Developers and lenders: Check your project permitting status! Bucharest PUG cancelled

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Just a few days ago, the Bucharest Tribunal cancelled the general zoning plan (PUG) of Bucharest. This may have severe implications on new developments in Bucharest.

Why? Because all the sector zoning plans, which govern each sector of Bucharest, have either already been suspended or cancelled. Thus, in the absence of new sector zoning plans, new permitting was possible only based on the PUG. But now, in its turn, the PUG has been cancelled as well.

From a theoretical standpoint, the PUG is not currently null and void, nor is the cancellation “definitive,” as the ruling on cancellation can be appealed and (if an appeal is made) it will not yet be directly enforceable.

However, leaving the theory aside, it is difficult to imagine a developer investing or a bank lending money for a project backed by a PUG that was cancelled by the court (for the moment, only in a first-instance court).

In this context, real estate developers and banks should consult with a lawyer to verify the permitting status of ongoing developments.

For new developments, there may be little room to be creative these days: Either some developers will put their projects on hold or relocate the project outside of Bucharest. Or (hopefully) the Parliament/Government will address this situation as soon as possible to avoid a very unpleasant situation, where key developments in Bucharest would be blocked.

We are monitoring the market and developments.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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