Lexploria

AS TO THE ADMISSIBILITY OF

Application No. 10522/83

by Leopold MELLACHER and another

against Austria

*

Application No. 11011/84

by Johann MÖLK and others

against Austria

*

Application No. 11070/84

by Christiane WEISS-TESSBACH and another

against Austria

The European Commission of Human Rights sitting in private on

8 May 1986, the following members being present:

MM G. SPERDUTI, Acting President

F. ERMACORA

M.A. TRIANTAFYLLIDES

G. JÖRUNDSSON

S. TRECHSEL

B. KIERNAN

A.S. GÖZÜBÜYÜK

A. WEITZEL

J.C. SOYER

H.G. SCHERMERS

H. DANELIUS

G. BATLINER

H. VANDENBERGHE

Sir Basil HALL

Mr H.C. KRÜGER, Secretary to the Commission

Having regard to Art. 25 of the Convention for the Protection

of Human Rights and Fundamental Freedoms;

Having regard to the application introduced on 5 August 1983

by Leopold and Maria MELLACHER against Austria and registered on 12

August 1983 under file No. 10522/83;

Having regard to the application introduced on 22 May 1984 by

Johann, Ernst and Anton MÖLK and Maria SCHMID against Austria and

registered on 18 June 1984 under file No. 11011/84;

Having regard to the application introduced on 4 July 1984 by

Christiane WEISS-TESSBACH and Maria BRENNER-FELSACH against Austria and

registered on 6 August 1984 under file No. 11070/84;

Having regard to the Commission's decision of 4 December 1984

to give notice of the applications to the respondent Government and to

invite them, in accordance with Rule 42 para. 2 (b) of the Commission's

Rules of Procedure, to submit observations in writing on the

admissibility and merits of the applications;

Having regard to the observations submitted by the respondent

Government on 4 March 1985 (application No. 10522/83) and 19 March 1985

(applications Nos. 11011/84 and 11070/84);

Having regard to the observations in reply submitted by the

applicants on 11 April 1985 (application No. 10522/83) and 9 May 1985

respectively (applications Nos. 11011/84 and 11070/84);

Having regard to the Commission's decision of 8 July 1985 to

join the three applications and to invite the parties, in accordance

with Rule 42 para. 3 (b) of the Rules of Procedure, to submit further

observations on the admissibility and merits orally at a hearing before

the Commission;

Having regard to the oral submissions of the parties at the

hearing on 8 May 1986;

Having deliberated;

Decides as follows:

THE FACTS

The applicants are house-owners who complain essentially that

rent due to them under tenancy agreements made before the entry into

force of the 1981 Rent Act (Mietrechtsgesetz, Fed. Law Gazette No.

520/1981) was reduced by operation of section 44 of this Act.

A system of rent control has existed in Austria since World War

I. The 1922 Rent Act (Mietengesetz, Fed. Law Gazette No. 872/1922),

which remained in force until 1981, provided for the freezing of rents

at the 1914 level. However, it did not apply to flats constructed

after its entry into force, for which no rent restrictions applied.

After 1967 (Mietrechtsänderungsgesetz, Fed. Law Gazette No. 281/1967),

rent restrictions were continued only for earlier tenancy agreements

which remained in existence. For new tenancy agreements, however,

there were no restrictions on the rent which could be agreed freely,

even for flats which had previously been subject to rent control. In

1974 (Mietengesetz- novelle, Fed. Law Gazette No. 409/1974), fresh

restrictions were introduced for new leases of sub-standard flats, for

which rents were to be calculated on the basis of a fixed maximum rent

per square metre.

The 1981 Act, which entered into force on 1 January 1982,

extended the system of maximum rents per square metre to other

categories of flats. Section 16 (2) provides for certain maximum rents

per square metre for new leases: AS 22.- for class A; AS 16.50 for

class B; AS 11.- for class C and AS 5.50 for class D. Any rent

agreement covered by this provision can be declared void insofar as it

exceeds those amounts. Moreover, the system of maximum rents was

extended to pre-existing tenancy agreements: by section 44 (2) and (3)

a tenant occupying a flat under a previously uncontrolled contract may

apply for a reduction of his rent to a maximum of 150% of the above

amounts. Thus, the rent agreement is not automatically affected by the

legislation. Only if the tenant so requests, the competent authorities

will declare the agreement void to the extent that it provides for a

rent exceding the legal maximum amount. This declaration does not

render the agreement void ab initio, but only as from the month

following the tenant's request.

However, the above provisions are not of general application.

The Act in fact exempts numerous types of flats from the system of

fixed maximum square metre rents, either by excluding them from the

scope of applicability (cf. section 1/4 according to which no

restrictions apply to flats in buildings constructed without public

subsidies after 1953, to flats in family houses and to freehold flats;

section 1/3 according to which flats in buildings of non-profit making

housing associations come under a different rent control system

established under the Non-Profit Housing Act = Wohnungsgemeinnützig-

keitsgesetz 1979) or by providing for another type of restrictions

(appropriate amount of rent which can be agreed according to section

16/1 for flats in buildings constructed after 1945, for flats in

historical buildings to whose preservation in the public interest the

landlord has made considerable financial contributions, for flats

upgraded in standard by considerable financial contributions of the

landlord, for class A and B flats beyond a certain size, and generally

for all flats after 6 months of tenure).

The Rent Act further contains a number of provisions concerning

the use of the rent proceeds by the landlord. They must in principle

be used for the maintenance of the building and only if they are not

sufficient for this purpose is there a possibility for the landlord to

ask for increased rents according to section 18 or for maintenance

contributions according to section 45 of the Act. Further provisions

limit the landlord's right to give notice to his tenants.

This right is in principle limited to important reasons specified in

section 30 of the Act. Even the death of the tenant does not terminate

the lease as various persons are entitled to continue the contractual

relationships according to section 14.

The facts in the particular cases may be summarised as follows:

Application No. 10522/83

The applicants, a married couple residing in Feldkirchen, are

both Austrian citizens. They are represented by Mr. H.G. Medwed, a

lawyer practising in Graz.

The applicants jointly own a block of flats in Graz with

several apartments leased out to tenants.

One of these apartments consisting of two rooms and a kitchen

(with a total surface of 40 m2) was let on 15 September 1978 under a

freely negotiated tenancy contract according to section 16 (1) of the

1922 Rent Act as amended in 1967. The rent in this particular case was

set at AS 1,870.-- per month.

In application of the 1981 Rent Act, the tenant of the above

apartment on 5 February 1982 applied to the competent Arbitration Board

(Schlichtungsamt) of the City of Graz to reduce his rent to AS 330.--

(= 150% of the legal maximum rent for class D) as from 1 March 1982.

After holding a hearing on 25 May 1982, the Board ruled on 7 June 1982

to allow the application.

The applicants being dissatisfied with this decision then took

the case to the courts, and the Board's decision thereby lost its

effect. The tenant claimed that when he rented the apartment it was

without running water and toilet facilities. These facilities were

subsequently installed in the apartment at the tenant's cost.

By a decision of 22 October 1982, the District Court of Graz

confirmed that the apartment was in class D and that under section 16

(2) of the Rent Act the regular monthly rent therefore should not

exceed AS 5.50 per m2. Under section 44 (2), the rent had to be

reduced to 150% of the regular amount, which in this case was AS

330.--. The overcharge as from 1 March 1982 (AS 12,320.--) had to be

paid back to the tenant by virtue of section 37 of the Act.

The applicants appealed claiming in particular that the

restrictions resulting from the application of section 44 of the Rent

Act were unconstitutional. In this respect they invoked the

Commission's decision on Application No. 8803/77 (DR 17, 80) which had

dealt with the earlier rent protection legislation and had found the

restrictions under this legislation to be at the very limit of

permissible interferences with property rights. Given the even more

restrictive nature of the new legislation, it was submitted that this

legislation went beyond the permissible limits. The reduction of a

freely and lawfully negotiated rental amount in favour of the tenant

in fact amounted to an expropriation of the landlord's property without

compensation. For these reasons, the applicants suggested that the

appellate court refer the matter to the Constitutional Court for an

examination of the constitutionality of the relevant legislation.

In addition, the applicants claimed that in the absence of a

specific request by the tenant, the Court should not have adjudicated

the reimbursement of the overcharged rent, and that the amount of the

reimbursement was exaggerated because it included tax which the

applicants had already paid but could not recover from the revenue

office.

The Regional Court of Graz, however, rejected this appeal on

18 February 1983. It did not feel prompted to seize the Constitutional

Court with the question of the constitutionality of section 44 of the

Rent Act, having regard to the Constitutional Court's case-law

concerning similar issues. As regards the reimbursement, the court

found that under the applicable provisions it had to be adjudicated ex

officio, and the question of taxation was not in issue in the present

proceedings.

This decision is final, no further remedy being available to

the applicants under the domestic law.

Application No. 11011/84

The applicants, four Austrian citizens born in 1902, 1908, 1948

and 1956, respectively, are all members of the same family and reside

in Innsbruck. They are represented by Mr. Ludwig Hoffmann, a lawyer

practising in Innsbruck.

The applicants jointly own an apartment house in Innsbruck as

a community of heirs. One of the apartments in this house with a total

surface of 68 m2 and consisting of three rooms and a kitchen, plus

toilet and water facilities accessible through the corridor outside the

apartment, was let on 7 December 1972 under a freely negotiated tenancy

contract according to section 16 (1) of the 1922 Rent Act as amended

in 1967.

The rent in this particular case was set at AS 800.-- per month

until August 1975, and at AS 1,500.-- per month as from 1 September

1975 having regard to certain investments to be made by the tenants

(including in particular the transfer of the water installations to the

apartment itself). The rent was furthermore subject to an indexing

provision on the basis of the consumer price index for 1966. As of

April 1983, the rent would therefore have been AS 2,985.-- per month.

The tenants actually paid AS 1,308.30 as from November 1982.

On 4 October 1982, in application of the Rent Act 1981, the

tenants of the above apartment applied to the competent Arbitration

Board (Schlichtungsstelle) of the City of Innsbruck to reduce the rent

to 150% of the legal maximum rent for class D. The Board allowed the

application by a decision of 6 April 1983.

However, the applicants then took the case to the courts, and

the Board's decision thereby lost its effect. A new decision had

accordingly to be taken by the District Court of Innsbruck.

Before the court, the applicants argued in particular that the

apartment in question was at present in class B. Although the

improvement of standard had not been financed by themselves, but by the

tenants, they observed that such improvements at the tenants' costs had

in fact been agreed in the original contract and had led to a reduction

of the rent for the initial period. The tenants objected that the

costs of their investments had by far exceeded the amount by which the

rent had temporarily been reduced.

The court decided on 22 June 1983 that the chargeable rent was

in fact to be based on class D because the apartment had been in this

class when the tenancy contract was concluded and the standard had not

been improved by the landlords. It accordingly reduced the rent to AS

561.-- as from November 1982. At the same time, it ordered the

applicants to pay back to the tenants the overpayments received since

that time (amounting to some AS 4,000.--).

The applicants appealed against this decision, claiming in

particular that the application of the legal provisions to them

amounted to an expropriation or other disproportionate interference

with their property rights as guaranteed by Article 5 of the Basic Law

and Article 1 of Protocol No. 1. They suggested that the question of

constitutionality should be referred to the Constitutional Court.

Apart from that they again claimed that the chargeable rent should in

any event be based on class B and not class D.

The Regional Court of Innsbruck partially allowed the appeal

by a decision of 15 November 1983. It found that the court of first

instance had failed to take into account the indexing provision of the

initial contract. Apart from that it confirmed the decision. In

particular it considered that the apartment had not been wrongly

classified as a class D apartment having regard to its standard at the

time of the conclusion of the tenancy contract.

The court had no doubts as to the constitutionality of the

applicable legislation. Section 44 of the 1981 Act provided for an

expropriation which was in conformity with the requirements of the

Constitution and of the Convention. The public interest served by this

legislation was the safeguarding of stable, socially and economically

justified housing rents for apartments which as a rule served the

urgent needs of those broad sectors of the population who depended on

tenancy contracts. Such apartments were often provided by the

landlords without any considerable expenditure of their own. In those

circumstances it could hardly be maintained that the legislator had not

acted in the public interest. Insofar as the legislation did not

provide for any compensation for the landlords in respect of the above

expropriation, the court referred the applicants to the possibility to

claim such compensation in the appropriate proceedings (i.e.

non-contentious proceedings under the Railway Expropriation Act).

Following this suggestion of the court, the applicants made an

application to the District Court of Innsbruck on 28 December 1983 in

which they claimed compensation from the State for legal expropriation,

in the amount of AS 26,600.-- (concerning the 14-month period between

November 1982 and December 1983). The application was rejected on 5

July 1984 and the applicants did not appeal in time against this

decision. Their subsequent application to be granted leave to appeal

out of time was finally rejected by the Innsbruck Regional Court on 3

April 1986.

The applicants also filed an appeal against the Regional

Court's above decision of 15 November 1983 in which they repeated in

particular their arguments as to the unconstitutionality of the

applicable legislation. On 6 March 1984, the Supreme Court rejected

this appeal as inadmissible. It found that the appeal was directed

against that part of the Regional Court's decision which had confirmed

the District Court's decision. An appeal against a decision of an

appellate court was, however, admissible only insofar as it had not

confirmed the decision of the court of first instance or if the

appellate court itself had granted leave to appeal in view of the

fundamental importance of the legal issue involved. In the present

case leave to appeal had not been granted. In these circumstances

there was no room for dealing with the applicants' arguments, in

particular as regards the alleged unconstitutionality of the 1981 Rent

Act.

Application No. 11070/84

The two applicants are Austrian citizens born in 1924 and 1899

who live in Vienna. They are each represented by a different lawyer,

i.e. by Mr. O. Weiss-Tessbach and Mr. F. Leon, respectively. At the

hearing before the Commission, they were represented by yet another

lawyer, Mr. G. Benn-Ibler of Vienna.

The first applicant is the owner, the second applicant the

usufructuary of a house in Vienna with several apartments leased out

to tenants.

One of the apartments consisting of six rooms, a kitchen, a

corridor, a bathroom and a toilet (total surface 200 m2) was let on 1

April 1979 under a freely negotiated tenancy contract according to

section 16 (1) of the 1922 Rent Act as amended in 1967. The rent in

this particular case was set at AS 3,800.-- per month, subject to an

indexing provision on the basis of the consumer price index for 1976.

The rent had risen to AS 4,236.51 by January 1982.

In application of the 1981 Rent Act, the tenant of the above

apartment wrote to the house administration on 23 December 1981 asking

them to reduce his rent to AS 3,300.-- (= 150% of the legal maximum

rent for class C) as from 1 January 1982. The applicants' lawyer

replied on 13 January 1982 that the request was unjustified.

On 19 February 1982, the tenant applied to the competent

Arbitration Board (Schlichtungsstelle) of the City of Vienna to reduce

the rent to AS 3,300.-- as from January 1982 according to the above

legal provisions. After holding a hearing on 24 February 1982, the

Board decided on 28 May 1982 to allow the application.

The applicants being dissatisfied with this decision then took

the case to the courts, and the Board's decision thereby lost its

effect. The applicants observed in particular that the tenant had in

his original application referred to a square metre rent of AS 16.50,

i.e. the maximum rent corresponding to class B apartments. They

submitted that this qualification of the apartment was correct and that

the reduction of the rent was inadmissible in the case of apart- ments

of class B exceeding a surface of 130 m2 (section 16 (1) 4 of the Act).

They further submitted that the house was situated in an area of

protection of monuments, and that the reduction of the rent was

inadmissible also under section 16 (1) 3. The tenant contested these

arguments.

After holding several hearings, the District Court of Vienna

City decided on 31 August 1983 to reduce the rent to AS 3,300.-- per

month as from 1 January 1982. It held that the apartment had in fact

been in class C at the date of the conclusion of the tenancy contract,

and that section 16 (1) 4 of the Act was therefore inapplicable.

Section 16 (1) 3 was likewise inapplicable because it had not been

proven that the house was situated in a zone of monument protection.

It was true that the applicants had made considerable investments (in

the total amount of AS 563,745.--), but this did not change the

situation.

The applicants appealed from this decision alleging in

particular that the apartment had been wrongly classified in class C,

and that the application of section 16 (1) 3 had been wrongly denied.

The Regional Court of Vienna rejected the appeal by a decision

of 13 December 1983. It considered that the court of first instance

had correctly assessed the evidence and had rightly concluded that

neither section 16 (1) 4 nor section 16 (1) 3 of the Act were

applicable. In particular it had not been proven that the investments

made by the applicants had been financed from other means than their

rent income which they were legally obliged to use for maintenance

purposes. It had therefore not been shown that they had borne a

considerable financial risk of their own. In these circumstances the

legal conditions for reducing the rent were fully established.

This decision is final.

COMPLAINTS

1. The applicants in all three cases complain that their property

rights under Article 1 of Protocol No. 1 to the Convention have been

violated.

They claim that the reduction of the rent due to them under

lawfully concluded tenancy contracts cannot be described as a

legitimate measure to control the use of property in accordance with

the general interest. They generally consider the degree of

interference with the landlords' rights brought about by the 1981 Rent

Act as being disproportionate and in particular deny a pressing social

need justifying an interference with existing rent agreements. In

their opinion the reduction of the rent amounts to a legal

expropriation (Legalenteignung) of their contractual claims and at the

same time to an expropriation of their real property whose value was

considerably diminished by this measure. This expropriation is

allegedly unjustified because it does not serve the public interest.

It is further claimed that the expropriation in question violates

Convention law because there is no possibility for the landlord to get

any compensation.

2. The applicants in case No. 11011/84 further claim a violation

of Article 14 of the Convention, read in conjunction with Article 1 of

the Protocol. In their view, the legislation is discriminatory of

private house-owners who have to bear a heavier social burden than

certain others including public house-owners.

PROCEEDINGS

Application No. 10522/83 was introduced on 5 August and

registered on 12 August 1983.

Application No. 11011/84 was introduced on 22 May and

registered on 19 June 1984.

Application No. 11070/84 was introduced on 4 July and

registered on 6 August 1984.

The Commission began its examination of the admissibility of

application No. 10522/83 on 14 May 1984, but decided to adjourn the

further consideration. The examination of admissibility was resumed

on 4 December 1984, when the Commission had also before it the two

further applications No. 11011 and 11070/84. The Commission decided

to give notice of all three applications to the respondent Government

and to invite them, in accordance with Rule 42, para. 2 (b) of its

Rules of Procedure, to submit observations in writing on the

admissibility and merits of these applications which, however, were not

joined at this stage.

The Government were requested to submit their observations

before 22 March 1985.

The Government submitted observations concerning application

No. 10522/83 on 4 March 1985 and observations concerning each of the

other two applications on 19 March 1985.

The applicants in application No. 10522/83 submitted

observations in reply on 11 April 1985 and the applicants in each of

the other two applications submitted theirs on 9 May 1985.

The Commission resumed the examination of the admissibility of

the three applications on 8 July 1985. It decided to join the cases

and to invite the parties, in accordance with Rule 42, para. 3 (b) of

the Rules of Procedure, to submit further observations on the

admissibility and merits orally at a hearing before the Commission.

The date of the hearing was first scheduled for 6 March 1986,

but at the Government's request had to be postponed to a later date.

On 23 December 1985, the new date of the hearing was fixed on 8 May

1986. On 14 March 1986, the parties were informed of the details of

the hearing and were asked to deal in particular with a number of

specific questions.

The hearing took place on 8 May 1986. The parties were

represented as follows: The Government by their Agent, Botschafter Dr.

Helmut TÃœRK, Head of the International Law Department, Federal Ministry

of Foreign Affairs, who was assisted by Ministerialrat Dr. Wolf

OKRESEK, Federal Chancellery, Constitutional Law Department, and

Ministerialrat Dr. Robert TSCHUGGUEL, Federal Ministry of Justice,

Advisers. The applicants by Rechtsanwalt Dr. Hans Günther MEDWED,

Graz, and Rechtsanwalt Dr. Gerold KLEINSCHUSTER, Counsel for the

applicants in application No. 10522/83; Rechtsanwalt Dr. Ludwig

HOFFMANN, Innsbruck, Counsel for the applicants in application No.

11011/84; Rechtsanwalt Dr. Gerhard BENN-IBLER, Vienna, Counsel for the

applicants in application No. 11070/84.

SUMMARY OF THE PARTIES' OBSERVATIONS

A. The Government

1. On exhaustion of domestic remedies

According to the Government, the applicants have not complied

with the requirements of Article 26 of the Convention because they

failed to take or to pursue proceedings with a view to obtaining

compensation on account of the alleged legal expropriation.

Such proceedings are in principle possible under Article 13 of

the Administrative Proceedings (Simplification) Act (Verwaltungs-

entlastungsgesetz, Fed. Law Gazette No. 277/1925) which provides that

in all cases of expropriation which do not come under special

legislation the Railway Expropriation Act (Eisenbahnenteignungsgesetz,

Fed. Law Gazette No. 71/1954) shall apply in the proceedings. According

to section 22 of the latter Act, the compensation due on account of an

expropriation shall be determined by a judicial decision if no

agreement can be reached between the parties. The judicial proceedings

in question are governed by the Non-Contentious Proceedings Act

(Ausserstreitgesetz, Imp. Law Gazette No. 208/1854). It has been

clarified by the highest jurisdictions in Austria, namely the

Constitutional Court and the Supreme Court, that the competence of the

ordinary courts in non-contentious proceedings is also established if

the claim for compensation is based on an alleged expropriation by

legislation. The Government refer to the Constitutional Court decision

of 5 December 1974 (A 2/74-8 = Slg. 7421), and the Supreme Court

decision of 9 December 1975 (5 Ob 241/75) which both concerned the case

underlying application No. 8003/77 to the Commission (cf. DR 17, 80).

The applicant in that case had claimed compensation in respect of an

alleged legal expropriation brought about by the 1922 Rent Act. While

it is true that in last resort it was confirmed by another decision of

the Supreme Court of 1 March 1977 (5 Ob 542/77) that the claim in that

case was without foundation, this does not mean that similar claims

could not succeed in the present cases.

The Government admit that they themselves consider such claims

as being unfounded. Such claims cannot be based on section 365 of the

Civil Code which provides that an individual must cede even his total

right of property for an adequate compensation if this is required in

the public interest. The case law of the Austrian courts has clarified

that the principle of compensation stipulated in this provision is not

inherent in the constitutional guarantee of property laid down in

Article 5 of the Basic Law on the Rights of Citizens (Staatsgrundgesetz

über die Rechte der Staatsbürger, 1867), and that in each case a

special legal basis is required for any compensation in respect of

measures interfering with property. The 1981 Rent Act itself does not

provide such a legal basis. However, the Constitutional Court has

developed a case law based on the principle of equality according to

which legislation may be unconstitutional if it does not provide for

compensation in respect of special disadvantages (Sonderopfer) imposed

in the public interest on certain persons but not on others.

Originally this jurisprudence was developed in connection with cases

of genuine expropriation, but more recently it has been extended to

cover also cases of the regulation of the use of property in the

general interest.

In this respect the Government refer in particular to

litigation brought by the owners of a nuclear power station against the

State for compensation in respect of the Nuclear Power Abolition Act

(Atomsperrgesetz) prohibiting the operation of nuclear power stations

in Austria. By a decision of 15 March 1984, the Regional Court

(Kreisgericht) of St. Pölten recognised a compensation claim based on

section 365 of the Civil Code. While this decision was not upheld by

the Supreme Court on the ground that section 365 did not in itself

provide a sufficient basis for compensation, the Supreme Court

nevertheless interrupted the proceedings and submitted the matter to

the Constitutional Court by a request under Article 140 of the

Constitution. The Constitutional Court was asked whether the failure

of the legislation to provide for compensation in respect of the

special disadvantages arising for the above nuclear power station was

unconstitutional. The Constitutional Court's ruling on this question

is still outstanding.

The Government do not conceal that in the proceedings

concerning the nuclear power station they opposed the compensation

claim in question. The development of the case nevertheless shows that

a compensation case is in principle arguable even in respect of

measures regulating the use of property in the general interest. A

Constitutional Court decision of 16 December 1983 (G 46/82) had

clarified that the Nuclear Power Abolition Act involved such measures,

and the restrictions brought about by the rent legislation are of the

same nature. In this latter respect the Government refer to the

qualification of the restrictions under the 1922 Rent Act by the

Austrian Supreme Court (decision of 1 March 1977, 5 Ob 542/77) and the

Commission (decision on application No. 8003/77, DR 17,80); they

further refer to the qualification of the restrictions under the 1981

Rent Act in the Supreme Court's decision of 3 July 1984 (5 Ob 86/83).

As regards this latter decision, the Government observe that

it concerned a procedure for the reduction of rent under section 44 of

the 1981 Act. It is true that in this connection the Supreme Court

confirmed the constitutionality of this provision and refused to seize

the Constitutional Court with a request for reviewing the

constitutionality of the legislation (Art. 140 of the Constitution).

However, it is submitted that different criteria would apply in a

compensation procedure brought under Art. 13 of the Administrative

Proceedings (Simplification) Act read in conjunction with section 22

of the Railway Expropriation Act. Therefore the Supreme Court's above

decision of 3 July 1984 does in no way prejudge the issue of

compensation.

The Government observe that the applicants in cases No.

10522/83 and No. 11070/84 did not bring any compensation proceedings

while the applicants in case No. 11011/84 in fact brought such

proceedings in the District Court of Innsbruck. However, they did not

pursue the proceedings after the latter court had rejected their claim

by a decision of 5 July 1984. They later asked to be allowed to appeal

against this decision out of time (Wiedereinsetzung in den vorigen

Stand), but their request was rejected by the District Court on 28

November 1984 and finally by the Regional Court of Innsbruck on 3 April

1986. Therefore none of the applicants has exhausted the domestic

remedies in this respect.

2. On compliance with Article 1 of Protocol No. 1

The Government consider that the restrictions on property

contained in the 1981 Act cannot be regarded as a deprivation of

possessions within the meaning of Article 1 para. 1 of Protocol No. 1

to the Convention. In this respect they rely on the Commission's

decision on application No. 8003/77 v. Austria (DR 17, 80), where it

was said that this provision is not applicable to restrictions on

property imposed by rental law regulations. The 1981 Act has not led

to any fundamental change in the legal position on which the Commission

based this decision. The new Act did not interfere with the

applicant's title as owners of the property nor with the substance of

their property. Further, there is no shift of property to the State,

but only a redistribution of financial advantages as between the

landlords and tenants. For this reason, too, the measure of rent

reduction cannot be considered as an expropriation.

This conclusion is not altered by the applicants' allegation

that there was not a deprivation of the thing itself (the real

property), but a deprivation of a right attached thereto (i.e. the

contractual claims under the rent agreements concluded in respect of

this property). Every restriction on property means that some of the

rights associated with the ownership of the object, such as the right

to financial benefit, are reduced to a smaller or greater extent by the

legislation. This does not entail a deprivation of possessions

contrary to the Convention. The other partial rights of ownership such

as the right to sell, bequeath or mortgage the property in question

have remained totally unaffected.

In this connection the Government submit that despite the rent

restrictions introduced since 1982, the value of housing property has

recently increased and even big investors such as banks, insurance

companies etc. continue to acquire such property. The reason is that

according to the applicable valuation principles (Realschätzordnung),

the value does not only depend on the rent proceeds (Ertragswert) but

also on other factors (Substanzwert). In practice it is possible to

encumber half of the value with mortgages for loans, although it is

admitted that under the system of the Rent Act only loans for

investments in the property itself can be repaid from the rent income

while loans for other purposes must in principle be repaid from other

sources.

In the Government's view, the 1981 Act only contains rules on

the use of property as referred to in Article 1, para. 2 of the

Protocol. In this respect the Government refer to the long-standing

case law of the Constitutional Court (since decision No. 1123/1928)

concerning the rent legislation in Austria. While the Constitutional

Court itself has not expressed itself on the constitutionality of

sections 16 and 44 of the 1981 Rent Act, the Supreme Court in its

above-mentioned decision of 3 July 1984 has dealt with this issue and

did not find it necessary to refer the matter to the Constitutional

Court. It held that although the disadvantages brought about by the

rent reform for the landlord might be more important than the

advantages, the legislation nevertheless involved no expropriation but

only a restriction on property. Under Article 5 of the Basic Law, such

restrictions could be ordered without infringing constitutional law if

they did not impinge on the essential content of the fundamental right

to inviolability of property or did not in any other manner violate a

constitutional principle. The transitional provisions of section 44,

paras. 2 and 3 of the Act were necessary in the public interest for the

general good because they fitted in with the balanced structure of the

adjustment of old law to new law and represented part of this necessary

and useful approximation. In conclusion the Supreme Court held these

provisions to be compatible with Article 5 of the Basic Law and Article

1 of the Protocol. It further did not find a violation of the

principle of equality because it considered the provisions to be

entirely justified in view of the actual situation and not

disproportionate in the overall framework of the reform. In this

context no arbitrariness or excess was seen in the discretion left to

the tenant by the legislation. The Supreme Court finally observed that

leases of apartments were continuous obligations which were not

completely immune from a certain amount of adjustment and change also

in other cases.

The Government observe that in this decision the Supreme Court

relied on the Commission's decision on application No. 8003/77 (DR 17,

80).

The Government further invoke the Eur. Court H.R. Handyside

judgment of 7 December 1976 (Series A, No. 24) where it was said that

those legal rules concerning the use of property are admissible which

a State considers necessary in accordance with the general interest and

that in this context the Contracting States are to be considered as the

sole judges of the necessity of any such interference.

The protection afforded to property in Article 1 of the

Protocol is couched in general terms and admits of more far reaching

restrictions through national legislation than are admissible, for

instance, under the exceptions stated in Article 8, para. 2 of the

Convention. It is explicitly reserved to States to order restrictions

in the general interest. Article 1 thus places the determination of

the substantive content of property rights largely in the hand of the

national parliaments. This has also been confirmed by the Eur. Court

H.R. judgment of 21 February 1986 in the case of James and others, to

be published in Series A, No. 98. The Government refer in particular

to the following statements of the Court:

"Because of their direct knowledge of their society

and its needs, the national authorities are in principle

better placed than the international judge to appreciate

what is in the public interest...

The Court, finding it natural that the margin of appreciation

available to the legislature in implementing social and

economic policies should be a wide one, will respect the

legislature's judgment as to what is in the public interest

unless that judgment be manifestly without reasonable

foundation....

Modern societies consider housing of the population to be a

prime social need, the regulation of which cannot entirely be

left to the play of market forces. The margin of appreciation

is wide enough to cover legislation aimed at securing greater

social justice in the sphere of people's homes, even where such

legislation interferes with existing contractual relations

between private parties and confers no direct benefit on the

State or the community at large." (loc. cit., paras. 46 and

47).

The Government admit that the 1981 Act subjected the property

rights of the applicants to certain statutory restrictions including

intervention in rental agreements concluded prior to the entry into

force of the Act by reduction of the rent at the tenant's request to

150% of the rents listed in section 16, para. 2 of the Act.

It is, however, submitted that restrictions of this kind are

covered by Article 1, para. 2 of the Protocol. Paras. 2 and 3 of

section 44 of the Act pursue a legitimate objective of social policy,

namely the protection of tenants' interests in a situation where

reasonably priced accommodation is scarce.

The Government insist that there is indeed a scarcity of cheap

accommodation in Austria and that many tenants had to leave flats with

free rent agreements because they were unable to afford the rent.

In order to ensure fair rents, Parliament in section 16, para.

2 of the Act laid down, stating maximum amounts, what rents are

reasonable (i.e. may not be exceeded) in new tenancy contracts so as

not to overtax the resources of people looking for an apartment who,

in order to get it, might be prepared to pay amounts which are

unreasonably high taking into account all relevant circumstances. Had

no rule been introduced in addition to section 16, para. 2 to cover

"old" tenancy contracts already existing on 1 January 1982, then this

would have led to unjustifiable discrimination between old tenants and

new tenants. Tenants who signed a contract before this date deserve

the same protection in social policy terms, being in the same situation

where they had to pay any price they could just barely afford, simply

to get the apartment.

The Government further submit that the interference with

property complained of is reasonable and does not transgress the margin

of appreciation conceded to national parliaments by Article 1 of the

Protocol. In this respect they refer to the Eur. Court H.R. Sporrong

and Lönnroth judgment of 23 September 1982, Series A, No. 52, according

to which a reasonable balance must be struck between the protection of

the community's general interest and the respect for property enjoined

by Article 1 para. 1.

The Government Bill proposing the legislation stated the

following on the question of general interest:

"All measures taken in this area must take account of

the principle that housing accommodation is one of the

basic vital needs of every human being. In the further

development of socially desirable rental housing law,

a special significance attaches to the conservation of

houses worthy of preservation and to preventing con-

versions of apartments into shops and offices resulting

in the depopulation of our city centres to strengthen-

ing the rights of tenants and other persons entitled to

the use of apartments, and to the introduction of a fair

price for all dwellings. Appropriate steps should be taken

to counter the undesirable practice of allowing apartments

to remain unoccupied. The prime concern is for provisions

aiming to ensure fair housing prices and to protect houses

worthy of preservation."

The Government add that special protection is required in view

of the fact that the financial burden is far heavier, and thus less

fair,on tenants who have to pay an unreasonably high rent month after

month for accommodation rented on a permanent basis, than it is for

other groups of consumers. Thus the provisions of the Act minister to

a basic need of society, namely housing. Special attention has to be

paid in this context to the social conditions prevailing in Austria.

In the Government's view there is no contradiction with the

public interest because by ensuring fair prices and by conserving

houses worthy of preservation, an important service is rendered to the

general interest and it would be onesided to speak of unilateral

benefits to the tenant.

One of the aims of section 44, paras. 2 and 3 of the Act is to

adapt old tenancy contracts to the whole system of reformed rental law

and to minimise the hiatus between the former and the new system.

Suitable machinery is introduced for making this adjustment. It is

conceded to the owner that he will get 50% more rent than he would if

the old tenant terminated the tenancy and the apartment would thus have

to be re-let. On the other hand, the old tenant is protected from

having to pay an excessive rent if he is not willing or able to

terminate the contract and rent an apartment elsewhere. In adopting

these transitional provisions, Parliament had in mind the provision of

section 934 of the Civil Code ("consideration less than one half of

true value"), a provision which was on the statute books at the time

when the tenancy contract was signed and this is why Parliament allowed

a reduction to one and a half of the reasonable rent newly fixed in

section 16, para. 2 of the Act.

This concession to tenants must be considered within the

overall framework of the reform rather than in isolation. The

possibility for the tenant to ask for a reduction under section 44,

paras. 2 and 3, which puts a burden on the owner, is accompanied by a

number of provisions easing the previous stringent tie on the amount

of rent claimable under old contracts whose amount had remained

unchanged since 1951. Thus there is a possibility to charge a higher

rent than hitherto in the case of the succession of a new tenant,

(section 46, para. 2). Further, the Act introduces a new possibility

for the owner to charge maintenance contributions even against the

tenant's will in addition to the rent, where the previous rent is so

low that it does not reach two thirds of the maximum amounts laid down

in section 16, para. 2 (section 45).

Thus, section 44, paras. 2 and 3 is only one of the measures

introduced to adjust tenancy contracts concluded prior to 1 January

1982 to the overall system of the new Act. This Act is designed to

bring rents negotiated at different times closer together in the

general interest, taking into account the social policy objectives

pursued by rental law. The rents were changed in two directions at the

same time, up as well as down.

The applicants' assertion that owners cannot obtain financial

benefits from rented houses coming under the Act is incorrect. If he

does maintenance and improvement work, the owner can use for himself

without specific accounts 20% of the cost of such work, these amounts

to be taken out of the rents perceived (section 20, para. 1 (2)(b) of

the Act). Moreover, he is free after ten years to dispose of all rent

income in so far as he has not used the rents for maintenance and

improvement work. Even within this ten-year accounting period, the

rents including interest are the owner's property. Only his freedom

to dispose of the rent proceeds is restricted as a result of his

obligation under the tenancy contract to keep the leased premises

useable for the agreed purpose (cf. section 1096 of the Civil Code and

section 3 of the Rent Act). He must use the rent during this period to

maintain or improve the house if at least one of the tenants requires

him to do so under sections 3 or 4 of the Act.

In connection with the owner's obligation to maintain the

premises, cost of raising outside capital and reasonable debit interest

on such capital as well as a reasonable sum for interest foregone (at

capital market rates) where own capital is used, are deemed to be costs

of maintenance work (section 3 para. 3 (1) of the Act).

The applicants' assertion that a square metre rent of AS 25.-

per month is necessary to maintain a rented house is in the

Government's submission incorrect and totally unsubstantiated. The

survey conducted in this respect in 1981 by a private interest group

contains components which have nothing to do with regular maintenance.

There is no reliable calculation of average cost, and it would hardly

be feasible to make such a calculation since each house is in a

completely different condition depending on its age, the intensity of

previous maintenance work, etc. Where the rent is not sufficient to

maintain the house, the required additional amount may be ordered to

be raised even over the tenant's objections for each house individually

under the new procedure permitting increases of rents (sections 18 and

19 of the Act).

The maximum square metre rents laid down in section 16 (2) of

the Act are based on an average calculation. The starting point for

this calculation is the rent claimable for flats in new buildings

constructed with public subsidies under the Federal Housing Subsidies

Act (Bundes-Wohnbauförderungsgesetz 1968) which has now been replaced

by the Non-Profit Housing Act (Wohnungsgemeinnützigkeitsgesetz 1979).

This legislation contains detailed regulations on rents which are based

on the principle that they may not exceed the costs incurred by the

owner. The average rent under this legislation is AS 29,37 per square

metre and 80% of this has been taken as the basis for the class A rent

under the 1981 Rent Act, the deduction of 20% being justified by the

fact that the flats covered by this Act are not new and that the

construction costs are generally paid off. A deduction of 25% has been

made for each further class in view of its lower standard. In this way

account has been taken of the differences existing between various

types of flats. It has not been possible to differentiate according

to the situation of each building, but where the rent proceeds

calculated on the above basis are not sufficient to cover the owner's

costs he has the possibility to ask for an increased rent under section

18 of the Rent Act.

The fact that the reduction depends on the tenant's decision

to make an application under section 44 is explained by the private law

nature of the rent agreements. In private law relationships there is

generally no public interference ex officio. The fact that the

decision is left to the tenant also tends to limit the interferences

with existing rent agreements to cases where the reduction is really

justified. The legislation provides that after six months of tenure

a higher rent may be agreed, and tenants are often prepared to accept

a higher rent e.g. in view of necessary maintenance and repair work

because, in this way, they can avoid a costly procedure under section

18 of the Act to increase the rent by a judicial decision. In these

circumstances it can be said that the principle of proportionality has

been respected.

The Government finally submit that the restrictions complained

of are of a nature that they do not call for a compensation. Apart

from the fact that the domestic remedies have not been exhausted in

this respect, the Government rely in particular on applications No.

9006/80 etc, Lithgow and others v. UK, Comm. Rep. 7.3.84, claiming that

there existed specific grounds based on legitimate consideration of

public interest to exclude the grant of compensation claims. There was

no substantial disproportion between the burden placed on the

individual and the public interest pursued by the legislation, namely

to adjust the rents to the aims of social policy and remove excessive

disparities between the rents claimed for the same apartments.

The Government conclude that the applicants' complaints under

Article 1 of the Protocol are manifestly ill-founded.

3. On compliance with Article 14 of the Convention read in

conjunction with Article 1 of the Protocol

(Application No. 11011/84)

The Government state that there is no difference of treatment

as between public and private house owners. The 1981 Rent Act applies

to all house owners alike, including public corporations such as the

Federation, the Provinces and the municipalities who in this sphere act

iure gestionis and are thus subject to exactly the same legal treatment

as private parties.

Nor does the Act delimit the scope of applicability of the rent

restrictions in such a way that they cover mainly private house owners

while public house owners would normally not be struck by such

restrictions. It is however true that the housing property of public

corporations is usually organised in the form of non-profit making

housing associations (gemeinnützige Wohnbaugesellschaften) which are

exempted from the provisions of the Rent Act and instead come within

the scope of special legislation, the Non-Profit Housing Act 1979. But

this legislation also contains rent restrictions based on the principle

that the rent may not exceed the costs incurred by the owner. Any

difference which may exist between the two systems of rent control are

justified by objective and reasonable considerations, in particular the

consideration that in the case of the non-profit making housing

associations the construction costs have not yet been paid off and the

further consideration that they must be able to accumulate certain

reserves in order to continue their building activities in the social

interest.

As regards the various exceptions from rent control laid down

in the Rent Act itself, the Government claim that they are in each case

justified by special circumstances. The special treatment of family

houses and freehold flats is not discriminatory because they

cannot be compared with blocks of flats. They are not usually built

for profit and mostly serve the owner's need for housing, with some

apartments being occasionally or temporarily let to other persons. Also

the different treatment of subletting is justified by special

circumstances.

The exemption of flats in buildings constructed without public

subsidies since 1953 or in all buildings constructed since 1945 is

justified by the consideration that the costs of these buildings have

not been paid off and that an incentive should be given for the

construction of new houses. The same is true for the preservation of

historic buildings or the renovation of flats at the risk of the owner.

The big class A and B apartments are exempted because they do not

normally serve as accommodation for people with small incomes who need

social protection. Such protection finally is not needed after the

tenant has established himself in the apartment and therefore it is

legally permitted to agree on a higher rent after 6 months of tenure.

The Government submit in conclusion that there is no element

of discrimination in the rent legislation, and that therefore the

applicants' complaint under Article 14 is manifestly ill-founded.

B. The applicants

1. On exhaustion of domestic remedies

The applicants observe that their complaint concerns a

reduction of rent brought about by the operation of the 1981 Rent Act,

which they consider as unjustified in itself, irrespective of a

possible compensation. Therefore they submit that it must be

sufficient for them to have taken all remedies available to them in

order to challenge the reduction of the rent in question. The

applicants have in fact contested the reduction in non-contentious

proceedings before the competent civil courts, but their remedies

failed. The civil courts did not consider it necessary to seize the

Constitutional Court with the question of the conformity with the

Convention of the applicable legal regulations, and this corresponds

to the approach taken by the Supreme Court in its decision of 3 July

1984. On the other hand the applicants did not have any direct access

to the Constitutional Court. In particular there was no possibility

for them to make an individual petition for the review of the

constitutionality of the legislation under Article 140 of the

Constitution because the legal regulations in question were not

immediately applicable without a judicial decision.

As regards the institution of compensation proceedings

according to Article 13 of the Administrative Proceedings

(Simplification) Act and section 22 of the Railway Expropriation Act

as suggested by the Government, the applicants consider that they were

not required under Article 26 of the Convention to use this remedy. In

this respect they rely on several reasons.

First, it is submitted that the taking of this remedy would not

square with the object of the applications, namely to obtain a finding

that the reduction of rent provided by the 1981 Rent Act is a measure

which is in itself contrary to Article 1 of the Protocol, irrespective

of whether or not compensation is granted.

Secondly, it is illogical for the Government to insist on this

remedy because the Government themselves are of the opinion that a

compensation claim would have no basis in substantive law. In the

applicants' view it is irrelevant that a formal competence of the civil

courts in non-contentious proceedings may exist for claims of this

nature by virtue of section 22 of the Railway Expropriation Act. The

decisive criterion is not the existence of a competent court, but the

existence of a legal basis for the claim.

In the applicants' submission it results from the case law of

the Austrian courts that a compensation claim is bound to fail because

of the lack of a basis in substantive law. Section 365 of the Civil

Code as interpreted by the courts and the legal doctrine does not

provide such a basis. According to the constant case law of the

Constitutional Court (decisions Nos. 1123, 2572, 2320) the principle

of compensation stipulated in this provision is not inherent in the

constitutional guarantee of property as laid down in Article 5 of the

Basic Law, and an expropriation without compensation is therefore not

unconstitutional. This has been confirmed by the Constitutional Court

in case G 46/82 on 16 December 1983 (JBl. 1984, 662). This view is

shared by the Supreme Court (cf. EvBl 55/1962 and Supreme Court

decisions of 3 June 1976 and 15 October 1985). Also the Supreme Court

decision in the nuclear power case (4 Ob 513/84) is based on the

consideration that section 365 of the Civil Code is not in itself a

sufficient basis for a compensation claim, and that such a basis must

be found in special legislation.

The Rent Act 1981 does not provide for a compensation claim of

the landlord, and the Government Bill for this Act expressly states

that the Act will have no financial implications for the State. That

such a claim does not exist also results from the Supreme Court

decision of 1 March 1977 (5 Ob 542/77) given in respect of the earlier

rent legislation and from the decision of the Innsbruck District Court

of 5 July 1984 given in respect of the compensation claim which the

applicants in case No. 11011/84 had actually raised. It is true that

the applicants did not appeal from this decision in time, and that

their request to be granted leave to appeal out of time was finally

rejected. However, the taking of appeal proceedings would in no way

have changed the legal situation according to which the claim had no

prospects to succeed in the absence of a special provision on

compensation.

The Government argue that a constitutional requirement to enact

legal provisions on compensation may be deduced from the principle of

equality. However, the applicants observe that until very recently

this jurisprudence was limited to cases of genuine expropriations and

did not cover mere restrictions of property. The extension of the

principle to restrictions on property has been suggested by the Supreme

Court in the nuclear power case, and the Constitutional Court has not

yet decided on this issue. In any event these developments are

posterior to the facts of the applicants' cases.

The applicants further argue in this context that the only

possibility to achieve the recognition of a compensation claim is

through the Constitutional Court to which the applicants do not have

direct access. They therefore depend on the willingness of the civil

courts to refer this matter to the Constitutional Court. However, the

civil courts refused to do so in the applicants' cases and also in the

case which was decided by the Supreme Court on 3 July 1984 where it was

held that the reduction of rent under section 44 of the Rent Act is

merely a restriction of property for which there is no right to

compensation. The applicants do not see why the same courts when

seized with an identical question in the context of different

non-contentious proceedings should reach a different conclusion.

The remedy suggested by the Government is therefore in the

applicants' opinion ineffective and for this reason is not required to

be exhausted under Article 26 of the Convention.

2. On compliance with Article 1 of the Protocol

The applicants contest the Government's view that the reduction

of rent under section 44 of the 1981 Rent Act is only a regulation of

the use of property in accordance with the general interest. They

claim that by this measure they have been victims of a deprivation of

their possessions. In case No. 11070/84 this deprivation struck not

only the owner of the property, but also the usufructuary, and

therefore both applicants in this case can claim to be victims within

the meaning of Article 25 of the Convention.

The applicants point to the difference of the present

applications from application No. 8003/77 where the Commission

qualified restrictions under the earlier rent legislation as a

regulation of the use of property. Unlike the applicant in that case

they were not confronted with the application of legal restrictions

which had existed already when they acquired the property nor could

they hope for a gradual reduction of the impact of such restrictions.

In fact the 1981 Act introduced new and more far-reaching restrictions

which interfered with the substance of their property rights. While

the restrictions under the earlier legislation had still been

considered as proportionate to the aims of social policy permitted by

Article 1 para. 2 of the Protocol, this could not be said of the new

additional restrictions under the 1981 Act even if they were to be

qualified as regulations of the use of property. The applicants claim,

however, that these new restrictions in fact amounted to expropriation

measures, and that therefore they come within the scope of Article 1

para. 1 of the Protocol.

The difference between expropriation measures and regulations

on the use of property has not been clearly established by the Austrian

jurisprudence and doctrine. However, the Constitutional Court has

considered it to be essential for an expropriation that there should

be a transfer of economic values (Vermögensverschiebung) from the owner

to third persons in that the former is totally or partially deprived

of his property or suffers an encumbrance of his property while

corresponding rights are transferred to or created for the latter.

This is clearly the case here as property is transferred month after

month from the owner to the tenant.

The applicants in case No. 10522/83 observe that the monthly

transfer in their case is about AS 1,500.- without taking into account

the indexing provision in the relevant rent agreement, and that the

total loss which they have suffered in this way is some AS 80,000.-.

They further observe that their contractual claim has been reduced to

a more or less symbolic amount of rent (AS 330.-) which corresponds to

no more than the price of a meal for two persons in a cheap restaurant.

The applicants in case No. 11011/84 state that the reduced monthly

square metre rent corresponds roughly to the price of 1/2 litre of

petrol. The applicants add that the rents originally agreed were in no

way exaggerated and corresponded to the market conditions on the free

market.

The view that section 44 of the 1981 Act involves expropriation

measures has also been confirmed by legal writers. The applicants

refer to the articles by Glassl (Österr. Immobilienzeitung 1983 p. 4)

and Kassowitz (ibid 1985 p. 156).

As regards the nature of the alleged expropriation, the

applicants refer to two different aspects: they consider that there has

been a legal expropriation of their contractual claims under the rent

agreements, and at the same time a de facto expropriation of the

substance of their real property.

On the first aspect it is observed that the rent agreements

concluded by the applicants before the entry into force of the 1981 Act

were fully in conformity with the earlier legislation as it had existed

since 1967. The 1981 Act had a retroactive effect in that it allowed

the tenants to obtain a judicial decision by which these earlier

agreements were partially declared void. In this way the tenants were

encouraged to commit a breach of contract in respect of the obligations

which they had accepted under the said agreements. The applicants claim

that their contractual claims under these agreements are "possessions"

within the meaning of Article 1 of the Protocol. They refer to the case

law of the Constitutional Court according to which the concept of

"property" means all private rights of economic value, including

besides the full right of ownership any part of this full right as a

special right. They further claim that the general principles of

international law, to which Article 1 of the Protocol refers, likewise

are based on a concept of "property" which extends to all acquired or

vested rights of economic value, including contractual claims.

All applicants claim that there has been a partial legal

expropriation of their contractual claims under the rent agreements.

The applicants in case No. 10522/83 submit that these claims were

expropriated but for a token amount of rent. The applicants in case

No. 11070/84 claim that apart from the legal expropriation of

contractual claims under the rent agreement there has in addition been

a legal expropriation of the contractual claims under the usufruct

agreement between the two applicants.

The applicants concede that the interference with their

contractual rights has not been brought about immediately by the

legislation because this interference depends on the decision of the

tenant to ask for a reduction of rent. However, it is nevertheless

justified to speak of a legal expropriation. In fact the tenant has

been authorised by the legislation to expropriate the landlord, and no

discretion is left to the authorities in this respect.

As regards the second aspect, the alleged de facto

expropriation of the applicants' real property, it is submitted that

it belongs to the substance of the ownership right in a block of flats

to be able to draw benefit from leases. This has also been recognised

by the Commission in application No. 8003/77. However, by the

cumulation of the various restrictions contained in the rent

legislation, the landlord is practically reduced to the state of a mere

administrator of his own property. The philosophy underlying this

legislation is that the landlord shall not be able to obtain any profit

from his property. He must in principle use the whole of the rent

proceeds for the maintenance and repair of the building, and his right

to give notice to his tenants is very severely restricted. For

instance, it is virtually impossible to give notice to a tenant on the

ground that a flat is needed for housing purposes of the owner himself,

while on the other hand a very restrictive approach is taken when the

ground of notice is that the tenant does not really need the flat. The

tenants' right to transfer the tenancy contract to other persons is

very broad, and a tenant may even change his flat with another person

without the landlord's consent being required. The landlord in

practice keeps no more than the nudum ius, i.e. the title in the

property, but he is deprived of the possibility to make an economically

reasonable use of it.

The applicants claim that by the introduction of new

restrictions on the landlord, in particular as regards his right to fix

the amount of rent by agreement with the tenant, the 1981 Act has led

to a considerable reduction of the value of the real property which in

fact amounts to a de facto expropriation of this property. According

to the regulations concerning the assessment of real property

(Realschätzordnung) the value of blocks of flats depends mainly on the

income value (Ertragswert), and this value has considerably dropped by

the introduction of new maximum rents. In particular the applicants

in case No. 10522/83 claim that they now could sell their property only

at a loss.

They had bought the house in question in 1978 from a

compensation which they had received for another house which had been

expropriated. They considered this to be a safe investment having

regard ot the rental legislation then in force which allowed the

conclusion of freely negotiated tenancy contracts. The price which

they had to pay at the time reflected the circumstance that there were

several unoccupied flats in the house which could be leased out on the

free market. By the introduction of the restrictions of the 1981 Act,

the value of the house was drastically reduced. This decrease in value

amounts to some AS 184,000.- only by virtue of the reduction of rent

in the case at issue. But there are several other tenants who would

likewise be entitled to ask for a reduction (from AS 750.- to AS 232.-,

from AS 2,850.- to AS 546.-, and from AS 1,841.60 to AS 314.-

respectively), with the necessary consequence of a further considerable

decrease in the value of the house. An analogous reduction was not

possible in one case where the tenancy contract had been concluded for

a limited period of time (on the basis of a monthly rent of AS

1,300.-), but there were two further tenants with contracts concluded

before 1968, whose rent was accordingly frozen under the earlier

legislation at the level of 1913 (on the basis of AS 23.75 and AS 23.80

respectively). The total loss is estimated at AS 300,000.- at least.

The applicants admit that the formal right to mortgage their

real property for the purpose of obtaining a loan has not been taken

away, but also in this respect it is claimed that there has been an

interference with their property rights. The value of the real

property having dropped, there is no longer the same economic basis

for taking out a mortgage. In practice, loans can be obtained for

mortgage only if they are intended for maintenance or repair work.

Loans for other purposes would have to be paid back from other sources

than the rent income. The applicants finally refer to the difficulty

of those landlords who have contracted a loan under the earlier regime

which they now are unable to pay back from the reduced rent income.

The applicants contest that the public interest justifies the

alleged expropriation measures. On the contrary, it is submitted that

these measures violate the public interest. Reference is made in this

context to the severe criticism of the legislation by representatives

of all political parties, including the governing parties. Also it is

claimed that it contradicts the public interest to encourage tenants

to act against the principles of good faith and to commit breaches of

contract. But the main criticism is that the measures lack a social

justification and are disproportionate to the aim pursued.

There was no urgent need for this legislation. The housing

shortage to which the Government refer does not in reality exist. There

are in fact some 100,000 - 150,000 unoccupied flats, and a considerable

proportion of these are in houses struck by the legislation. Moreover,

many of the flats coming under the legislation are not really needed

by the tenants because they frequently have more than one flat. This

is a consequence of the rent protection legislation itself by the

combined effect of cheap rents and generous application of provisions

to protect tenants against termination of their contracts or provisions

enabling them to transfer their tenancy rights to others. The

legislation leads to a situation where the landlords prefer to leave

flats unoccupied rather than letting them at an economic loss. The

Vienna provincial legislation even introduced special taxation to curb

this effect, but this legislation was subsequently quashed by the

Constitutional Court. The applicants finally observe that there is a

trend away from rented apartments to owning property. In 1982 already

52% of the population lived in houses or apartments of their own. This

shows that the economic and social importance of the rent legislation

is less than the Government suggest.

The proportion of cases in which rent reductions under section

44 of the Act take place is very small. There was a total of 100 cases

in Graz, of which 30 were reductions of rent by judicial decisions and

the remainder reductions by agreement between the parties. The lacking

need for this legislation is also shown by the fact that the decision

is left to the tenant, and that the legislation provides for many

exceptions. Also, it was not considered as necessary in 1974 when

maximum rents were first introduced for substandard flats to interfere

with existing rent agreements. The 1981 Act now allows to interfere

with such agreements even in respect of other categories of flats.

The maximum rents fixed by the 1981 legislation do not

correspond to economic realities. The applicants have submitted a

study prepared by a private house-owner association according to which

a square metre rent of AS 25.- would be absolutely necessary only to

maintain houses. They further have submitted a survey of rents paid

on the free market which are considerably above the legal maximum rents

but in no way exaggerated. The general level is about 20% above that

applicable to flats rented from municipalities. These figures show

that tenants are actually able to pay economically reasonable

rents. The average income in Austria is comparable to that in other

Western European States, but the level of rent envisaged by the

legislation is very far below the standard in these countries. It

would be socially justified for a tenant to spend about 20 to 25% of

his income for rent. The legislation does not make any social

differentiation, every tenant can ask for a reduction of rent

irrespective of his income. It would be more in line with a social

housing policy to give subsidies to tenants who really cannot afford

the rent. The applicants observe that a system of rent subsidies does

in fact exist and that under the applicable legislation tenants who

cannot afford the rent have a legal right to get such subsidies. The

proportion of expenditure for rent which is considered as justified in

this context is about 20-25% of the income.

The applicants further observe that the calculation of the

legal maximum rents is not based on sound economic principles. They

state that the mode of calculation explained by the Government at the

oral hearing comes as a surprise for them. They do not recall that

this argumentation was used when the legislation was being prepared.

Moreover, the Government had themselves earlier stated that there was

no reliable calculation of average cost, and that it would be hardly

possible to make such a calculation since each house is in a completely

different condition. In this context the applicants submit that no

differentiation is made between individual houses according to their

particular conditions, nor any distinction with regard to regional

differences. The same level of rent is applicable in big cities and

rural areas, in the capital and elsewhere despite considerable regional

market differences.

The applicants deny that the restrictions placed on the

landlord are counterbalanced by other measures in favour of the

landlord. First, these measures are in themselves insufficient because

they do not allow the landlords to adjust rents to an economically

justified level. In fact the maintenance contributions under section

45 of the Act cover only two thirds of what the Government themselves

consider as a justified rent, and moreover these contributions must

entirely be used for maintenance of the building and must be repaid if

they are not used for this purpose. The same applies to the

possibility to increase rents under section 18. Therefore these

provisions, too, involve disadvantages for the landlord. The other

improvements cited by the Government are of negligible importance. In

any event none of the provisions allegedly improving the situation of

the landlord was applicable in the present cases.

In conclusion, the applicants submit that there was no public

interest which could justify the measures taken against them, in

particular the public interest to preserve property of private

house-owners was disregarded. It is further submitted that the

measures in question did not strike the right balance between the

public interests which may legitimately be pursued by a social housing

policy, and the individual interests of the house-owners, and for this

reason, too, these measures were wholly disproportionate and contrary

to Article 1 of the Protocol as exceeding the margin of appreciation

conceded by this provision.

3. On compliance with Article 14 of the Convention

(Application No. 11011/84)

The applicants admit that there is no formal distinction

between private and public house-owners in the Rent Act itself.

However, the applicants submit that the provisions of the

Non-Profit Housing Act benefit mainly public house-owners as non-profit

housing associations are usually set up and owned by public

corporations. The rent permissible under section 14 of this Act

includes a profit of some 8% of the capital invested, while a similar

profit is not conceded to private house-owners struck by the provisions

of the Rent Act. While the income of the non-profit housing

associations may in principle be used for other purposes, the rent

proceeds of the private house owners must be entirely used for

maintenance and repair. The applicants allege that this amounts to

discrimination of private house-owners contrary to Article 14 of the

Convention.

THE LAW

1. The applicant landlords complain of the reduction of rental

claims against certain of their tenants brought about by court

decisions taken in pursuance of section 44 of the 1981 Rent Act. They

claim that this measure amounted to a deprivation of possessions

contrary to Article 1 para. 1 of Protocol No. 1 (P1-1) to the

Convention consisting, on the one hand, in a legal expropriation of

their contractual claims under the relevant rent agreements, and on the

other hand in a de facto expropriation of their real property. The

Government object that the contractual claims cannot be considered as

a separate property and that the measure complained of involved no more

than a regulation of the use of the applicants' real property in

conformity with Article 1 para. 2 of the Protocol (P1-1-2).

2. The Government submit that the applicants have not exhausted

all available domestic remedies as required under Article 26 (Art. 26)

of the Convention because they failed to introduce (or in case No.

11011/84 to pursue) compensation proceedings under Article 13 of the

Administrative Procedure (Simplification) Act read in conjunction with

section 22 of the Railway Expropriation Act which is considered to be

applicable in this type of case. The applicants claim that they have

in fact exhausted domestic remedies by challenging the court decisions

ordering the reduction of rent. They consider that they were not

required under Article 26 (Art. 26) to take compensation proceedings.

3. The Commission finds that the applicants were not required to

use the remedy suggested by the Government because this remedy must be

considered as ineffective for the reasons set out below:

4. It is not contested that the applicants had no hope to obtain

compensation from the civil courts on the basis of the actual legal

situation. A compensation claim could not be based on section 365 of

the Civil Code as interpreted by the constant case law of the

Austrian courts, but only on a special legal provision which provides

for such a claim. It is clear that no special provision existed either

in the Rent Act itself or otherwise. In particular section 22 of the

Railway Expropriation Act did not provide a substantive basis for a

compensation claim, it only established the jurisdiction of the civil

courts in non-contentious proceedings for this type of claim. This has

been confirmed by the Constitutional Court decision of 5 December 1974,

the Supreme Court decision of 1 March 1977, and finally also by the

Innsbruck District Court's decision of 5 July 1984 given in case No.

11011/84.

5. Since the applicants could not hope to be awarded compensation

on the basis of the existing legislation, the only possibility for them

was to challenge the constitutionality of this legislation because it

failed to provide for a compensation claim. The Constitutional Court's

case law on the principle of equality has in fact established a basis

for attacking legislation interfering with property on the ground that

it does not provide compensation for special disadvantages arising for

certain individuals. The Supreme Court has recently suggested in the

"nuclear power" case that this principle might also be applicable to

legislation regulating the use of property. However, the

Constitutional Court's decision on this issue is still outstanding.

Therefore it is not entirely clear whether the principle could be of

assistance to the applicants on the basis of the case-law of the

Supreme Court which qualifies the restrictions under the Rent Act as

regulations on the use of property.

6. Under Article 140 of the Constitution, the review of

legislation as to its constitutionality is the exclusive competence of

the Constitutional Court. Therefore the applicants' above claim could

only succeed if the Constitutional Court was seized with the matter and

ruled that the Rent Act was unconstitutional for failure to provide for

compensation. However, it is clear that applicants did not have any

direct access to the Constitutional Court. Proceedings under Article

137 of the Constitution were bound to fail in view of the

Constitutional Court's decision of 5 December 1974. Proceedings under

Article 140 could not be taken by the applicants themselves because

they were not directly affected by the applicable legislation whose

operation in relation to them depended on judicial decisions given in

respect of requests by tenants to reduce the rent. In such

circumstances it is provided that only the courts of second instance

dealing with the matter can refer the question of the constitutionality

of the applicable legislation to the Constitutional Court if they

should have any doubts in this respect.

7. In the present cases there were two different court proceedings

in which the question of reference to the Constitutional Court could

arise: the rent reduction proceedings under section 44 of the Rent Act,

and the compensation proceedings under section 22 of the Railway

Expropriation Act. The applicants exhausted the remedies in the former

proceedings and in this connection suggested to the courts that they

should refer the question of the constitutionality of section 44 of the

Rent Act to the Constitutional Court. However the courts

declined to do so. Their approach in this respect was in line with the

Supreme Court decision of 3 July 1984. The constitutionality of

section 44 was considered in this decision and the Supreme Court

qualified the measures under this provision as a regulation of the use

of property in accordance with the general interest in respect of which

no compensation was due. It had no doubts as to the constitutionality

of the legislation in this respect and refused to refer the matter to

the Constitutional Court. Therefore it is clear that at least in

connection with the non-contentious proceedings on the reduction of

their rental claims the applicants could not achieve a review of the

rent legislation as to its constitutionality.

8. The Government submit that different legal considerations might

be applicable in compensation proceedings under section 22 of the

Railway Expropriation Act which the applicants did not pursue. However,

the Government have not specified what further legal considerations

could be relevant. The Commission notes that the proceedings in

question would again be non-contentious proceedings and that they would

take place before the very courts which had dealt with the rent

reduction proceedings. As the problem of the constitutionality of the

rent legislation, including the absence of compensation, had already

been dealt with in the latter proceedings, it is difficult to conceive

how in these circumstances the courts could adopt a different approach

on the same question.

9. It follows that the taking of compensation proceedings according

to section 22 of the Railway Expropriation Act would have been

ineffective for the applicants because they could neither hope to

obtain compensation on the basis of the existing law, nor expect the

competent courts to refer the matter of the constitutionality of the

legislation to the Constitutional Court. The Government's argument as

to the non-exhaustion of the domestic remedies must therefore be

rejected.

10. As regards the substance of the applicants' complaints under

Article 1 of the Protocol (P1-1), the Commission has taken note of the

arguments of both parties. This includes, in particular, the

applicants' submission that they were unjustifiably deprived of their

possessions including their contractual claims to the monthly rent,

that this deprivation was not in the public interest and that it was

grossly disproportionate to any legitimate aim of a social housing

policy. It further includes the Government's submission that the

legislation involved no expropriation and in particular no

expropriation of contractual claims, but merely a regulation of the use

of real property in pursuance of a legitimate social housing policy

which was both necessary in the public interest and proportionate to

the aim pursued, and which therefore was covered by the margin of

appreciation conceded to the Contracting States by Article 1 of the

Protocol (P1-1). In the light of these submissions the Commission

finds that the cases raise complex and difficult issues of importance

for the interpretation and application of Article 1 of the Protocol

(P1-1) which require to be determined as to their merits. The

applicants' above complaints therefore cannot be rejected as being

manifestly ill- founded within the meaning of Article 27 para. 2

(Art. 27-2) of the Convention.

11. The applicants in case No. 11011/84 have submitted an

additional complaint under Article 14 (Art. 14) of the Convention in

conjunction with Article 1 of the Protocol. They allege that the rent

legislation is discriminatory against private house-owners in

particular in comparison with public house-owners. The Commission is

satisfied that the applicants have exhausted the domestic remedies in

respect of this complaint by invoking the constitutional principle of

equality before the law. As regards the substance of this complaint,

the Commission considers that it is so closely linked to the remainder

of the case that it cannot be separated. Accordingly this part of the

application must also be reserved for a consideration as to the merits

and cannot be rejected as being manifestly ill-founded.

For these reasons, the Commission, without in any way

prejudging the merits,

DECLARES THE APPLICATIONS ADMISSIBLE.

Secretary to the Commission Acting President of the Commission

(H.C. KRÜGER) (G. SPERDUTI)

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MELLACHER AND ANOTHER, MÖLK AND OTHERS AND WEISS-TESSBACH AND ANOTHER v. AUSTRIA

MELLACHER AND ANOTHER, MÖLK AND OTHERS AND WEISS-TESSBACH AND ANOTHER v. AUSTRIA

LEXI