Real Estate

Recent changes in the Hungarian Construction Law: Mandatory use of an Electronic Construction Log (e-log)

While the Budapest construction scene is awaiting signs of recovery and an increase of development activities, new stories may no longer be written with pen and paper. A recent overall reform of building regulation introduced full electronic administration of building matters and the mandatory use of electronic construction logs (e-log or virtual log). Modern, IT-based solutions have been put in place to increase flexibility, transparency, and authority control in the entire construction process.

Overall amendment of building regulation

Property developers have long been urging to increase transparency, credibility, and predictability of the licensing procedure in the Hungarian building sector.

Building licensing has traditionally been a burdensome and time-consuming process, specifically regarding the necessity of numerous sub-authority approvals, such as in many cases the consent of the environmental authorities, monument protection authorities, and numerous other special bodies.

As extreme bureaucracy hindered and frustrated many projects through the years, the legislator appears to have realised the key importance of keeping the fragile investment mood among the difficult market conditions. To reflect on developer initiatives, a set of new building regulation rules, many technical, was put in place on 1 January 2013.

Emphasis on electronic administration

By coming into effect via consecutive governmental decrees, the complex application of the Electronic Documentation System (EDS) was introduced to implement e-administration of building licensing proceedings, adoption of authority resolutions, and communication between authorities and applicants. Simultaneously, a Building Documentation and Information Centre (a central electronic database for storing classified data and documents on building matters, habitation, and urban development) has been set up. As an interactive sub-system to the central database, the so-called National Building Registry was also created by the competent department of the Ministry of Internal Affairs.

The National Building Registry represents a breakthrough, being a fully IT-based, complex, comprehensive, up-to-date, and authentic system of electronic applications, data, and documents for all kinds of building activities and building (licensing) matters.

An e-log is mandatory for all

In line with the introduction of e-administration, mandatory use of electronic construction logs (e-log) is now also generally prescribed. With a few exceptions relevant for certain building types (eg, traffic and water facilities, military properties), an e-log has been compulsory for all construction projects started on or after 1 October 2013.

A formalised construction log has been long applicable for all building activities subject to authority licensing or acknowledgment procedures, and to public procurement rules. By definition of law, the construction log qualifies as a documentation being kept from the beginning until the completion of a project, containing all relevant data on construction activities in chronological order, information on the adequacy and certifications of works, as well as data relevant for financial settlement. Through the log, the contractual parties also inform each other about their knowledge of any facts, circumstances, and emergencies impacting fulfilment of contractual duties.

A particular importance of the construction log is its later use for reference in authority and court proceedings, in case of any debate about legal compliance or contractual adequacy of construction works performed.

Since 1 October 2013, the construction log has exclusively been functioning as an e-log application available through a dedicated webpage (www-e-epites.hu) and associated interfaces operated by the Minister responsible for building affairs.

Access to and parts of the e-log

The (virtual) e-log with a data storage capacity provided by the operating authorities is available for users after registration by way of password protected access into the National Building Registry through the central e-building webpage.

Irrespective of the number of associated contractual documents, a single separate e-log record is associated with each construction project. The e-log is  kept in and initially determines in Hungarian the object and site of construction, the building permit number, the adequacy certificates, and other associated documents.

The building authority automatically puts the e-log in standby mode upon the issuance of a building permit; the standby mode may also be “switched on” electronically by the property owner/developer. Actual e-log application is then activated and opened upon the takeover of the building site by the contractor.

A so-called “main log” section is opened and kept up-to-date by the general contractor in charge, while individual “sub-logs” are kept by each of the sub-contractors. The main log and the sub-logs are further articulated to virtual title pages, registry parts, and summary sheets, as well as associated disclosures, such as: authority notes, fulfilment verification log, subcontractor registry, etc. All e-log chapters remain opened until the contractor leaves the building site post-completion.

Every registered user has a dedicated e-log function and access rights subject to that function. Contractors may make notes only to their own log parts and may see only the notes of those other contractors registered in contractual relationship with them. Access and insight may also be possible for, among others, the building authorities, the tax authority, the property owner/developer and his proxies, the building technical supervisor, and the designer instructor.

Closed logs in the National Building Register remain available for subsequent authority surveys, such as to compare the planned, licensed, and realised status of the building.

Conclusion

Although real usefulness and effectiveness of the new building regulation are currently heavily disputed, the technical background and conditions of the authority licensing procedures has greatly improved.

Practice can later tell whether the communicated goals of transparency, authenticity, clarity, remote access, and easy handling are in fact reached, and whether all these really support a more efficient and flexible implementation of construction projects and, thereby, the investors’ true interests.

Irrespective of the number of associated contractual documents, a single separate e-log record is associated with each construction project.