Money_HouseIf you are a real estate developer or are going to build a family house in Slovakia, your costs may increase due to new “development fee” introduced by the Act No. 447/2015 Coll. on Local Fee for Development and on Amendments and Supplements to Certain Acts (the “Act”). The Act gives the municipalities a right to introduce by their local regulations a new fee that applies in case of the construction or reconstruction of a ground structure in its territory. The payer of the fee will be the constructor that is constructing or reconstructing in the territory of the municipality, e.g. real estate developers but also individuals building or reconstructing their house.

The development fee can range from €3 to €35 for each (even commenced) square meter of the floor area of the aboveground part of the structure. In case of bigger cities, the fee can vary for various cadastral areas or even various types of structures. The fee also applies to the renovation of the existing buildings but only if new floor area is added.

The municipality adopts the fee in the form of a generally binding regulation and may change its amount annually – with the effect as of January 1. For the year 2017, the municipality may adopt the fee also during this year but such fee will apply retroactively from January 1.

The municipality levies the fee to the constructor by issuing a decision, which becomes due and payable within 15 days from the day when the decision became final and binding. The decision is preceded by the issuance of a building permit to the constructor.

If there is more than one constructor, the fee is paid either as per an agreement between the constructors or in equal proportions.

The fee does not apply to:

  1. a) Reconstruction, maintenance, repair or modernization of a residential building, which does not change the total floor area of all apartments and non-residential premises in a residential house;
  2. b) Maintenance, repair, reconstruction or upgrading of a building other than a residential house where the floor area of the building and the purpose of its use are not changed;
  3. c) A small structure with a floor area of up to 25 square meters; and
  4. d) Other structures, such as structures of healthcare facilities, structures of social housing, etc.

The development fee contributes to the municipality’s budget and the municipality can use the money coming from the fee only for certain types of the constructions, such as childcare facilities, social housing, school facilities, municipal roads, parking areas, technical infrastructure, etc. In principle, the amenities should be built in the cadastral territory or in its part, in which the development fee has been levied in respect of the new construction. But the municipality may, through a generally binding regulation, determine that the proceeds from the fee or a precisely specified percentage shall be used in another cadastral territory or in another individual part of the municipality.

The development fee should replace the current practice of the municipalities to impose obligations on developers to construct/renovate as part of their development, adjacent roads, playgrounds, renovate school facility and similar obligations. However, as the law does not explicitly prohibit the municipalities – in their capacity of building office – to impose such additional obligations not related to the development itself – developers do not have 100% certainty that such obligations will no longer be imposed.

Hopefully, the municipalities will be using the proceeds from the development fee effectively and will not be burdening the constructors too much as the ultimate payee is the future resident of the municipality.