Explained: Improvement Fees

An improvement fee is imposed on landowners whose properties (finished and unfinished) benefit from work carried out by public authorities. The local administrative unit collects the fee.

The Financial Law of Administrative Units (Law No. 37 of 2021) regulates how administrative units may collect certain fees, including improvement fees. Previously, Law No. 98 of 1965, repealed by Law No. 37, governed the provisions for improvement fees.

Under Law No. 37, among the public benefit works that generate improvement fees are those carried out by public entities, such as opening and widening roads, markets, malls, squares, and public parks, constructing bridges, water, and flood channels, implementing urban planning and development laws, tourism and leisure projects, amending building regulations and the building code system, and establishing real estate development zones.

The executive office of the administrative unit identifies the areas that benefit from the improvement works and issues a decision to this effect, which is then published in the Official Gazette, a local newspaper and on the notice board of the administrative unit. The Directorate of Cadastral Affairs is also notified of the decision regarding the areas covered by the improvement and the properties within them to place a restraint on the disposal of those properties. Law No. 37 prohibits local Cadastral Affairs directorates from processing property transfer transactions for these properties before fully paying the improvement fee.

According to Law No. 37, the value of the improvement is estimated by a committee formed by the governor and headed by an advisory judge appointed by the Minister of Justice and includes two real estate appraisers appointed by the governor and two experts representing the property owners. The committee must complete its work in estimating the value of the improvement within three months. The committee must also consider the property’s current value before the project implementation and value after the improvement.

The committee creates an alphabetical list of the property owners’ names, their property numbers, the current value before and after the improvement, and the cost of the fees, which is then sent to the administrative unit. This unit, in turn, notifies the owners. Publishing this information in the newspapers is a notification to those owners who cannot be reached directly.

This provides a legal justification for the administrative unit to rely on public announcements instead of direct notifications, potentially depriving the owner of the opportunity to object to the committee’s decision. In any case, the right to object is limited to formal matters, such as a computational error in the fee’s calculation. The owner can object to such mistakes within 30 days of the notification or publication date. If the property is co-owned by several partners, an objection by one is considered to be an objection by all. Objection requests are submitted to the administrative unit, which then refers them to the committee to correct errors within ten days of submission.

The improvement fee can be directly collected from the property owner, but its payment can be deferred until a transaction is conducted on the property, such as applying for a construction permit or subdividing the property. Law No. 37 allows the person liable for the fee to send a request to the administrative unit’s executive office so that they can pay the improvement fee in interest-free instalments over six months. However, the fee must be paid immediately in cases of property ownership transfer, if the owner conducts legal transactions for travelling abroad, is declared bankrupt, fails to pay an instalment on time for more than 15 days, or in the event of the owner’s death.

The improvement fee equals half the value of the improvement made on the property. In cases where a property listed for an improvement fee is expropriated, the fee is deducted from the expropriation compensation before payment to the owner. There may be a delay in the disbursement of expropriation compensation to the rightful recipient until the committee estimates the said fee.