In Norway development and construction agreements are important tools in both the private and public sectors, laying the groundwork for collaboration between developers and either municipalities or landowners. In this blog, we will examine these two types of agreements and the various legal considerations that must be considered when initializing a development and construction project in Norway.
Construction agreements with the municipality
Developers and landowners can enter into agreements with the municipality regarding planned development of an area. The Planning and Building Act provides guidelines on what such agreements can and should contain.
Municipalities enter into such agreements to control the design of buildings in the area and to establish infrastructure that the developer is required to finance according partially or fully to the zoning plan. The developer takes on greater responsibility to ensure the plan can be implemented. Typically, the developer commits to building or financing roads, water and sewage systems, bus stops, and treatment plants. We see that sequencing provisions are particularly included and regulated in such construction agreements, as well as other mechanisms for cost distribution between the municipality and the developer.
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Development agreements with landowners
Developers can enter into development agreements directly with landowners, where the developer obtains the right to develop properties that are not yet zoned for the intended purpose. Such an agreement is typically regulated as an option, contingent on the zoning plan for the desired purpose being approved. The developer assumes the cost of planning, applications, and any necessary preparations.
In such an agreement, it is important that the interests of the landowner are safeguarded when their property is strictly limited and locked to a given purpose. Therefore, the developer must provide certain guarantees and commit to the project in terms of effort, prioritization, funds, and progress.
Development agreements can also be made for the development of an already zoned property, where compensation to the landowner occurs in line with, for example, the sale of plots. The developer takes on responsibility for developing the area with infrastructure and utilities, as well as constructing buildings and selling them to buyers. Such a model can provide better liquidity for the developer and better profits for the landowner compared to the landowner selling the entire property to the developer, who then starts developing it.
Legal considerations and limitations
Construction agreements are subject to legal limitations to ensure fairness and prevent unreasonable burdens on the developer. Measures must be reasonably proportional to the nature and scope of the development and the obligations the municipality assumes in the agreement. This regulatory framework protects the developer from unfair demands from public authorities.
Do you need help with your development and construction agreements?
Development and construction agreements are effective and strategic tools that are crucial for navigating the complexities of real estate development in Norway. They promote collaboration between developers, municipalities, and landowners, ensuring that projects adhere to statutory standards while fostering sustainable development of real estate areas. The agreement framework provides good guidelines for the project's development and can serve as a management tool for the parties. It also forces focus on important aspects of the real estate development.
Are you about to start a development project or need guidance on zoning requirements? Our team at Magnus Legal is ready to offer expertise tailored to your needs. Contact us today for more information on how development agreements can optimize your project.
Contact us
Contact us for help with your development and construction agreements.
