Real Estate Quarterly – Q3 2015: Operating permits for shopping centres and retail stores: status in the 3 Regions
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Operating permits for shopping centres and retail stores: status in the 3 Regions
By Ariane Brohez, Martin Manzanera and Sophie Van Berkel
Shopping centres and (large) retail stores underwent rapid growth at the end of 1920, forcing the Belgian legislator to intervene in 1937 through the so-called “Padlock Law” that provided basically for a ban on opening new store surfaces or enlarging existing store surfaces except in exceptional circumstances.The abrogation of the Padlock Law in 1961 led to a(new) spectacular development of superstores on out-of-town sites, calling for a new legislative measure, namely the law of 29 June 1975. The socio-economic permit, seen as a compulsory complement to the building permit, was born. In 2004, the system was simplified by what was called the “Ikea Law”, which, among other things, did away with the reference to the gross built surface and the link with the building permit (which has since come under the authority of the regions).
In 2009, further to the implementation of the Bolkestein Directive into Belgian law, socio-economic criteria included in the Ikea Law, considered as contrary to European law, were modified: the new language refers to (i) consumer protection (instead of consumer interests), (ii) compliance with social and labour legislation (instead of the project’s influence on employment) and (iii) protection of urban environment (instead of the impact of the project on existing trade).
With the 6th State Reform, authority to grant/refuse socio economic permits was transferred to the Regions, with effect as from 1 July 2014. The Brussels Region immediately adopted a new Ordinance, abrogating the Ikea Law with effect as from 1 July 2014 – and promptly announced a review of the current legislation. The Walloon Region followed suit early this year, with effect as from 1 June 2015. The Flemish Region has a draft Decree ready but has not adopted it yet, and so still applies the Ikea Law. Moreover a specific regime is provided for large projects adjacent to the other regions: a consultation process must take place between the authorities concerned, where the project exceeds 20,000 m² net retail surface located at less than 20km from the boundaries of the other Region(s).
In this short note, we highlight the main modifications and differences compared to the Ikea law and between these new legislative regimes.
The Ikea Law was built around two main concepts and four criteria:
- the retail trade establishment whose activity is to resell merchandise to consumers;
- the net retail surface, which is the surface designated for sales and is accessible to the public, which comprises cash register zones and entrances used to display or sell merchandise;
- the four assessment criteria being the location of the retail store, the protection of the urban environment, the protection of the consumer and compliance with the social and labour legislation.
Situations where an operator will need a socio-economic permit, are as follows, click here to view table.
The Ikea Law also provides for a simplified procedure (limited to a declaration) if (i) the extension is to an existing retail store or retail centre that already has a socio-economic permit, provided the extension does not exceed 20% of the existing net retail surface (with a cap of 300 m²) or (ii) the relocation within a distance of 1,000 m within the same municipality (as the case may be with the extension mentioned before).
In our view, the three major problems of the Ikea Law and its application, are:
- the notion of “net retail surface”, which is a variable statistic, particularly in the context of a shopping centre,
where it will also depend on the location of shops, their own fit-out and the use made of the total space available;
- the notion of “substantial change in the nature of the commercial activity”, which is not defined. It should be noted
that the scarce case-law on this has generally been favourable to the operator, concluding that, in most cases, there has not been a “substantial” change and hence, no need for a new socio-economic permit; and
- the “retail mix”, which is tied in with both these issues: the net retail surface dedicated to a type of shop or merchandise is a variable statistic and the question as to whether a change of retail activity should (always) be considered as a substantial change in the nature of the commercial activity. Furthermore, one could take issue with the need to comply with this request for a retail mix, or even with the sated reasons for imposing such a requirement for a retail mix, with the Bolkestein Directive.
Since the Ordinance of 8 May 2014 that enters in force on 1 July 2014, the regulation of shopping centres and retail stores is now fully integrated into the town-planning legislation. The socio-economic permit in Brussels is, therefore, a redundant issue, and we refer exclusively now to a building permit in Brussels.
The Brussels reform is based on four principles:
- through the definition of net retail surface, the legislation is extended to services (e.g. horeca, fitness, banks);
- the “substantial change in commercial activity” (instead of the “nature” of the commercial activity) under the Ikea Law, now requires a building permit;
- an environmental impact report (rapport d’incidences / effectenrapport) is required for projects of 1,000 m² or
more, and an environmental impact study (étude d’incidence / effectenstudie) is required for projects of 4,000 m² or above;
- a town-planning declaration is required for each and every retail project, including changes that are not substantial.
The assessment criteria cover mobility, accessibility and parking, the integration of the project in its urban environment, consumer protection and health and safety issues related to the site and its surroundings.
Compared to the Ikea Law, the situation in Brussels is now as follows, click here to view table.
The Brussels Ordinance also specifies that an extension of the net retail surface of less than 20%, subject to a cap of 300 m², when the store already benefits from a socio-economic permit (before 1 July 2014) or a building permit (after 1 July 2014) is not an “substantial change” (COBAT, Article 98, 13°, §4).
As with the Ikea Law, we believe that the terms, “net retail surface”, “substantial change” and “retail mix” may cause problems under this new legislation, particularly the term “net retail surface” where the town-planning regulations refer to gross surface areas. The Brussels Government envisages modifying this legislation in order to specify when an extension requires an environmental impact study and to define the concept of “substantial change”.
The Walloon Decree of 5 February 2015 entered into force on 1 June 2015. Compared to the Ikea Law, and contrary to the Brussels Ordinance, this Decree does not modify the definitions of “retail trade establishment” and “net retail surface”, and still refers to the “substantial change in the nature of the commercial activity”.
The main novelty of this Decree is that it provides for two types of permits: the retail permit (permis d’implantation commerciale) and the integrated permit (permis intégré). Public enquiry and evaluation of environmental impact are also required, subject to exemptions decided by the Government and in accordance with the Environmental Code. The Municipality must also be informed of all opening, extension or modification of the nature of the commercial activity of a retail trade establishment of a net surface of 400 m² or less.
The assessment criteria for a permit request are: consumer protection, protection of the urban environment, the social policy objective and the contribution to sustainable mobility.
Where the Ikea Law provided for a simplified procedure, the Walloon Decree provides for an exemption from permit for (i) an extension of an existing retail store or retail centre that already has a socio-economic permit, provided the extension does not exceed 20% of the existing net retail surface, subject to a cap of 300 m², or (ii) the relocation within a distance of 1,000 m within the same municipality (as the case may be with the extension mentioned before) provided that the net retail surface does not exceed 400 m². This second exemption is of no practical interest as, in such cases, a town-planning declaration is required.
It should also be noted that exempted extensions and modifications, not considered by the operator to be substantial, are to be mentioned in a dedicated register. This register is accessible upon request by the civil servant responsible for retail trade establishments, and must be periodically produced to him(periodicity to be determined by the Government). Within 15 days from receipt of this register, the civil servant may decide to requalify the change as being substantial and invite the operator to fill in a retail permit request for regularisation.
Compared to the Ikea Law, the situation in Wallonia is now as follows, click here to view the table.
The legislation also introduces new tools:
- the regional and local retail development schemes (schémas régional et communaux de développement
commercial) help operators to complete their application forms and guide the authority in the assessment of a project;
- the software “LOGIC”, which is a geographic data base reflecting the “current” state of the commercial sector in
Wallonia, with a classification based on net retail surface, products, brands… The operator can check his project
against these criteria to see if it is appropriate to apply and the authorities can use the results to assess the project; and
- the software “MOVE”, which targets underlying commercial and geographic behavioural patterns.
As with the Ikea Law and the Brussels Ordinance, we believe that the terms, “net retail surface”, “substantial change” and “retail mix” may cause problems under this new legislation, particularly the term, “net retail surface,” where the town-planning regulations refer to gross surface areas.
The Ikea Law is still in force in Flanders, where only a draft decree is currently available.
The main aspects of the draft legislation can be summarised as follows.
- If both a building permit and a retail permit are required, the procedure will be integrated into the building permit procedure.
- The construction and extension of retail stores or retail centres for a new retail surface of more than 400 m² will require a permit. The change of use of a building, in order to operate a retail store or retail centre, exceeding 400 m², will require a permit. The merger or split of retail stores or retail centres, when at least one of the retail trade establishments has a net retail surface of more than 400 m², will require a permit. A substantial change in
the nature of the commercial activity in a building with a net retail surface of more than 400 m² will require a permit
- The assessment criteria are:
(1) the project must ensure sustainability,
(2) guarantee that consumers can access what is on offer,
(3) improve the quality of urban life by complementing core commercial spaces, avoiding pockets of retail outlets, and
(4) contributing to sustainable mobility..
The draft Decree defines what is to be understood by a “substantial change in the nature of the commercial activity” by classifying the activities in three categories: the sale of food, the sale of personal/household goods and the sale of other products and services. The closure or start-up of one of these activities is a “substantial change” as is the changeover from one activity to the other. The reference to “services” in this definition is of questionable relevance since the rendering of services is excluded from the scope of the definition of “retail trade establishment”.
Having survived the transfer of responsibility for town-planning and environmental matters to the Regions, the Belgian market and investors in it should be able to survive this reform as well (with a certain amount of instruction, maybe). But the real challenge is not confined to modest dimensions of Belgium and its three Regions, but is to be found at European level. Despite the (lengthy) explanation, in all parliamentary preparatory works, it is not yet demonstrated that these legislative changes comply with the Bolkestein Directive and this could well give rise to differences of interpretation in the
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