be set in opposition; they must be weighed in fair proceedings and the right balance of interests ensured.
The Supreme Court emphasised that developing a plot in accordance with an adopted detailed spatial plan does not need to be justified by the public interest. The right of ownership serves primarily private interests. Accordingly, if a developer remains interested in implementing an old plan and doing so would not harm the public interest or the rights of another person, there is no need in a democratic society to obstruct the implementation of the plan merely on the grounds that it is old.