Lawyer: Planning Decisions Must Be Based on Substantive Considerations, Not Political Sentiment

The Supreme Court recently made a significant ruling in which it provides important guidance to developers and local authorities both when refusing to establish developer-requested detailed plans and when invalidating old detailed plans. Sandra Kaas, co-head of the planning department at the law firm RASK, which represented the real estate developer in the dispute, explains the reasoning behind the decision. 

In areas with denser settlements, a detailed plan is generally necessary for the development of properties. An established detailed plan gives the right and basis to design buildings requiring building permits on one's property and the facilities serving them. At the same time, a detailed plan sets construction and land use restrictions to protect the interests of neighbors and the public.

The number of detailed plans being established generally moves in step with the economy. For example, detailed plans for new residential areas were established in large numbers during 2005–2007, the period of the global real estate boom. Not all detailed plans established during these active development periods have been possible to implement for practical reasons. Nevertheless, they remain valid today and constitute an important part of the value of various properties.

Intensive planning activity has now forced some municipalities to set limits on population growth, as social infrastructure, such as schools and kindergartens, cannot keep pace with the sharply increasing population. For this reason, in recent years, many municipalities have begun actively reviewing detailed planning procedures that have been ongoing for a long time and long-standing detailed plans, deciding on the termination of planning procedures and the invalidation of plans. 

The possibilities and value of land use develop together with applicable restrictions

Although the Constitution protects the land owner's right of ownership, this right is not absolute. The actual limits and content of property use depend on laws and restrictions established under law. For a land plot, such a restriction is also the obligation to draw up a detailed plan, if the legal acts provide for this. In such a case, the scope and content of the right to use property is specified in the detailed plan through the building right of the plot.

Thus, the possibilities for land use always develop together with applicable restrictions, such as a detailed plan, which determines what and under what conditions can be built on the land plot. It is important that these restrictions do not disappear even when the land owner changes. If a land plot is sold further, the obligations and restrictions resulting from the detailed plan automatically transfer to the new owner. This means that the new owner cannot start with a "clean slate" or use the land solely at their discretion, but must take into account the already existing plan.

Such restrictions also affect the value of the land plot. If construction or use possibilities are limited, this generally reduces the market price of the land plot. Conversely, the more possibilities the plan provides, the higher the land plot's value can be. In summary, this means for the buyer that the property's value and possibilities for use must be clarified before the purchase. Ownership is therefore never completely "unrestricted," but develops together with all applicable rules and restrictions.

The owner's desired use sought is in principle within the scope of protection of the fundamental right of property, and unjustified termination of detailed planning may infringe upon it

The Supreme Court highlighted in its recent ruling a principle that has been less emphasized until now, but which is substantively very important: the owner's desired, newly sought use of a land plot also falls under the protection of the fundamental right of property. This means that if an owner wishes to obtain building rights through a detailed plan or change the building rights of their land plot, for example to construct buildings or develop the land in another way, this is in principle within the scope of protection of the fundamental right of property, an interest that must be taken into account in the planning process.

At the same time, this does not give the owner the right to dictate the content of the plan. The municipality still has broad discretion and must balance various interests: public interests, the rights of neighbors, and the objectives of spatial development. The owner's wish is not automatically determinative, but it must be considered fairly. If a detailed plan is not established as the owner wishes and as a result expected revenue is not obtained, the state or municipality does not have to compensate for such damage. Such revenue is not treated as a violation of a certain right, but rather as an opportunity that was not realized. 

In practice, in recent years, situations have arisen where a detailed planning process has dragged on for more than 10 years and a municipality wishes to terminate it, citing building requirements or planning rules that have changed in the meantime. Often, the land owner is given to understand that if the development wish has remained the same, it is possible to start the entire process anew. In other words, the land owner is directed to submit a new proposal to initiate the procedure in order to achieve the same goal and wait for its resolution. 

Meanwhile, in larger cities, it is in itself an achievement if a detailed planning process is initiated at all. Therefore, it is not right to direct land owners to abandon an already initiated planning process without a compelling substantive reason. Changes in the legal order do not automatically mean that the planning process must be terminated and a new process initiated. A plan can often be processed further, based on the rules in effect at the time the process was started and, if necessary, adapting the solution in accordance with changed substantive conditions or requirements. 

An established detailed plan gives the land owner a significantly more certain and strongly protected position than development possibilities still under consideration

The Supreme Court explained that if a detailed plan is established, it determines very precisely what may be built on the land plot and under what conditions. This means that the owner's rights are no longer merely a hope or plan, but a legally binding framework that must be taken into account by the state and municipality as well.

Therefore, the invalidation of such a plan is a significantly more serious intervention for the owner. If a detailed plan is invalidated against the owner's will, the owner loses the previous position shaped by the plan – that is, the right to use the land plot in a specified manner. 

Such a decision must not be made lightly. The invalidation of a detailed plan must be based on much weightier reasons than those that might be sufficient for terminating a newly requested planning process or refusing to establish a plan. Mere changes in political preferences or the desire to start a procedure anew are not sufficient. 

In summary, the Supreme Court drew a clear line between two situations. On one hand, an owner cannot demand that a detailed plan suitable for them be certainly established. On the other hand, if a plan has already been established, it cannot be simply taken away without a compelling reason, as this interferes with the owner's fundamental right of property. Such interference cannot be justified by a completely inarticulated or merely hypothetical need for a new plan. 

Additionally, such a step may have real consequences for the state or municipality. If the invalidation of a plan disproportionately infringes on the owner's rights, it may in certain cases result in an obligation to acquire the land plot or pay compensation. 

In genuine and clearly justified cases, the invalidation of an old detailed plan may be justified 

The Supreme Court did not exclude that in genuine and clearly justified cases, the invalidation of an old detailed plan may be justified. In such a case, however, the municipality must show why, in the case of this particular land area, the public interest has changed so significantly that it outweighs the land owner's rights. 

General references to public interest are not sufficient to invalidate a detailed plan. The values and objectives on which the municipality bases the invalidation of the plan must be legally identifiable, relevant, and justified specifically for the particular area. Otherwise, it is not possible to assess whether the infringement of the fundamental right of property is necessary and proportionate. 

Therefore, boilerplate and unspecified claims that the municipality's spatial preferences or political attitudes have changed over the years are not sufficient. The infringement of the fundamental right of property cannot be justified by an abstract desire to build less than before or to leave land areas generally undeveloped. Such needs must be reflected in planning and development documents of broader scope, in particular in the comprehensive plan. This is also important to avoid arbitrary situations where one development is abandoned while another is still permitted. 

The Estonian planning system is hierarchical for precisely this reason: it replaces arbitrary or changeable political will with a structured and procedurally controlled decision-making process. Each spatial use decision goes through public proceedings and thorough consideration. During the planning process, it is clarified whether and on what changes there is a basis, and how conflicting interests, such as those of the public and the land owner, could be reconciled. Public and private interests cannot merely be opposed; they must be weighed in a fair procedure and the right balance of interests must be ensured. 

The Supreme Court emphasized that the development of a land plot according to an established plan does not have to be justified by public interest. The fundamental right of property primarily serves private interests. Thus, if a developer continues to be interested in the implementation of an old plan and its implementation does not harm the public interest or the rights of another person, there is no need in a democratic society to prevent the implementation of the plan merely because the plan is old.