Instructions for housing companies about additional developments
Additional development can turn a fearsome renovation project into a renovation of opportunities. This requires that the housing company can look further into the future.
Preliminary reviews, project planning and selection of the necessary experts, land use planning with resident participation and possible complaints, and decision-making by the housing company at various stages usually take at least 3 to 4 years. Depending on the economic situation and the commercial attractiveness of the site, it may also take longer than expected to find a partner to implement the project.
As major renovations approach, there is often a debate in housing companies whether some of the costs could be covered by an additional development project and how it could be implemented. At the suggestion of the board of directors or a shareholder, a majority of the general meeting may decide to look into the matter. The broader the consensus, the more solid the base for the project.
In addition to the articles of association and any necessary amendments, the first step is to determine the current status of the local detailed plan, building rights, parking spaces and parking obligations. The local planner will give a preliminary view on the project's boundary conditions, such as whether it can proceed with a deviation decision or whether it requires changes to the local detailed plan (see information box). If there are no insurmountable obstacles to progress, the housing company’s board will arrange a meeting with the most relevant city officials. Representatives from the City Planning Department, the Building Control Department and the Plot Unit provide guidance for further planning.
Additional development by a housing company – issues to consider with the local planner:
- Who owns the property?
- Is it a new building, an extension, a project to raise the building or a demolition and reconstruction project?
- Can the area be built on, is there an infill development plan for the area, or are the area or buildings of cultural and historical value?
- What kind of development is suitable for the area? How should it be positioned so that, for example, the views and the cityscape form a functional entity?
- How is parking organised? How many parking spaces are needed for existing and new residents?
- Is there room for additional development and parking on the plot? Would it be possible to extend to the neighbouring plot?
Discussions, expert meetings and workshops should be organised for members of the housing company to identify options, risks and opportunities. The timing of revenues from the project must also be preliminarily planned.
To ensure that the project progresses favourably and to identify potential partnerships, discussions should also be initiated with neighbouring properties. Ideally, the same contractor will be selected to carry out the renovation and possible extension of several buildings, thus contributing to the economic feasibility of the project.
The limited liability housing company or the property manager usually does not have the expertise or resources for this type of project, so the board of directors, authorised by the general meeting, orders a project plan for the additional development from an architectural office. When raising a building, a structural engineer must be hired to determine the structural boundary conditions of the building and draw up structural plans based on the structural inspections.
The housing company can also hire a separate design consultant to put the project together until a constructor is selected. On the basis of the implementation and location of the additional development, the project plan containing the courtyard and parking solutions and a profitability calculation, a general meeting will decide on the application for changes in the local detailed plan. If there is no implementation partner yet, it is also decided at which stage the company will put the project out to tender.
The company can also start co-operation with a constructor, developer or investor at this stage. If the project proves to be feasible and profitable for both parties, a preliminary agreement on the sale of the plot or issuing shares will be signed, the terms of the final sale agreement will be agreed on and the city will be asked to initiate the preparation of changes in the local detailed plan. The preliminary agreement also sets out how the costs will be shared if the project does not materialise.
Once the application for changes in the local detailed plan has been processed, the City Planning Department will start drawing up the plan in co-operation with the company's representatives and the architectural office that drew up the project plan. For additional development, a larger area, such as street block level, is considered, if only for the parking arrangements. It is a question of scaling the additional development, seeking functional solutions and defining quality objectives.
When the plan is initiated, the need for a land use agreement is clarified with the Plot Unit or, if the property is located on a leased plot, the necessary amendments to the lease agreement are clarified. Negotiations on land use agreements will begin once the draft of the local detailed plan approved by the City Planning Commission and the data on land use, floor area and building rights provided by the City Surveying unit are available. If necessary, the master plan for the public utilities must be updated in order to provide relevant information for the contract negotiations on the costs of the public utilities required to implement the plan.
The land use agreement can be made binding on the parties once the draft of the local detailed plan has been approved by the City Planning Commission; this is also a condition for the plan to enter into force. All local plans involving a land use agreement require the approval of the City Board.
The city usually invoices the land use agreement fee within three months after the local detailed plan has become legally binding. On a case-by-case basis, the fee can be divided into several instalments or linked to the transfer of the building right. However, there is always a time limit for the payment of the agreement fee.
Once the detailed plan has entered into force, a plot division will be drawn up, on the basis of which the parcelling can be carried out. When a plot is parcelled, a part of the plot is separated from the original plot to form a separate property. If a contract for the sale of part of the plot with building rights has already been signed, or after a construction company has bought shares from the housing company with building rights specified in the local detailed plan, the construction company or developer starts the construction project in accordance with the new plan. The developer can speed up the sale of the apartments by offering apartments from the new building for the residents of the property that sold the building rights.