New Precedent in Planning and Building Law: Supreme Court’s HR-2024-2308-A Explained

Background of the Case

The background was a dispute between a developer and a landowner (neighbor) regarding the costs of establishing roads, water, and sewage in an area zoned for residential use.

The reimbursement provisions in the PBA stipulate that a developer (project owner) who is required to develop infrastructure in connection with a construction project may claim the costs from others who also benefit from the measure. The Act contains detailed rules on who may be liable for reimbursement, which costs the project owner may claim reimbursement for, how the costs are to be allocated, etc. Under PBA Section 18-8, reimbursement claims are based on the project owner’s plans for execution, cost estimates, and proposals for allocation. Landowners affected as liable for reimbursement must be given an opportunity to comment before the proposal is approved by the municipality. A prerequisite for the right to reimbursement is that the municipality approves the cost estimate before construction commences.

In the case considered by the Supreme Court, two preliminary decisions were made by the municipality under Section 18-8, the first of which was annulled by the then County Governor. The second preliminary decision was upheld by the current County Governor (now “Statsforvalter”), after costs for the main water pipeline and a roundabout, which could not be included in the reimbursement settlement, were removed. Nevertheless, the costs in the second reimbursement calculation were significantly higher than in the first. The neighbor’s share of the reimbursement increased from NOK 6.7 million in the first preliminary decision to NOK 8.9 million in the second.

The municipality then made a final decision under Section 18-9, in line with the County Governor’s confirmed decision under Section 18-8. Trøndelag District Court and Frostating Court of Appeal found the municipality’s decision invalid, and this was upheld by the Supreme Court.

Questions Considered by the Supreme Court

The first question the Supreme Court considered was whether the courts may, as a preliminary matter, review the validity of the County Governor’s decision under Section 18-8 in connection with a decision under Section 18-9. This concerns whether the court can consider the underlying administrative decision under Section 18-8 in order to assess the claim brought before it (the basis of the claim).

The second question considered was whether the municipality and the County Governor had the authority to approve the increased cost estimate.

The Supreme Court found that a decision under Section 18-9 must be based on the preliminary decision under Section 18-8, and any errors in the preliminary decision may therefore be reviewed as a preliminary matter. The preliminary decision under Section 18-8 had not become final and barring preliminary review requires special justification. This was not the case here. The Supreme Court stated in paragraph 43:

“A final reimbursement settlement under Section 18-9 will, however, not be valid if it is based on an invalid Section 18-8 decision, even when the latter decision is made by the County Governor. Should the municipality consider it necessary to obtain the County Governor’s renewed view on its Section 18-8 decision, it may, as part of the case processing, request this.”

The Supreme Court further found that the increase in costs in the revised calculation was not permitted, as they were neither necessary nor justified based on the original assumptions. The Supreme Court pointed to predictability as an important purpose of Section 18-8. The Supreme Court stated in paragraph 61:

“It was not permissible to rely on new information about the project owner’s other costs than those that justified the annulment. The information was submitted after the municipality made its first Section 18-8 decision, and also after the project owner had commenced the works.”

In our view, the Supreme Court’s decision was not particularly surprising, but it is always welcome when unresolved questions are clarified.

You can read the full judgement here.