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10 December 2020

Hungary: Real estate developers not always aware of potential obligation in construction law

Real estate developers are not always aware of a potential obligation in construction law, namely the provision of additional parking spaces if refurbishment works result in an area increase or if there is a function change. But how are additional parking spaces calculated and what shall be done if no additional parking lots can be constructed? Either additional construction works or the payment of a redemption fee. The latter can unfortunately be an unexpected cost although it can be assessed in the early stages of the process. Laszlo Krüpl from Schoenherr provides practical insights on these problems.

Governmental decree no. 253/1997 (XII. 20.) on town planning and building requirements ("OTÉK") defines the required number of parking spaces. The required parking spaces of a newly developed building depend on its function and can be calculated as follow: OTÉK defines that one parking space needs to be provided for each guest room of a hotel, each commenced 20 sqm net area of an office building, 1500 sqm net area of a warehouse or 5 sqm net area of a catering unit etc. Local building laws issued by cities, towns or municipal districts may deviate from these numbers. For instance there are local building laws in certain districts of Budapest which stipulate that in case of a hotel development only 50% or 25% of the new parking spaces required by OTÉK shall be provided.

When determining the number of additional parking lots required in case of function change or area increase in existing buildings, although there is no clear rule in the OTÉK, in practice the building authority and the architects may follow a very specific method: a so-called theoretical parking number ("elvi parkolószám" or "örökölt parkolószám") is computed to which an existing building would be entitled if it was newly developed and it is taken as basis instead of the actually available parking lots.

An example for the function change of an existing building: the theoretical parking number of an office building constructed in the 1960's with a 1200 sqm net office area is 60 (because the current rule sets out 1 parking lot for each 20 sqm net office area), even if factually only 40 parking lots are available. If such property would turned into a 45-room hotel (whereas the current rule sets out 1 parking lot for each guest room), then in fact no additional parking space would be required because the total parking number for a hotel (45) is less than the office building's theoretical number (60) even if only 40 parking lots are actually available. It is to be noted that in case of function change in monument buildings no additional parking space needs to be provided if there is no area increase.

An example for the area increase in an existing building: if a simple refurbishment project is done in which 40 sqm kitchen/restroom is turned into a 40 sqm newly developed net office area in a 1 year old office building, then the developer can easily face the legal obligation to provide 2 additional parking lots, based on the current rule that 1 parking lot is required for each 20 sqm net office area in case the refurbishment is subject to a building permit.

If there is no technical possibility to provide the required parking lots, they should be redeemed from the local municipality. The amount and the calculation method are usually included in the local building laws and the regulation vary from town to city or municipal district. For example, the redemption fee of a non-residential parking lot in Budapest 6th District can amount to HUF 6,325,000/piece whereas in the Kecskemét inner city parking lots were redeemed following an individual negotiation for HUF 810,000/piece.

The parking number balance ("parkolómérleg"), i.e. the number of the required parking spaces needs to be calculated and established by the architect in the technical description as part of the building permitting documentation and should be verified on a case-by-case basis by the building authority. In any case, it needs to be carefully assessed whether the planned construction activity results in an obligation to provide additional parking lots. If these cannot technically be provided, the associated redemption cost should be anticipated.