NBC: The Greek Government Freezes the Real Estate Market Following the Supreme Court’s Announcement

ΝΙΚΟΣ ΧΡΙΣΤΟΦΑΚΗΣ

Written by Konstantinos Kioleoglou, Civil Engineer NTUA & Managing Partner of Avakon – Real Estate Development

Chaos in the Real Estate Market Following the Council of State’s Ruling on Building Code Bonuses

The real estate market is in turmoil following the announcement from the Supreme Court regarding the construction incentives of the New Building Code (NBC). Everything has come to a standstill, with architects, engineers, property owners, and investors facing a state of uncertainty. Everyone awaits, on the one hand, the publication of the Supreme Administrative Court’s decision and, on the other hand, the next steps from the Ministry of Environment and Energy.

To prevent irreversible consequences and deadlocks, the Ministry has submitted an urgent transitional provision to Parliament, which includes the following:

1. Suspension of pre-approval and issuance of new building permits that utilize specific provisions of the NBC, such as bonuses for increased building parameters, the exclusion of mezzanines from the building factor, and others.
2. Suspension of urban planning council meetings on related issues until the decision is published.

Furthermore, these suspensions may be extended by the Minister of Environment and Energy for one month after the decision is published. Building permits already issued under the NBC incentives will not be revoked until the decision is released, and any revocations made since December 11, 2024, are automatically annulled.

Possible Legislative Action

If legislative adjustments are required to adapt to the Supreme Court’s ruling, the suspensions of pre-approvals, new building permits, and urban planning council meetings may be extended by a ministerial decision for up to one month after the publication of the ruling.

Permits already issued under NBC incentives remain valid until the decision is published, and any revocations since December 11, 2024, are automatically reversed.

The Impact on the Construction Sector

After months of uncertainty, a new reality has emerged: the construction sector is officially hitting the brakes. Following nearly a year of stagnation and postponement of new investment projects—both small and large—the state has halted the issuance of building permits until the regulatory framework becomes clear.

The recent announcement by the Council of State leaves the situation ambiguous, as it references certain articles and provisions without excluding broader applications of the ruling. This prompted the government to take immediate measures: initiating public consultation on the matter and freezing the issuance of new building permits.

According to the forthcoming Council of State ruling, which is expected in January, certain contested provisions of the 2012 NBC were deemed unconstitutional. These provisions allowed building services to issue permits that deviated from established building parameters without adequate institutional justification. The Council emphasizes that the incentives provided by these regulations should have been evaluated based on specialized scientific studies during urban planning, taking into account the specific characteristics of each area.

Implications for Building Permits

While the government, private sector, and construction industry initially welcomed the fact that not all building permits issued under the NBC were retroactively annulled, the situation remains complex. The retroactive invalidation of permits where work has not yet commenced creates significant challenges. Additionally, the vague definition of “work commencement” is likely to further complicate matters.

Similar issues arise for permits in the process of being issued. Hundreds of permits are effectively “in limbo,” awaiting approvals from public agencies such as archaeological services or the Hellenic Electricity Distribution Network Operator (DEDDIE).

Uncertainty About Implementation

The main concern is the timeline for implementing the Supreme Court’s ruling. The December announcement indicated that the January ruling would have retroactive effect, invalidating permits for projects where construction had not started by December 11. However, the definition of “commencement” remains unclear.

• Will excavation work qualify?
• What about the demolition of existing structures?
• Or payments made to initiate construction?

The lack of clarity around these questions heightens anxiety and uncertainty in the sector.

Broader Concerns and Legal Ambiguities

The Supreme Court’s unusual step of announcing a decision before its publication, coupled with vague language in its findings, adds to the challenges. Setting the decision’s effective date at such a nebulous point in time complicates matters further. Any annulment of administrative acts has collateral consequences, disproportionately affecting good-faith third parties who acted under the reasonable assumption that these acts were lawful. For this reason, annulments or revocations of administrative acts should not have retroactive effect, and transitional provisions should ensure a smooth adaptation to new regulations.

Who Are the Losers?

For now, the biggest losers are individuals, developers, contractors, and investors who were unable to begin construction work by December 11. Despite relying on building permits deemed lawful under the presumption of legality, they now face significant challenges.

Similarly, those whose permits were subject to judicial challenges face injustice. The Supreme Court’s announcement specifies that only permits where work had commenced are exempt from retroactive annulment, excluding those pending litigation. For projects caught in legal battles, owners risk permit annulment and building illegality, particularly concerning additional floors or square footage.

Ripple Effects Across the Industry

Those who exercised caution and waited for the Court’s ruling without starting construction now face equally serious consequences. Property subdivision agreements, sales contracts, and finalized deeds may need to be canceled, while property exchange agreements will require renegotiation. The decision also impacts ordinary citizens, causing widespread disruption.

Advance payments will need to be refunded, while projects must be redesigned from scratch, potentially rendering many unfeasible under the new terms. Both Greek and international buyers who signed contracts for projects that hadn’t started now find themselves in uncertain positions. Similarly, numerous owners of older properties who demolished their buildings based on the 2012 NBC provisions are now trapped.

Appeals and Compensation

It is certain that a wave of lawsuits and appeals will emerge due to the aforementioned issues. On one hand, private individuals whose sales agreements were canceled will pursue legal action against contractors, seeking compensation for breach of contractual obligations. They will argue that contractors misled them, as they either knew or should have known about the potential invalidation of building permits.

On the other hand, contractors suffering significant losses are expected to file lawsuits against the State, Urban Planning Services (ΥΔΟΜ), and Municipal Authorities (as supervising bodies) for the revocation of building permits. Although the State is obliged to revoke administrative acts based on laws declared unconstitutional, this obligation is not absolute when it affects the rights of third parties. The only exception is when higher public interest protection is at stake.

Beyond these legal and financial complications, a serious question arises regarding the accountability of the Administration, which implemented an unconstitutional law for years, and the Judiciary, whose delays in rendering decisions have undermined legal certainty.

These problems might have been avoided if the Council of State’s decision had not been retroactive but instead limited to prohibiting the issuance of new building permits based on the NOC from this point forward. The issue at hand involves several hundred building permits, indicating that prioritizing legal security could have been feasible.

This would have been particularly crucial during a housing crisis, where further increases in real estate prices due to reduced supply and market distortions represent a highly unfavorable scenario with broader social and economic repercussions.

Once again, unfortunately, it becomes evident that our country lags in critical areas. With the way things function, substantial progress remains out of reach. The inflexibility of the government and local authorities, coupled with an inability to engage in dialogue for the collective good, leads to dead ends.

It is known that as early as 2023, the government established a committee, which included a representative of the Central Union of Municipalities of Greece (KEDE), to address the shortcomings of the 2012 NOC and modernize it to meet the country’s current urban planning needs. Despite months of consultations, the committee’s work was ultimately suspended due to an inability to reach consensus among the participating parties.

This administrative failure resulted in escalating tensions between municipalities and the government, leaving citizens caught in the middle as the true victims.

An organized state must correct legislative errors and modernize its procedures systematically, ensuring equality, legal certainty, and citizen protection. This should be achieved calmly through proper consultations, with clear transitional provisions and sufficient adjustment periods to guarantee a smooth transition from the existing framework to a new one.

Regrettably, in this case, all these principles were violated by the responsible authorities. The State failed to function as mandated by the Constitution, leaving citizens exposed.

Currently, as the market awaits the publication of the Supreme Court’s decision and the legislative initiative expected from the government, the construction sector and real estate market have temporarily “frozen,” while landowners remain confused about the value of their properties. At the same time, trust in the Greek market has been deeply shaken after nearly a year of turmoil and irrationality, with devastating consequences for those who trusted the laws and the State in good faith.

The preparation of General and Urban Planning studies has been set as a priority by the government. However, this is a complex and time-consuming process, requiring at least two to three more years for the General and Local Urban Planning Schemes of the country to be completed. Additionally, areas that already have a General Urban Plan (like most major urban centers) are prohibited from revising it during the first five years, while any modification requires a minimum of two years.

In short, a legislative initiative is essential until the completion of these urban plans to ensure the smooth operation of the market.

 

Konstantinos Kioleoglou

Civil Engineer, NTUA
MEng in Structural Engineering, N.T.U.A.
MSc in Real Estate Investment and Finance, Heriot-Watt University
Recognized Expert Property Valuer & European Valuer, Tegova
Managing Partner, Avakon

Translated with chatgpt4

Source/Read More :Noupou