In building permit cases administrative authorities that fail to reach a decision on an objection within the statutory time limit are by no means the exception. Authorities are particularly likely to exceed the time limit by some considerable margin where large construction projects require not only a building permit but also a decision allowing an exemption from the zoning plan. Here the time limits are six and ten weeks respectively (if an objection committee has been set up).
As a notice of objection lodged against a building permit does not in itself suspend the effect of the permit, a failure to take a decision within the statutory period need not, in objective terms, have any adverse consequences for the permit holder. As long as the permit has not been suspended by way of interim injunction there is no obstacle in a legal sense to the performance of the work. In practical terms, however, the absence of a decision most certainly has adverse consequences. Since the judgment of the Supreme Court in the Gemeenschappelijk Eigendom/The Hague case the situation has been that a party who starts work under a building permit that has not yet become irrevocable does so at its own risk. As this is hardly an attractive proposition for permit holders, they are bound to be reluctant to start work pending a decision on an objection.
Supreme Court judgment
A judgment of the Supreme Court of 22 October 2010 (LJN: BM 7040) may perhaps provide some solace for developers as it makes clear that administrative authorities that exceed the period for decision on an objection cannot always do so with impunity. If the permit holder suffers financial loss as a consequence of a decision that is out of time, it may be eligible to receive compensation in certain circumstances. The facts of the case that led to the judgment of 22 October 2010 were as follows:
A developer obtained a building permit and an exemption from Eindhoven municipal executive under section 19 (2) of the Spatial Planning Act (old) for the construction of 68 dwellings. Two parties lodged an objection to the issue of the permit, but did not initially apply for the effect of the permit to be suspended. The developer then started work on the project. As a decision on the objection had still not been taken 24 weeks after the expiry of the statutory period for decision, the objectors lodged an application for suspension of the permit after all. This application was granted by the interim relief judge and the developer was therefore required to break off the construction work. Not until 12 weeks later did the municipal executive hold that the objections were unfounded. The objectors then pursued their case before the administrative courts up to the highest authority. Their application for judicial review and subsequently their appeal were both held to be unfounded, at which point the building permit became irrevocable. By this time the building work had been completed.
After the building permit became irrevocable, the developer sued the Municipality of Eindhoven for the loss it had suffered as a consequence of having to break off the construction work. The District Court granted the claim and awarded damages of €126,033.47. On appeal the Court of Appeal upheld the judgment of the District Court. The municipality’s appeal in cassation was dismissed by the Supreme Court by judgment of 22 October 2010.
Quite apart from the conclusion that a municipal authority can be liable to a permit holder for loss suffered as a consequence of failure to decide within the time limit, the judgment of the Supreme Court is interesting in legal terms in two respects:
i) the reasons given for rejecting the doctrine of the formal legal effect, and
ii) the reasons given in respect of unlawfulness and the requirement of ‘relativity’.
Formal legal effect
The municipality’s principal defence against the claim was based on the formal legal effect of the decision (out of time) on the objection. The municipality argued that as the decision had become irrevocable the civil courts should basically assume that the decision was lawful in terms of both its content and the manner in which it had been arrived at. In the opinion of the municipality, the fact that the decision was made out of time was part of the process of reaching a decision and, owing to the formal legal effect of the decision, could not be described as an unlawful act.
The Supreme Court rejected the municipality’s argument based on the formal legal effect of the decision and followed the case law of the Administrative Jurisdiction Division of the Council of State. The Division had held in a judgment of 21 July 2010 (case number 101001152) that failure to take a decision could not be treated as part of the process of reaching a decision. The Supreme Court followed this judgment of the Administrative Jurisdiction Division and concluded that the failure to give a decision in time on the objection was not covered by the formal legal effect of the decision.
Unlawfulness / relativity
As regards the alternative argument put forward by the municipality on appeal in cassation, the Supreme Court held that the mere fact that an administrative authority took a decision outside the statutory period for decision was an insufficient reason for concluding that it had acted unlawfully within the meaning of Article 6:162 of the Civil Code. Such a conclusion would be warranted only if there were additional circumstances, namely that by taking a decision only after the expiry of the statutory period for decision the administrative authority had breached the duty of care it owed to an interested party in accordance with generally accepted standards. Factors that may be of importance in this connection include the extent to which the decision is out of time, the cause or causes of the failure to decide in time and the interests of the other interested parties of which the administrative authority could have been expected to be aware. In addition, it is apparent from section 7:10 (4) of the General Administrative Law Act that the statutory deadline for deciding on a notice of objection extends to protection of the interests of persons other than those who have lodged the notice of objection. This provision does not therefore prevent a finding that, where there are additional circumstances as just described, failure to decide within the statutory period represents a breach of the duty of care and is thus unlawful in relation to these other interested parties.
Applying the assessment framework referred to above, the Supreme Court held in this case that the Court of Appeal had concluded on the right grounds that the municipality had acted unlawfully in relation to the permit holder by exceeding the statutory period for decision. The Supreme Court took into account the following circumstances:
- that even after the expiry of the period for decision the municipality had failed to reach a decision on the objection within a reasonable period;
- that the municipality knew that the permit holder had started work;
- that the municipality had also not been alleged or shown special circumstances of such a kindthat it could not reasonably have been expected to reach a decision more quickly or that made the extent of the delay acceptable from a reasonable perspective.
The argument that the requirement of ‘relativity’ (i.e. the requirement under Dutch law that the legal rule breached should serve to protect against damage of the kind suffered by the person alleging loss) had been fulfilled was upheld by the Supreme Court in just a few words. The Supreme Court inferred from the wording of section 7:10 (4) of the General Administrative Law Act (which provides that further postponement of a decision is possible insofar as the petitioner agrees and the interests of other interested parties cannot be prejudiced by this or these parties have agreed to this) that the statutory limitation of the period for deciding on an objection was partly intended to protect interests other than those of the persons lodging the notice of objection, such as the permit holder in this case. As the requirement of relativity too had thus been fulfilled, the Supreme Court upheld in the cassation proceedings the decision of the District Court and the Court of Appeal to award damages against the municipality.
As a result of the Supreme Court’s judgment, administrative authorities will feel some pressure not to wait too long to reach a decision on an objection after the expiry of the statutory period for decision. This applies, in particular, in situations in which it is foreseeable that a long delay in reaching a decision will have adverse consequences for interested parties, who may include not only the persons lodging the objection but also in any event the permit holder. The permit holder in particular will generally have an interest in obtaining a quick decision on the objection, as the length of the uncertainty about the tenability of the permit can then be minimised. Insofar as administrative authorities might have been tempted to infer from the Gemeenschappelijk Eigendom / The Hague judgment that (undue) delay in the objection stage is one of the risks that must be borne by the permit holder, they have been disabused of this notion by the judgment of 22 October 2010.