Construction permits process in Poland

Construction Permits Process in Poland November 2010 Investment Climate Advisory Services  World Bank Group With funding from FIAS, the multi-donor investment climate advisory service I. Background The Doing Business report records all the procedures, costs, and time required to build a warehouse and connect it to utilities in a country’s largest business city. Doing Business 2011 reports that it takes 32 procedures, 311 days, and it costs 121.8% of per capita income to build a warehouse in Warsaw, following all the official requirements. On the ease of dealing with construction permits, Poland ranks 164th among all the countries in the report and 30th among the 30 OECD countries. The Polish government deems this ranking to be unsatisfactory its ambitious targets to improve its investment attractiveness and industry competitiveness. Moreover, the ranking does not convey the breadth and decisiveness of the government’s reform agenda, which has not yet materialized in the construction industry, due to specific non-sector related factors. Poland was one of the Central European countries that survived relatively well the turmoil of the economic crisis of 2008-2009. While other European Union countries suffered a major decline in production between 2008 and 2009, including in the construction sector, Poland’s economy experienced positive GNP growth of 1.8%. Construction output increased even faster - 4.3% - as a consequence of the completion of many civil engineering projects co-financed by the European Union. However, residential and commercial construction in the large cities experienced negative growth.2 In Warsaw, where the usual number of building permits for construction projects used to be over 1,000 per year, only 300 permits were issued in 2009.3 In 2009, to improve the investment climate, the Polish government introduced a radical regulatory reform in the construction sector. The government proposed a considerable number of amendments to the Construction Code and related laws,4 which the lower house of Parliament (Sejm) adopted on April 23, 2009. These reforms sought to limit the scope of administrative decisions by the authorities in favor of the builders’ responsibility for safety and sustainability of their works. They eliminated the requirement for a construction permit (pozvoleniu na budowe) from the law (except for a short list of large and risky projects) and replaced it with the requirement for a registration of construction works (rejestracji budowy). For smaller and less risky projects, even the notification would not be required when a qualified construction site manager would be sufficient to protect the public interest. In the approved bill the Parliament has reduced the statutory time to 2 Poland. A Report by Mariusz Sochacki, PAB-PCR&F Institute, for the 69th EUROCONSTRUCT Conference, Dublin, June 24 – 25, 2010. 3 Information received in authors’ interview with the Architecture and City Planning Department of Warsaw. 4 The legal and regulatory framework of the construction industry is based on the following laws:  Construction Law Act, issued on 07.07.1994 (DZ.U. 2006, No 156, item 1118, with further amendments)  Act on Public Roads, issued on 21.03.1985 (Dz.U. 2007, No. 115, item 115, with further amendments)  Act on the Establishment and Operation of Large Commercial Facilities, issued on 11.05.2007  Act on Spatial Planning and Development, issued on 27.03.2003 (DZ.U. 2003, No 80, item 717, with further amendments)  Act on State Sanitary Inspection, issued on 14 March 1985 (Dz.U.2006, No 122, item 851, with further amendments)  Act on Fire Protection, issued on 24 August 1991(Dz.U.2002, No 147, item1229, with further amendments)  Act on Environment Conservation, issued on 16 April 2004 (Dz.U.2001, No 92, item 880, with further amendments)  Environmental Protection Law Act, issued on 27.04.2001(DZ.U. 2006, No 129, item 902)  Administrative Proceedings Code, issued on 14.06.1960 (consolidated act DZ.U. 2000, No 98, item 1071, with further amendments) 2 adjudicate the application to 30 days. Within this period, the authorities should either ―register construction works‖ as notified by the builder or reject notification by issuing a decision. In the case of ―no objection‖ after the 30-day period the builder may commence the construction project while adjudicating applications within a 65-day period under the ―construction permit‖ system. Some of these changes were interpreted as possible violations of the EU Declaration on Citizens’ Rights, and the new law was sent to the Constitutional Tribunal for a decision on its legality. The Tribunal has been reviewing the issues of due process in public consultations for more than a year. Market-based reforms and the emergence of civil society in former planned economies brought about the process of public consultations in spatial development, in which all stakeholders (not only the state and vested interests) are able to voice their opinion regarding land use and spatial development plans, as well as specific construction projects. According to the laws in developed market economies, including the European Union, interested and affected parties may appeal decisions of the authorities regarding construction projects in their neighborhood, town, or city. The courts in Poland and other Central European countries have been flooded with claims by interested parties for compensation for real or perceived damages. The legal and judicial costs of putting construction projects through the approval, appellate, and implementation processes have skyrocketed. In many instances, they have become an excessive burden for developers, who opted out of investment opportunities in specific projects with high public interest. The government of Poland (as well as Hungary and other EU accession countries) has been looking for a balance between safeguarding the civil rights of citizens to participate fully in decision making regarding their habitat, and clarity and predictability of decisions in spatial planning and urban development. The government and Parliament of Poland put forward amendments to the construction laws, and the Constitutional Tribunal will soon pronounce its verdict. Meanwhile, in May, 2010, heavy floods struck sizable populated areas of the country and prompted urgent calls to restore, without delay, destroyed or damaged dwellings. In response, the government adopted a regulation allowing 564 municipalities with heavily flooded areas to abide by simplified rules prescribed by the Construction Law in force. The regulation included waivers of the permitting procedures for people rebuilding their own damaged homes. The government’s reform agenda goes beyond these emergency measures. The status of reform implementation and direction of further reforms are presented in Figure 1. II. Mission objectives, reporting and coordination In June 2010, an Investment Climate Reform Advisory team conducted a review of the construction permitting process in Poland as part of a broader request of the Government of Poland for assistance to improve its business regulatory environment. The objectives of the review of the construction permitting process were:  Assess progress in reforming the construction sector;  Discuss short and medium-to-long-term goals in reform implementation by government ministries, agencies, and municipalities; and 3   Deliver key reform recommendations to the government, in the context of, but not limited to, enhancing Poland’s performance in the Doing Business report’s ―Dealing with Construction Permits‖ indicator. In order to assess the progress of reforms, the mission followed the procedures to obtain a construction permit for a book warehouse located in a peri-urban area of Warsaw. The mission followed the standard Doing Business methodology to the maximum extent possible, although not all representatives of agencies involved in the permitting process were available for meetings. The information was collected through meetings with the following representatives of government’s agencies and practitioners:  Olgierd Roman Dziekonski, Undersecretary of State, Ministry of Infrastructure  Monica Majewska, Department of the Construction Market, Ministry of Infrastructure  Tomasz Zemla, Deputy Director, Architecture and City Planning Department, City of Warsaw  Anna Macinska, Director, Law-Organization Department, General Office of Building Control  Joanna Piekutowska, Director, Department of Administrative Ruling, Main Inspectorate for Environment Protection  Piotr Kulpa, General Director, Main Sanitary Inspectorate  Andrzei Kosinski, Deputy Director, Main Sanitary Inspectorate  Leszek Zajac Deputy Director, Supervision and Control Department, State Labor Inspectorate  Piotr Wojtaszewski, Deputy Director, Main Directorate of State Fire Protection III. Construction Permit Process as documented in discussions with counterparts The mission held a total of six meetings. The findings from these discussions with the regulatory bodies and government officials were subsequently discussed in interviews with industry practitioners—construction firms and developers, lawyers and architects. The mission’s findings were rather rich and led to significant interpretations, comments and recommendations regarding the improvement of Poland’s construction related regulations. Table 1 outlines the mission’s findings. The table contains comments and recommendations, which the Polish government may wish to consider, to improve the country’s construction permitting process. For additional information, the authors’ contact information can be found on the final page. 4 Figure 1. Reforms under implementation and additional reform recommendations. Pre-construction During construction Post-construction Reforms under Implementation Processing of construction and Guidelines, inspections, Enforce the ―silence is occupancy permits construction permits consent‖ rule in issuing the  Risk-based approach in  Utilities issue public occupancy permits by allowing processing applications specialized agencies 14 days guidelines to simplify  Digitization of maps preparation of technical and construction authorities 21  Electronic submission of conditions days to file an objection to the data  Elimination of excessive notification on completion of  Short and enforceable inspections for simple works statutory approval limits construction objects  Project supervision (such as Environmental delegated to private sector Protection) professionals  Further streamlined and  Cautious use of ―silence is re-engineered consent‖ principle in procedures construction permitting Additional Reform Recommendations One-stop-shop‖ at municipality Enhance the role of private  Consider broader public access for issuance of utility technical sector professionals in to the register of notifications of terms construction oversight by completion in order to alert delegating the right to validate interested parties on compliance  Replace permits with the final opinions and provide with the registered design (not notification-based regulatory to challenge the registered them to the applicants system to ensure smooth project) implementation of enacted  Increase the financial and changes without compromising criminal liability of inspectors requirements for safety, health, (both public and private) for and environment neglect and oversight in order to  Ensure transparency of applied better protect the public interest rules (e.g., public access to  Introduce further anti- registered permits and corruption measures in the notifications) inspection processes  Ensure public access to  Rationalize and consolidate registered notifications and post-completion inspections; to rights to appeal by affected reduce the time and cost burden 5 parties on entrepreneurs, introduce multifunctional inspections Table 1. Construction Permitting Procedures Construction Permit Construction Procedures, per Comments Recommendations Procedures, per World amendments to the Construction Bank mission’s mapping, Law as adopted by the lower June 2010 chamber of the Parliament (Sejm), April 23, 2009 PRE-CONSTRUCTION Request technical Construction Law requires (art. Construction of a modern building Restore the provision in the conditions for electricity 34, para 3, item 3) construction is possible only when utility amended law. connection from PGE design to include statements of connections are secured by getting Poland, the electricity relevant bodies that the supply of terms and conditions of Consider setting up a one-stop- distribution company in power, water, heat, gas, sewage warehouse connection to the shop for processing utility Warsaw – 4 weeks5 disposal has been secured and networks. Privatization and applications at a municipal Request technical terms and conditions for private management of public site, as in neighboring conditions for water and connection of the warehouse to utilities do not address this need. countries (e.g., Lithuania). sanitation from Miejskie these networks are defined. In the Being natural monopolies, most of Przedsiebiorstwo Sejm bill this article is removed these utilities should be regulated Wodocagow i Kanalizacji, for unknown reasons. by the government and users the water and sanitation should have equal and company in Warsaw – 4 unrestrained access to utility weeks6 services. Request technical conditions for telecommunications from Telekomunicacja Polska – 4 weeks7 Request an extract and a No change is proposed in Art. 20 The time limits for issuing an Consider accepting maps printout from the local of Construction Law which lists extract are specified in the Spatial issued more than 6 months spatial development plan – as a duty of the designer ―to Planning and Development Law. beforehand (e.g., 12 months 5 Source: Proces inwestycyjny (w odniesieniu do inwestycji kubaturowych). Working material prepared by the Ministry of Infrastructure. 6 Source: Ibid 7 Source: Ibid 6 1 day prepare the construction design in The Law on Administrative validity) and reducing the Receive a copy of the accordance with the decision on Proceedings gives the investor the statutory deadline to issue the extract and updated spatial conditions for construction and right to complain to a higher updated extract and printout. development plan – 4 land development‖ without administrative body in case of a Consider introducing weeks specifying the time limits for the delay. The maps, to be valid, must digitization of maps and local authorities to issue an be not more than 6 months old electronic submission of data. extract. and prepared by licensed surveyors. Request and obtain design No change is proposed in art. 5 of These procedures have been Phase in full delegation of the approval from licensed the Construction Law which streamlined and synchronized. review function to the licensed sanitary, fire, work safety requires that basic requirements There is room for further private sector practitioners and hygiene and the be fulfilled related to these simplification, though, which is starting with smaller and/or administrator of the public aspects of construction ―taking not yet envisaged in the less hazardous projects, roads – 14 days into account the expected period improvements adopted by the particularly since the licensing of use and in accordance with Sejm Bill. Currently the review process is rather demanding. technical knowledge principles.‖ work is mostly done by the For example, out of 40 licensed private sector candidates to become licensed for project review on fire practitioners (e.g., there are 400 fire safety experts in Poland andsafety, only two were selected similarly a large numbers for in 2010. sanitary and work safety Full delegation will allow the inspectors). Their conclusions state inspectorates to focus must be validated by the exclusively on large and/or corresponding state inspectorate.high risk projects saving investors’ time in processing the bulk of applications. Request and obtain the The fundamental change Replacing permits with Clarify the requirements to the construction permit. The proposed by the Sejm Bill was the notifications for most construction requisites of the notification in basic provision of the replacement of the permitting projects is a major reform the proposed amendment of Construction Law (art.28) system in construction with the proposal. Other simplification Art 30.1 provides for works to declarative principle by measures will also lead to commence solely on the significantly limiting the scope of aggregate cost savings for Allocate additional time for basis of the final decision administrative decisions in favor investors. The government should public consultations and the 7 on the construction permit of notifications for most be commended for proposing such post-notification right to (except for small construction projects (except steps. In the text of the Sejm Bill appeal when construction is structures). If the permit is large and high risk). After though there must be a provision located in high density urban not issued within 65 days registration, notifications do not for time for no objection not only areas or seriously affect from the date of filing of require decisions by the by the authorities, but also by environment or people the application, the government bureaucrats. This other stakeholders (neighbors, living/using existing structures authority of higher instance saves time and resources for general public, etc.) who should in peri-urban areas. shall impose a fine on the investors, who, at the same time, be given clearly defined time span procrastinating authority of take full responsibility for the to raise their objections to the Such an opportunity should be PLN 500 for each day of accuracy and conformity of the filed notifications and file them given to the stakeholders after delay (art 35.6). Smaller project information. with the authority. Building the notification stage by and lighter structures may without a registered notification ensuring transparency of the be built on the basis of Other reforms: may be stopped and the builder notification log and notifications which should  Reducing to 30 days the time fined (Art. 50.1). announcements in the media be filed not later than 30 limit for the authority to object The proposed bill is modest and postings in the area of the days before the the notification to a larger regarding the transparency aspect construction site. construction commences contingency of construction of the notifications filed. Will all provided authority does not projects (instead of 65 days per stakeholders have access to the The proposed bill may include object with a decision (art current law (Art 30a.4). notification log? How the appeal more provisions as to public 30.5).  For some light and small forms process will be organized in the dissemination of the filed which require notification in the new system based on declarations notifications, the public current law, neither notification and not on permits? consultation process and ways In 2009, fines for delays nor decision will be required to appeal the registered beyond 65 days were  For another group of projects notifications by interested imposed on 40 local notification may not be partied. governments; in 2010, only accompanies by design on 10.  For building renovations and finishing works, notifications are not required -- participation of a construction site manager will be enough. 8  DURING CONSTRUCTION Conclude agreements with Utility connections are regulated The mission visited Miejskie Utilities should issue public utility providers of by specialized laws on electricity, Przedsiebiorstwo Wodocagow i guidelines to further simplify electricity, water and water and telecom. The general Kanalizacji, the water and preparation of technical sanitation, provisions of the Construction sanitation company in Warsaw, conditions. telecommunications – 14 Law to this effect are proposed to and was impressed by the quality days be removed. of services provided by the company, which benefitted from extensive EU technical assistance. PGE Poland, the electricity distribution company in Warsaw, is the largest integrated electricity producer in Poland. The State owns 85% of its shares. The telecom sector is competitive. No periodic inspections n/a As a comparison, in many On this requirement, Poland during the construction transition economies the offers a best practice on cycle are required. regulatory authorities continue to delegation of construction intervene in the construction supervision to private parties, process with periodic visits of the either qualified site or project construction authority’s inspectors managers and/or to project all along the building cycle: (a) designers (so called ―author’s completion of the ground level supervision‖), and/or other works, (b) structural parts (walls), third parties. (c) roof works, (d) heating and water systems, (e) electric works, (f) painting and wall paper works and amelioration of territory, (g) installation of doors, windows, and floor. These inspections hardly improve quality of construction and are known to be opportunities for corruption. 9 Role of the Environmental Until 2008, most of construction In many developing countries The Polish experience and the Protection Inspection in the projects required notifications to (e.g., in Latin America) the risk-based classification of process of construction – and inspection visits by the inflated role of environmental construction objects for nil Environmental Protection agencies resulted in its environmental inspection Inspection. In a 2008 regulation, omnipresence at many stages of purposes may be offered to those visits were divided into 3 the construction permitting developing countries as best categories, two of which require process. In some countries those practice. EPI involvement (industrial are the most corrupt links in the facilities and plants, parking lots approval chain. for more than 100 trucks or 300 passenger cars, developments of more than 2 ha, other). Smaller and less risky sites are grouped into category 3, which does not require EPI involvement. Inspections may be sent on discretion of the municipal authorities. In the case of a book warehouse analyzed by the Doing Business report, these inspections rarely happen. Several proposals in the Sejm Bill The proposed simplification Using experience of EU In 2006 – 2008, will simplify the process further: measures are aimed at promoting countries and elsewhere (e.g., amendments to the -If in the process of construction of market-based principles and Quito in Latin America), Construction Law provided the investor decides to transfer deregulation of construction consider further study and overall simplification of the the operation to another investor, (passing the site from one investor implementation of best construction permitting under the current law the to another), carefully balancing practice experiences to allow process. authority should issue a decision the public interest with ease of commercial activity at or in this respect. In the new law an investor’s entry and exit, by around heritage sites. investor’s statement will be consolidating authority in the enough (Art.40.1). hands of one regulator - A permit from architecture or (conservation authority) and not construction for authorities will spreading responsibility among 10  not be required construction many government offices none of works on buildings registered as which can held accountable for monuments. All decisions the permitting process as it is regarding such buildings observed now. (including demolition) will be made by the conservation and preservation office (Art.39.1, 39.2 and 31.1). POST-CONSTRUCTION Upon completion of the The Sejm Bill kept this ―silence- This provision is best practice. The government may want to construction, the builder is-consent‖ rule in its text. The The 3 inspectorates have the right consider anti-corruption must notify the government inspectorate may or may not send to inspect the competed building, measures in all three sanitary inspectorate, the inspectors to the site to verify if needed, but missed deadline inspectorate (like rotation of government labor compliance with the design means approval. inspectors from one city inspectorate, and the registered previously with the The silence-is-consent rule is district to another, not government fire directorate builder’s notification. Inspectors correctly applied. The Sejm Bill allowing inspectors to visit the about his intention to put are visiting most of the proposes not applying the silence- same sight alone, etc), and in the building to use (Art completed works upon is-consent to high risk projects the future the objective could 56.1). Until 2008 there completion and submitting like railroads, surface roads, be setting up a combined was a similar requirement opinions to the building authority. power networks, pipelines, ships, multi-functional inspectorate to notify the Environmental recreational facilities, residential which would carry out labor, Protection Inspection (see buildings (Art. 56.3). sanitary and fire inspections in above). It has been one time, which may lead to eliminated from the current cost and time savings for firms law. These inspectorates and will reduce corruption need to take a position opportunities, as the regarding this proposal experiences of some countries within14 days upon receipt has shown (Columbia, of the notification. Silence Bosnia). is considered to be inspectorates’ no objection to the project (Art. 56.2) – 14 days. 11 Receive inspections from The Sejm Bill proposes to add A positive step which would Make reference to a legal act the government sanitary financial and criminal liability on improve compliance in the in which the financial liability inspectorate, labor the respective inspectors (Art.90). construction sector. will be estimated. inspectorate, the government fire directorate – 14 days Upon completion of the The Sejm Bill upheld this clause Another manifestation of a wise Consider provisions of a wider project, the builder must specifying in an additional clause use of the silence-is-consent rule public access to the register of notify the building the start time of the 21 day in the Sejm Bill, not in the current notifications and permits for authority of the intention to period, i.e., the stamp of the law, is a provision which clarifies construction. put the building to use Polish Post service per Art 54.2 that ―confirmation of completion (Art.54). Silence-is- (and not the authorities’ log date of the works does not release the Once provided an opportunity consent is also applied to which is easier to manipulate). investor from the delegation to to comment on the notification this procedure, but the obtain the approvals or other stakeholders should not authority is given 21 day to permissions to use as required by have unlimited right to torpedo object the notifications vs. separate regulations‖ (Art. 55.2). the investment process (e.g., only 14 days are allowed by commenting on for specialized The Sejm Bill did not change the appropriateness of a inspectorates to file their provisions of the law regarding construction project at the objections – 21 days transparency and accessibility to occupancy stage). When the the notifications’ registry. properly notified and registered building is complete, complaints and appeals may be accepted only in those cases where they relate to the builders’ compliance with the registered design. Submit altered site maps to No change Consider introducing archives of the Geodesic digitization of maps and Authority – 1 day electronic submission of data. Professional liability in the The Sejm Bill, nevertheless, A positive step which would Rather than imposing fines, construction industry is contains additional caveats to improve compliance in the the best practice of imposing a 12 well detailed in the existing strengthen construction rules and construction sector. ban (or cooling off period) for law. norms governing professional a professional liability breach liability, inter alia, by extending may be considered. the period for claims to be submitted for starting the proceedings from three to five years (Art. 100). Upon completion of the These procedures seem to be The working document of the The data should be provided building and receipt of the regulated by other laws, not the Ministry of Infrastructure8 and examined regarding the occupancy permit, the construction law. provides for 6-to-8 weeks. The registration procedures for investor must register the legal requirement is 4 weeks, or 6 newly built structures in property ―as a standalone – 8 weeks for complex cases. property registries. In these unit.‖ data, there must be an The application is filed and indication of whether the land a certificate should be title and rights for buildings issued. are registered in one real estate property document, or whether land and improvement rights are registered separately in different registries, which is the case in many post- communist countries. 8 Proces inwestycyjny (w odniesieniu do inwestycji kubaturowych). Working material prepared by the Ministry of Infrastructure. 13 Acknowledgments This note was prepared by Igor Artemiev (Investment Climate Regulatory Simplification – CICRS, World Bank Group), under the supervision of Penelope Fidas and Massimiliano Santini (Investment Climate Reform Advisory – CICRA, World Bank Group). For questions or comments, please contact Igor Artemiev (email: iartemiev@worldbank.org) or Massimiliano Santini (phone: +1-202-458-2967; email: msantini@ifc.org). 14