Development Fees; Collection

The development of building sites through the provision of on-site infrastructure is the responsibility of the municipalities. Development facilities—for which residents are typically required to pay a proportional share due to the specific benefits they receive—typically include, on the one hand, utility networks (water supply, drainage, district heating) and, on the other hand, access roads (and, where applicable, parking spaces, green spaces, and noise barriers). Municipalities have broad discretion in the specific design of road or utility routes.

An obligation to pay may arise from contracts. This is the case, for example, when a contractor, pursuant to a development contract with the municipality, undertakes the development at its own expense and then passes these costs on to the adjacent property owner (purchaser) via the purchase price in the real estate purchase agreement. Often, municipalities also acquire the building lot themselves, plan and develop it, and then recoup their costs from the adjacent property owner (purchaser) through the purchase price in the real estate purchase agreement.

Unless refinancing is provided for in a contract, municipalities are generally required to cover their development costs through so-called development contributions. It is essential to note that “the infrastructure as a whole” cannot be billed; rather, contributions must be levied separately for each facility—for example, separate contribution notices for each individual street, for the water supply, and for the sewer system.

In any case, the collection of these fees requires a valid local fee ordinance, which may vary from municipality to municipality, meaning that general statements can only be made to a limited extent. An assessment of fee notices always requires knowledge of the relevant local law, which can be reviewed at the municipality.

Contributions for the initial construction of roads, parking lots, green spaces, and noise barriers are referred to in the narrower sense as “development contributions.” They are levied pursuant to Article 5a of the Bavarian Municipal Tax Act (KAG) in conjunction with a corresponding development contribution ordinance. The obligation to pay these fees arises automatically for the developed properties under the ordinance once the legal requirements—primarily the technical completion of the facility, the availability of all invoices, and the fact that the development has taken effect—are met.
Municipalities are legally obligated to collect these contributions and are not required to bear more than 10% of the development costs. Since April 1, 2014, development contributions may generally be levied only within a maximum period of 20 years after the benefit has been realized. The benefit is deemed to have arisen when the infrastructure is “fully operational,” i.e., technically completed. Furthermore, effective April 1, 2021, Article 5a(7), second sentence, of the Bavarian Municipal Tax Act (KAG) applies, according to which development contributions may no longer be levied 25 years after the start of the initial technical construction of a development facility.

For other infrastructure facilities, particularly pipeline-based systems (water supply, drainage), contributions may also be required under the Bavarian Municipal Tax Act. To this end, the municipality must enact two statutes: a master statute governing the use of the facility (e.g., a water supply statute for the water supply system or a drainage statute for the sewer system), as well as a corresponding fee ordinance (usually referred to as the “Contribution and Fee Ordinance”). Unlike with development contributions, the municipality has a choice here: it can finance its investment costs through contributions or incorporate them into the calculation of the fees to be collected on an ongoing basis, thereby refinancing them in many small increments over a longer period of time. It is also possible to combine both options and pass on the investment costs to residents partly through contributions and partly through fees. The municipality decides on one of these options in the local contribution and fee ordinance by establishing contribution or fee rates calculated accordingly.

Contributions for infrastructure projects can be quite substantial. 

If the collection of these fees causes undue hardship for the person liable to pay, it is within the municipalities’ discretion to alleviate this hardship in a socially responsible manner through equitable measures, such as payment in installments, annuitization, deferral, or waiver. The person liable for the fee may submit a request to their municipality for this purpose.

If you disagree with a contribution notice, please ensure that you comply with the deadlines specified in the relevant notice of appeal rights. Once these deadlines have expired, the notice becomes final.