With a decision at the end of last year on regional planning contracts in Tyrol, the Supreme Court strengthened the municipalities' backs when drafting contracts and made very exciting general statements on regional planning contracts and the related design options, particularly in connection with the goal of affordable housing, which extend beyond the borders of Tyrol.

Initial situation

In its decision of 19.11.2024 on 1 Ob 57/24z, the Supreme Court dealt fundamentally with the topic of regional planning agreements and the admissibility of certain contractual clauses. The original dispute concerned a regional planning contract concluded between a Tyrolean municipality (defendant) and a property developer (plaintiff). The parties to the dispute agreed that the defendant would reclassify the plaintiff's property from open land to a residential area for the construction of a residential complex, whereas the sale of all units created could only take place under the conditions of the Tyrolean housing subsidy and only the defendant had the right to award contracts. After completion of the residential building, the developer sued for annulment of the contract, deletion of the pre-emptive rights and determination of the municipality for the financial loss.

The court of first instance dismissed the action and the court of appeal did not uphold the appeal. Although the Supreme Court did not uphold the ordinary appeal, it took the opportunity to make fundamental statements on the regional planning contracts.

Definition, form of action and admissibility

In the absence of a legal definition, the Supreme Court initially defines spatial planning contracts as “civil law contracts concluded between the public sector and private parties in connection with the amendment of zoning and/or development plans”.

In the course of this, it is also clarified that within the framework of such contracts, public tasks are fulfilled by means of private law and are therefore to be qualified as acts of private sector administration. The limits of this private-sector action can be found, on the one hand, in the fiscal application of fundamental rights and, on the other hand, where the legislator indicates that a sovereign arrangement is mandatory. Due to the clash between public interests and the legal positions of the individual protected by fundamental rights, the immorality corrective pursuant to Section 879 ABGB must also be observed in the case of such regional planning agreements.

With regard to the admissibility of spatial planning contracts, the Supreme Court refers to the existing case law of the Constitutional Court: According to this, the mandatory (legal) link between sovereign measures in the form of ordinances (planning ordinances) and private law contracts (“mandatory spatial planning”) is inadmissible - because it is unconstitutional. However, this only applies if this mandatory link is the only prerequisite for the rezoning to building land (so-called prohibition of coupling). Contracts that serve the implementation of public interests of spatial planning can in any case be a basis for the issuance or amendment of planning regulations (“optional spatial planning”).

The Supreme Court left open the effects of the amendment to Art. 15 para. 5 B-VG, which came into force on 15.07.2024, and the question of whether this new dedicated constitutional basis made spatial planning agreements permissible to a greater extent (“elimination of the prohibition of coupling”) than under the previous legal situation.

Civil law aspects in general

The existing general rules must be applied when assessing whether a regional planning agreement is wholly or partially invalid. It is therefore primarily the purpose of the prohibition that determines whether total nullity or the residual validity of the remaining contract is to be assumed. If the purpose of the prohibition is neutral in this context, the hypothetical will of the parties must be taken into account. If there are still doubts, the remaining validity of the rest of the contract must be assumed.

A contractually agreed waiver of avoidance on the grounds of error, deceit, duress or similar legal institutions is - as is the case with other civil law contracts - invalid. If such a waiver is nevertheless agreed, this will only lead to the partial invalidity of the clause in question based on the result of the purpose test to be carried out.

In connection with the combination of different types of contract provided for in spatial planning law (e.g. Section 33 para. 1 case 1 with case 2 TROG 2016), it is stated that this is permissible precisely because, on the one hand, the municipalities' private autonomous freedom of design is restricted anyway and, on the other hand, the typical spatial planning objective of meeting the demand for affordable building land is achieved more easily than through other measures that interfere with fundamental rights (e.g. expropriation, land price).

The municipality can be granted certain rights (e.g. rights of proposal and approval pursuant to Section 33 para. 4 TROG 2016) to ensure compliance with the spatial planning agreement. The substantive limit for the design of these rights is the immorality corrective pursuant to Section 879 ABGB.

Conclusion

Generally applicable principles for the drafting of regional planning contracts can be derived from the Supreme Court's decision:

- The conclusion of a regional planning contract constitutes private-sector action on the part of the municipality. This form of action is restricted by the fiscal application of fundamental rights and the immorality corrective pursuant to Section 879 of the Austrian Civil Code (ABGB) and is inadmissible in the case of statutory orders of sovereign design.

- A (spatial planning) contractual waiver of avoidance on the grounds of error, deceit, duress, etc. is ineffective and generally only leads to the nullity of the corresponding clause.

- The combination of different contracts provided for by spatial planning law is permissible, in particular due to the limited private autonomous freedom of the municipalities to shape their own plans.

- The municipality may be granted certain rights to ensure compliance with the spatial planning contract. Section 879 of the Austrian Civil Code (ABGB) forms the substantive limit of the design.

In summary, the Supreme Court's ruling strengthens the backing of municipalities when drafting contracts and gives them more legal certainty, particularly in connection with the objective of ensuring affordable housing, although the Supreme Court also believes that the limits here will have to be assessed on a case-by-case basis. On the one hand, the Supreme Court's decision means that property developers need to take better account of the contractual provisions in their calculations and, in particular when purchasing properties with already concluded zoning agreements, pay more attention to these when purchasing properties and drafting contracts.