Building permits

SURETIES
Guarantees similar to those for Contracts

BUILDING PERMITS
NATIONAL LEGISLATION

The regulation of building permits, originally covered by Law 10/1977 and later supplemented by a multitude of amendments and additional laws, has been streamlined in the Consolidated Building Code, approved with Presidential Decree (D.P.R.) of June 6, 2001, No. 380.
For most substantive provisions, the Consolidated Code mainly coordinates the legislative provisions in the field of construction, reproducing their content and making only the necessary modifications to avoid contradictions or repetitions, ordering them in a logical sequence.
Law No. 10/1977 generally established the requirement for a building permit for “any activity involving urban and building transformation of municipal territory.”
Subsequent legislation introduced a dual-track system, based on the "building permit" for major interventions and the "building authorization" for minor interventions.
The Consolidated Code now provides for only two enabling building permits, depending on the type of intervention: the building permit and the start of activity declaration.
For this purpose, interventions that constitute urban and building transformation of the territory must first be identified, requiring the prior issuance of a building permit. For minor building interventions that do not involve such transformation, the permit is instead identified in the start of activity declaration. The transition between these two legal titles is dictated by the type of intervention.

CONTENT AND LIMITS OF THE GUARANTEE
Entities authorized to carry out building interventions can present surety bonds to guarantee:

Deferred payment of the concession fees;
Direct execution of urban development works.
The guarantee can include payment of administrative penalties applicable for late payment of individual installments.
In the case of transfer of the building permits, the lack of a release declaration from the original contractor by the Municipality results in joint liability between the original contractor and the succeeding buyer.
In any case, it is essential to obtain the Municipality’s procedures in advance for succession in order to verify content and conditions (transfer of all obligations to the new owner, releasing the previous one, or joint liability between the two parties).

BUILDING PERMIT
Article 10, paragraph 1, of the Consolidated Code, defines the following categories of interventions subject to the issuance of a building permit, which involve an urban and building transformation of the territory:

New construction and urban restructuring;
Building renovations resulting in a building that is entirely or partly different from the previous one (interventions involving an increase in the number of housing units, changes in volume, shape, facades, or surfaces).
The provision in Article 10, paragraph 1, is not exhaustive, as paragraph 2 of the same article grants Regions the power to subject additional categories of interventions to the building permit regime “in relation to their impact on the territory and urban load.”
Another element of flexibility has been introduced by enhancing the autonomy of local authorities, which are empowered to define, in urban planning, “in relation to zoning and the environmental and landscape value of the areas,” instances where related interventions are not classified as new construction, thus exempting them from the building permit regime.
This provision allows for the adjustment of control over private building activities in relation to the specific urban and environmental characteristics.

START OF ACTIVITY DECLARATION
The building interventions that can be carried out via a start of activity declaration are identified residually in relation to categories explicitly subject to a building permit (possibly supplemented by additional cases identified by individual Regions). The identification of interventions that involve urban and building transformation of the territory makes it unnecessary to list minor building interventions.

URBAN DEVELOPMENT COSTS AND CONSTRUCTION COSTS
The permit involves the payment of a contribution calculated based on the impact of urban development costs and construction costs.
The portion of the contribution related to urban development costs must be paid to the Municipality upon the issuance of the building permit and, at the request of the applicant (Art. 16, paragraph 2), may be paid in installments.
To offset part or all of the amount due, the permit holder can commit to directly carrying out urban development works according to the terms and guarantees established by the Municipality. Primary urban development works include residential roads, parking spaces, sewage systems, water networks, electricity and gas distribution networks, street lighting, and public green spaces (Art. 16).
Secondary urban development costs include those related to nurseries and kindergartens, compulsory schools, as well as structures and complexes for higher education, neighborhood markets, municipal offices, churches and other religious buildings, sports facilities, neighborhood green spaces, social centers, and cultural and healthcare facilities. Healthcare facilities include works, buildings, and systems intended for the disposal, recycling, or destruction of urban, special, hazardous, solid, and liquid waste, as well as the remediation of polluted areas.
The construction cost contribution is calculated based on parametric tables determined by the Regions, which are updated every five years.
The construction contribution is not only composed of the fees necessary to urbanize the property in connection with its transformation into a building asset but also includes a different type of contribution unrelated to this requirement.
It is the portion proportional to the cost of the transformation intervention covered by the building permit, with determination criteria based on this aspect of the initiative.
The construction cost is paid during the construction process according to the terms and guarantees established by the Municipality, no later than sixty days from the completion of the works.
The amount is determined by the Regions concerning the maximum allowable costs for subsidized housing and ranges between 5% and 20%, with reference to the maximum allowable costs for facilitated housing.
The building permit must specify the start and completion deadlines for the works. The start deadline cannot exceed one year, and the completion deadline cannot generally exceed three years from the start date.
Failure to start or complete within the specified timeframes results in the revocation of the building permit, which must be explicitly declared.

For late or non-payment of concession fees, the following penalties apply under Art. 42 of the Consolidated Code:
a) A 10% increase in the contribution if payment is made within 120 days;
b) A 20% increase in the contribution if the delay exceeds the 120-day period but does not extend beyond an additional 60 days;
c) A 40% increase in the contribution if the delay exceeds the period specified in b), but does not extend beyond another 60 days.
In the case of installment payments, penalties apply to the deadlines of individual installments.
Regions may legislate on this matter, provided they do not exceed twice the limit specified in point c) of Art. 42.
In the absence of regional legislation, the 40% limit cannot be exceeded.

PLOTTING AGREEMENTS
In municipalities with a building program and those with a general zoning plan, the plotting of land for building purposes may be authorized by the Municipality with prior approval from the regional public works official, following consultation with the Regional Urban Planning Section and the competent Superintendent.
Municipal authorization is subject to the conclusion of an agreement to be recorded by the owner, which provides for the free transfer, within specified terms, of the areas necessary for primary urban development works specified in Article 4 of Law of September 29, 1964, as well as the free transfer of the areas necessary for secondary urban development works and the owner's assumption of the costs related to primary urban development works and a portion of the costs for secondary urban development works related to the plotting or necessary to connect the area to public services. The share is determined in proportion to the size and characteristics of the plotted settlements.
The agreement must be approved by a council resolution, and the issuance of building permits within individual plots is conditional on the commitment to the simultaneous execution of primary urban development works related to the same plots.
The execution of the works covered by the agreement must be completed within ten years, and appropriate financial guarantees must be provided to ensure performance.

EUROPEAN LEGISLATION
With a ruling issued by the European Court of Justice – Sixth Section on July 12, 2001, for urban development works exceeding €5 million, contracting authorities are required to issue a public tender inspired by community procedures.
From now on, concessionary companies will no longer be able to use the offset mechanism, a workaround previously used to equalize the contribution to be paid to the Municipality for the issuance of the concession.
As a result, developers must pay the required amount directly without resorting to compensation, such as constructing residential roads, parking lots, sewers, water networks, etc.
As a result of the aforementioned ruling, our legal system now mandates the use of public procurement procedures for all urban development works exceeding €5,000,000.

Type
Contract guarantees

Category
Similar to those for contracts

Legal References
Law of January 28, 1977, No. 10 (Bucalossi Law)
Article 42 of Presidential Decree (D.P.R.) of June 6, 2001, No. 380, as amended by Article 27, paragraph 17, of Law of December 28, 2001, No. 448

Usual Policyholder
Those intending to build or carry out building transformations

Usual Beneficiary
The Municipality in whose territory the work is to be carried out

Duration
As requested by the Municipality based on the obligations assumed by the policyholder; typically 18/24 months for payment; for the duration of the works in case of execution

Extensions
Yes, they are provided

Relevant Market Sectors
Potential clients include both construction companies building for resale and private individuals constructing residential or commercial/industrial properties for their own use

Commonly Requested Clauses
Reduction of the guarantee based on a written approval from the Municipality certifying the partial completion of the works or payment of the due installment. The Municipality may request a clause for revaluation of the guarantee based on the provincial index of consumer prices if the contribution due has not been fully paid at the expiration of the guarantee.