Cost recovery and land exploitation under the Environment Act

Cost recovery in the Environment Act is regulated through exploitation rules in the environmental plan. In the Environment Act we have cost recovery with period and cost recovery without period. Cost recovery with a period is very similar to the exploitation plans that we have now. Cost recovery without period is new and is - after an agreement - the most desirable form of cost recovery. Furthermore, it is important that cost recovery under the Environment Act will be determined via a separate decision. The landowner himself must request that decision.

With the upcoming entry into force of the Environment Act (likely by July 1, 2022), we are also informing you about the consequences this year. Previously, we wrote articles about the environmental plan, fees under the Environment Act, flexibility and procedures under the Environment Act, the Built Environment Decree, the technical construction activity, coordination under the Environment Act, the changed system for an application for a review of the environmental plan, steering possibilities, the transitional law and the major consequences of the Omgevingswet for plan damage, for example because of the new assessment for indirect plan damage and the fixed percentage for the normal social risk, soil (contamination) in the Environment Act and the changes for "environmentally harmful activities" under the Environment Act.

In this article, we discuss the new cost recovery rules.

Exploitation plan abolished

Anyone who has ever had to deal with an exploitation plan and its annual mandatory review knows that the exploitation plan is a laborious instrument: costly and time-consuming. It has brought many parties together, as it has made them realize that it is better to conclude an anterior agreement. The exploitation plan was used in practice only when land acquisition in the exploitation area was not yet complete. A good reason to jettison the instrument of the exploitation plan, and this is also happening with the introduction of the Environment Act. However, cost recovery must of course continue to be ensured, so the exploitation plan (via Article 13.14) is integrated into the environmental plan.

Does nothing change in the end? Yes, it does. The legislator realized all too well that, especially in increasingly complex area developments, a rigid instrument such as the exploitation plan, in which all costs and revenues are estimated in advance, is not always desirable. The time of large-scale area development in expansion locations, where costs and revenues could also be estimated well in advance, passed after the crisis into the time of inner-city developments and transformations, in which it is not clear when exactly what will be realized (organic development), so that it is also not clear when which costs and revenues fall.

Cost recovery without period

The instrument in the Environment Act that should provide the solution is called: cost recovery without period (Article 13.15 Environment Act). If we contrast this instrument with cost recovery with period (the old exploitation plan as it is integrated into the environmental plan), we see a number of differences:

• A complete estimate of costs and revenues need not be included, only the maximum cost recovery must be determined (Article 13.15(1)(a) and (b) of the Environment Act).
• With cost recovery without period, the increase in the value of the site as a result of the activity is the maximum for cost recovery. With cost recovery with a period, the maximum remains as it was under the Land Exploitation Act: no more costs may be recovered than the entirety of the estimated revenues. In an exploitation area, therefore, in the case of cost recovery with period, (partial) locations may still arise that are loss-making (Article 13.15(2)(2) of the Environment Act). In the case of cost recovery without period, loss-making locations may no longer arise.
• Equally interesting is the difference that the cost recovery without period is limited to the costs for "works, works and measures necessary for non-expendable land" (Article 13.15 paragraph 3 Environment Act jo. 8.15 under a Environment Decree jo. Annex IV, Table A to the Environment Decree). So it only concerns costs incurred in the cost recovery area as designated in the Environment Plan. Also important: the PPT criteria (benefit, proportionality and accountability) continue to apply. So no recovery of costs that do not benefit the landowner.

No cost recovery without period for project decisions and out-of-plan environment plan activity

Surveying the differences, a preference emerges for cost recovery without a period of time. Less complex, nicely flexible and with a clear limit: the value increase must be able to bear the costs. Then, of course, it is unfortunate to note that cost recovery without a period is not allowed for project decisions and environmental permits for an out-of-plan environmental plan activity. Cost recovery without a period of time can only be included in an environmental plan. The bill shows that the choice between cost recovery with period and cost recovery without period is determined by the municipality's choice of an active approach or a facilitative approach. This implies that granting cooperation to an environmental permit for an out-of-plan environmental plan activity or a project decision always indicates an active approach, while the practice is that the municipality often plays only a facilitating role in such projects as well.

Separate decision for cost recovery

Either way, it becomes important for landowners to pay attention to which cost recovery area their sites are placed in by the City Council: in the cost recovery area for cost recovery without period or the cost recovery area for cost recovery with period.

But even once that choice has been made and the environmental plan has been adopted, it remains to be careful. Article 13.12 of the Environment Act states that no activity may be realized until the costs due have been paid. In addition to the application for the activity itself, an application must also be submitted to determine the amount of money owed. Articles 13.18 et seq. of the Environment Act then apply to that. It may be worthwhile to prepare that application well, so that the sum of money owed is not set too high or (for example) payment is linked to the actual execution of the works and activities on non-expendable land. It should also be checked that no more costs are recovered than the site becomes more valuable as a result of the activity.

Time will tell whether cost recovery without period will supplant cost recovery with period, but the conclusion of an anterior agreement is expected to remain the preferred option. If only because then more certainty about the "final settlement" can be obtained in advance.