In the absence of the required contractor’s declaration for occupancy permits for new constructions in accordance with Article 14 of Government Decree No. 191/2009 (IX. 15.) (hereinafter: “Building Code“) [beyond the cases regulated in the provisions of Article 39 (d) of the Government Decree 312/2012 (XI.8.) (hereinafter referred to as the “Permitting Decree“)], the conditions for the issuance of an occupancy permit were clarified by the Curia in its ruling No. Kfv.V.37.37.275/2022/11.
The subject of the review proceeding was the judgment of the Metropolitan Court of Budapest No. 110.K.705.597/2021/24, in connection with which the Curia had to rule on the question whether the issuance of the occupancy permit should be refused pursuant to Section 40(5) of the Permitting Decree, if the declaration of the general contractor with the content required by Section 14 of the Building Code is not available.
In the case at issue, a settlement dispute arose between the builder and the general contractor during the construction of a residential building, as a result of which the builder terminated the construction contract and closed the construction site. It did not appoint a new general contractor for the finishing works, but contracted with several contractors who completed the building and closed the construction log. The applicant appointed a new technical manager responsible. There was a dispute between the builder and the main contractor over possession and a civil action for a contractor’s fee.
The developer applied for a building occupancy permit, accompanied by a declaration of the new technical manager in charge in accordance with Article 14 of the Building Code. The first instance authority granted the occupancy permit for a residential building with 41 apartments, 27 parking spaces, one retail unit, one office unit and one passenger lift, and the decision became final.
The Budapest Chief Public Prosecutor’s Office, at the initiative of the developer, issued a prosecution request, as a result of which the decision granting the occupancy permit was annulled. As a result of the deficiencies remedy ordered by the first instance authority, the builder submitted in the proceedings the declaration of the technical manager responsible for the completion of the construction and the declaration of the building expert for the whole building, according to which the building is fit for its intended purpose and safe for use, in view of which the authorisation for use was granted.
The Budapest Chief Public Prosecutor’s Office again appealed against the new decision granting the authorisation for use, stating that the suitability of the building for safe use could not be established in the absence of a declaration by the general contractor pursuant to Article 14 of the Building Code, and that, in its view, the declaration could not be replaced by a declaration by a technical expert in the field of building. Based on the notice, the first instance authority revoked its decision and rejected the application for a permit to use the building. In accepting the prosecutor’s summons, it explained that to prove that the requirement of Article 44 (2) of the Building Act concerning the proper and safe construction of the building had been fulfilled, the general contractor had to submit the general contractor’s application pursuant to Article 14 of the Building Code, and the statutory provisions do not provide for the declaration to be replaced by a declaration from a technical expert who is not involved in the construction activity. The conditions for granting the occupancy permit set out in Article 40(3) of the Permitting Decree have therefore not been fully met, the application for the permit must be refused.
The building owner brought an action for review of the decision, which was dismissed by the court of first instance on the ground that the dispute did not lie on whether the building was in fact fit for its intended and safe use, but on the documentary evidence which the applicant had to provide to prove that fact. He explained that the amendment of the Permitting Decree in the meantime, Article 39(8)(c) and (d), which entered into force on 1 January 2021, allows the replacement of the declaration of the contractor by a declaration of a technical expert in the field of construction only in the case of an expired building permit or in the event of the termination or death of the contractor, and that that provision is in this case not applicable.
The builder lodged an appeal against the judgment with the Curia, which found that it was well founded.
The Curia held that the application for an authorisation to use the building had been rejected, following two calls by the prosecutor, solely because the builder had not provided a declaration under Article 14 of the Building Code from the general contractor who carried out a significant part of the construction work, and the defendant had not accepted the declaration of the technical architectural expert obtained by the applicant as a substitute for that declaration, together with the other evidence.
In the merits of the case, the Curia held that pursuant to Article 36(1) of the Building Act, a building permit may be granted in accordance with the provisions of the Act and the Building Code if the application and its annexes and the activity applied for comply with the professional requirements laid down by law. By virtue of the authorisation granted by Article 62 of the Building Act, the Government, by enacting the Building Act, has laid down rules on the procedures, inspections and services of the building authority and the building supervisory authority, and by enacting the Building Act, on the construction activity. When assessing the submitted application for a permit to use the building, the building authority is required to apply the provisions of Article 40 (2) of the Permitting Decree, and must ensure that the construction activity has been carried out in accordance with the building permit, the amended building permit and the architectural and technical documentation with the corresponding permit clause, that any deviations found are subject to a permit from the building authority, and that the building is in a condition suitable for its intended purpose as specified in the building permit and is in a safe condition for use, the completed building complies with the relevant legislation and requirements, the necessary ancillary works required for the uninterrupted use of the building as specified in the building permit have been carried out, the parade ground has been demolished, the environmental clean-up has been carried out, and – as specified in point (f) – the declaration under Art. 14 of the Building Code or the expert opinion pursuant to § 39 (8) (c) [i.e. technical expert opinion on construction] was added to the construction logbook.
According to Article 14 of the Building Code, after the completion of the construction activity, the general contractor shall make a declaration on the summary sheet of the construction logbook, in respect of the circumstances, data and facts detailed in this provision. In the case at hand, the contractor itself admitted that it had completed 100% of the construction activity on the site, but due to a financial dispute between the parties, it did not provide the general contractor’s declaration for the works already completed following its exclusion from the site.
The Curia held that the building authority, in its procedure under Paragraph 44(2) of the Building Act and Paragraph 40(2) to (5) of the Permitting Decree, had to examine, on the basis of the multi-level rules governing the authorisation of the use of the building, whether the applicant’s failure to attach a declaration of interest to its application constituted a defect which prevented the proper and safe use of the building. This task of the authority is also consistent with the wording of Article 40(2) (‘shall satisfy itself’), (3) (‘may grant’), (4) (‘shall not find that there are any impeding defects’) and (5) (‘may refuse’) of the Permitting Decree, which clearly express the obligation of the building authority to examine the merits. The Court of First Instance was therefore wrong to find that the defendant had to decide whether the declarations of all the main contractors were available and that the question to be decided in the administrative proceedings was not whether the building was in fact fit for its intended and safe use, but by what ‘document’ the applicant had to prove that fact.
The Permitting Decree does not regulate the case where the general contractor does not issue a declaration despite being obliged to do so under the Building Code, but only regulates the case where the general contractor has died or has ceased to exist, or where the building is applied for after the expiry of the building permit. Under Article 28 of the Constitution, in the application of the law, the court interprets the wording of legislation primarily in accordance with its purpose and the Constitution. When interpreting legislation, it must be presumed that it serves a moral and economic purpose which is in accordance with common sense and the common good. As explained above, there is a multi-level legal regime for the authorisation procedure for the use of land. In the spirit of Article 28 of the Constitution, the court must assess, in the light of the legal hierarchy, whether the building authority rejected the applicant’s application solely on the ground of the absence of a declaration by the general contractor as a document and not on the ground of the technical deficiencies in the content of the building work listed in Article 14 of the Building Code. As a consequence, the court was required to apply the provisions of Article 44(2) of the Building Act and Article 40(2) to (5) of the Permitting Decree and it should have examined, in accordance with the rules of procedure applicable to administrative proceedings whether the absence of a declaration by the contractor was a defect preventing the proper and safe use of the building, because only if this is established can the rejection of the applicant’s application for authorisation to use the building be lawful.
Based on the above the Curia nullified the final decision and ordered the Court of First Instance to conduct new proceedings and issue a new decision. In the new procedure, the Court of First Instance must assess the available evidence including the technical expert’s report on the entire building. It must decide, by comparing the evidence with the facts established in the building authority proceedings, whether the declaration of interest is a deficiency in the applicant’s application for authorisation to use the building without which the proper and safe use of the building cannot be established.
In the light of the above ruling, a contractor’s declaration pursuant to § 14 of the Building Code is generally accepted as proof of compliance with the public interest protection rules guaranteeing safe use of the construction but is not a sole condition. In laying down the conditions for the grant of authorisation for the occupancy permit of a building, the legislature did not seek to safeguard the interests of the general contractor in a dispute with the developer by imposing an instrument of extortion, but only the fulfilment of the substantive requirements (technical and safety requirements) necessary to ensure the public interest in the safe use of the officially authorised works.
