Public law settlement agreement is void: no "construction by contract" – outer area remains outer area!

A public law settlement agreement does not turn building and land use planning law into a matter for negotiation.

By order of 21. Oktober 2025 (5 A 2395/21.Z) the Hessische Verwaltungsgerichtshof (VGH Kassel) has sent a clear signal:

A public law settlement agreement that treats a building plot in the outer area as belonging to the inner area is void.

Neither a municipality nor a building authority can contractually "redefine" the planning law status of a property.

In this way, the court underscores the strict separation between public planning law and contractual arrangements. For developers, municipalities and investors, the following applies: the Baugesetzbuch (§§ 34, 35 BauGB) is as a rule not negotiable.

What this was about: from park grounds to a planned single-family home

The plaintiff was the owner of a property on the grounds of a former park. The area was designated in the Flächennutzungsplan as a green space and lay outside a development plan.

Several building applications for a single-family home had been rejected by the building authority because the property was in the outer area (§ 35 BauGB).

In the course of an earlier appeal procedure, the plaintiff concluded a public law settlement agreement with the city and the district in 2017. It was agreed that the area should be treated as a building plot within the meaning of § 34 BauGB (inner area). In return, the plaintiff discontinued her proceedings.

On the basis of this settlement, she applied again for a building permit – again unsuccessfully. The VG Gießen dismissed the action; the VGH Kassel rejected the admission of the appeal.

Legal background: inner or outer area under the Baugesetzbuch

The VGH recalled the core rule of building and land use planning law:

A property belongs to the inner area (§ 34 BauGB), if it forms part of a building development context is. This regularly ends at the last building structure.

Areas adjoining it are considered open countryside (§ 35 BauGB) – regardless of property boundaries, access roads or planting.

In the concrete case, the claimant's property, despite existing edge development, did not fall within the building development context. It was part of a former park, topographically and visually clearly separated from the closed built-up area. A building gap, which continues the inner area, was not present.

Public law settlement agreement and statutory limits

According to the opinion of the VGH, the concluded settlement agreement violated a statutory prohibition (§ 134 BGB) and was therefore void (§ 59 HVwVfG).

Such a contract may only be concluded if a factual or legal uncertainty exists, which is to be eliminated through mutual concession (§ 55 HVwVfG).

No such uncertainty existed here: the facts had been fully determined, the legal position was clear. The building area lay in the open countryside – and this was known to all parties involved.

The attempt to make an allocation decision by contract is contrary to the town planning authority of the municipality. Only within the framework of formal town planning (§§ 1 ff. BauGB) – for example through a development plan or a clarification statute pursuant to § 34 Abs. 4 BauGB – can an area be lawfully assigned to the inner area.

The VGH emphasises: a 'contractual inner area allocation' is impermissible under town planning law and void, because it circumvents the public planning procedure and disables the balancing of public and private interests as required by law.

No privileging and no legal uncertainty

A privileging pursuant to § 35 Abs. 1 or Abs. 4 BauGB did not come into question either. The planned residential building did not serve agriculture or other privileged uses.

Moreover, there was no legal uncertainty within the meaning of § 55 HVwVfG. A mere litigation risk or uncertainty as to the outcome of court proceedings is not sufficient to justify a public law settlement agreement.

It was therefore clear: the contract could have no legal effects. The claimant had no entitlement to a building permit.

Significance for Practice: Limits of Municipal Contract Design

The decision of VGH Kassel demonstrates with great clarity that even a public law settlement agreement does not change the fact that planning law is not a matter for negotiation.

A public law contract that treats a plot of land in the outer area as if it were in the inner area is unlawful and void.

A public law settlement agreement may not and shall not be used by municipalities to contractually 'shift' planning law boundaries.

For local authorities, this means:

• No planning law concessions outside a development plan,
• No settlement agreement regarding 'location within the inner area',
• Clear separation between administrative contract and development planning.

For property owners, the following applies:

• Do not rely on supposed 'agreements' or assurances,
• A legally secure development is only possible through formal development planning or a clarification statute.

Conclusion and Recommendation

With its decision, the VGH Kassel has clarified the legal boundaries to which a public law settlement agreement is subject in building law:

A contract cannot create a planning law fiction. Outer area remains outer area – even if all parties wish otherwise.

If you are a municipality, investor or property owner and have questions regarding the admissibility of construction projects in the outer area, the design of public law contracts or the legally secure development planning, you should seek advice at an early stage.

The experts at AVANTCORE Rechtsanwälte in Stuttgart support you with the review of settlement agreements, legally secure planning of construction projects and communication with building authorities – if necessary also before court.