FIFTH SECTION

DECISION

Application no. 81454/12 REAL, SPOL. S R.O. against the Czech Republic

The European Court of Human Rights (Fifth Section), sitting on 19 May 2022 as a Committee composed of:

Stéphanie Mourou-Vikström, President, Lətif Hüseynov, Kateřina Šimáčková, judges, and Martina Keller, Deputy Section Registrar,

Having regard to:

the application (no. 81454/12) against the Czech Republic lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) on 13 December 2012 by a limited liability company established under Czech law, REAL, spol. s r.o. (“the applicant”), which has its registered office in Prague and which was represented by Mr S. Němec, a lawyer practising in Prague;

the decision to give notice of the application to the Czech Government (“the Government”), represented by their Agent, Mr V.A. Schorm, of the Ministry of Justice;

the parties’ observations;

Having deliberated, decides as follows:

SUBJECT MATTER OF THE CASE

1. The application concerns mainly a limitation of the contractual freedom of the applicant, a landlord, who was imposed a tenant unable to pay the rent and the charges (Article 1 of Protocol No. 1).

2. In October 2001 the original tenants of a flat owned by the applicant, which had been allocated to them for an indefinite term, agreed with M.S. to exchange their respective flats. The applicant company did not agree, arguing that, in order to remain competitive with other landlords, it needed to enter into a new, fixed-term tenancy agreement enabling it to change tenant if M.S. was unable to pay the rent.

3 . By a judgment of 16 July 2002, the Prague 8 District Court consented to the flat exchange in the applicant’s place. It did not find any serious reasons which would justify the applicant’s refusal to accept the flat exchange, considering that the need to maintain competitiveness could not outweigh the protection of the tenancy. As a result, the exchange was allowed to take place and the original tenancy agreement was to change only in respect of the identity of the tenant and not in respect of other decisive features, such as the duration of the tenancy or the amount of rent payable.

4 . On 13 November 2002 that judgment was upheld by the Prague Municipal Court. The applicant’s argument regarding the non-payment of rent by M.S. was considered merely hypothetical.

5 . On 22 May 2004 an appeal on points of law by the applicant was dismissed by the Supreme Court. It reiterated that in the specific situation of an exchange of flats, the parties to the exchange agreement entered into the original tenancy agreement. It also agreed with the appellate court that the applicant’s speculations about the possible failure by M.S. to pay the rent were merely hypothetical and did not amount to serious reasons within the meaning of the relevant law.

6 . On 16 June 2005 the Constitutional Court dismissed as manifestly ill ‑ founded a constitutional complaint in which the applicant complained of a violation of its rights to a fair trial and to protection of property. While endorsing the interpretation made by the courts, according to which the landlord could not make its consent to the exchange dependent upon a new tenancy agreement, the Constitutional Court noted that it had already invited the legislature to amend the legislation on rental housing in order to better meet current societal needs without breaching landlords’ constitutional rights.

7 . In the meantime, in September or October 2002, M.S. moved into the flat. She paid a monthly rent and charges for services related to the use of the flat until May 2004 , when her personal and financial situation worsened.

8 . On 9 May 2005 the applicant brought an action against M.S., seeking payment of the rent and charges due for the period from May 2004 to April 2005. Its action was allowed by the District Court on 27 July 2006. Another action by the applicant seeking payment of the rent due from June 2005 to March 2008 was partly allowed on 9 September 2010. The applicant was not able to recover any of the debts.

9 . Furthermore, by a judgment of 29 September 2006 the District Court authorised the applicant to terminate the tenancy, considering that it was up to the State, not the applicant as a private entity, to provide M.S. with basic living conditions in the event of material distress . M.S. was thus obliged to leave the flat within fifteen days of the expiry of the notice period and of the applicant providing her with alternative accommodation.

10. M.S. vacated the flat on 7 February 2008.

11. Relying on the State Liability Act (Act no. 82/1998), the applicant brought an action for damages against the State, claiming the amount of approx. 7,870 euros (EUR) encompassing the outstanding rent and charges. It complained of being obliged to pay the charges in place of M.S. and to pay value-added tax on the unpaid rent, without deriving any profit from its property.

12. On 8 October 2009 the action was dismissed by the Prague 2 District Court, finding that the conditions for establishing the State’s liability had not been met as none of the 2002 decisions had been quashed as unlawful and the State could not be held liable for M.S.’s failure to pay her enforceable debts.

13. An appeal by the applicant was later dismissed by the Prague Municipal Court, and so was on 19 September 2011 the applicant’s appeal on points of law. The Supreme Court found that the 2002 decisions had neither been quashed as unlawful, as required by the law, nor were they discriminatory since the applicant had not suffered any disadvantage compared with other landlords.

14. By a decision of 4 June 2012 (served on 13 June 2012), the Constitutional Court dismissed as manifestly ill ‑ founded a constitutional appeal by the applicant relying on Articles 6 and 13 of the Convention, as well as on Article 1 of Protocol No. 1 taken separately and in conjunction with Article 14 of the Convention. Admitting that the social and legal dysfunctions referred to by the applicant were serious, it considered that it was not for the courts to address those issues.

15. Relying on Article 1 of Protocol No. 1, the applicant complained that the State interfered with its freedom of contract by imposing on it a tenant who was unable to pay the rent and the charges. It further alleged that it had been discriminated against compared with landlords who were able to conclude tenancy agreements freely, contrary to Article 14 of the Convention, and that the courts had breached its rights under Articles 6 and 13.

THE COURT’S ASSESSMENT

16. As to the Government’s argument that the six-month time-limit should be calculated from the Constitutional Court’s decision of 16 June 2005, putting an end to the proceedings concerning the flat exchange, the Court observes that the applicant’s complaint relates indeed to the situation which occurred following the courts’ decisions of 2002 consenting to the flat exchange in its place. It was by virtue of those decisions that M.S. entered into the original tenancy agreement for an indefinite term, after the applicant’s arguments in relation to the need to maintain competitiveness by negotiating a new fixed-term tenancy agreement and to the possibility of M.S. being unable to pay the rent had not been considered to amount to “serious” reasons within the meaning of the law. The Court notes in this connection that, in 2002, nothing pointed to the risk of M.S. being in financial distress, so the courts cannot be blamed for having arbitrarily imposed an insolvent tenant on the applicant.

17. It is not disputed, and it was also acknowledged by the Constitutional Court (see paragraph 6 above), that at the time of the events the legal regulations governing rental housing created an imbalance between the rights of landlords and those of tenants, the latter having been afforded a high level of protection. This was mainly due to the economic and social circumstances of the time, marked by the transition from a totalitarian regime to a democratic State and an overall housing reform, which required the elimination of what were considered to be social injustices and an adjustment of the conflicting interests of landlords and tenants. The Court observes that, in this domain, the State’s 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 (see James and Others v. the United Kingdom , 21 February 1986, § 47, Series A no. 98).

18 . In any event, in so far as the applicant complained about the limitation of its contractual freedom and the impossibility of imposing a fixed-term tenancy agreement on M.S., it must be concluded that the final decision in this respect was taken by the Constitutional Court on 16 June 2005, whereas the present application was lodged on 13 December 2012.

19. The Court does not lose sight of the fact that the applicant’s concerns as to the insolvency of M.S., which appeared hypothetical and speculative in 2002, materialised in May 2004 when she stopped paying (see paragraph 7 above). In such a situation, the applicant was entitled to seek the payment of the outstanding sums and also authorisation from a court to terminate the tenancy. Indeed, the applicant used those avenues and its claims were allowed (see paragraphs 8 and 9 above). Therefore, it cannot be said that it was left without any possibility of defending its rights.

20. To the extent that the applicant complained about not having been able to evict M.S. and to recover the unpaid sums, the Court reiterates that when final judgments are given against “private” defendants, the State’s positive obligation consists in providing a legal framework allowing individuals to secure payment from recalcitrant debtors of sums awarded by the judgments in question (see Dachar v. France (dec.), no. 42338/98, 6 June 2000 ). In the present case the applicant did not allege that the authorities had failed to assist it in the execution of the judgments or that they had remained inactive. Thus, the respondent State cannot be held responsible for the failure by M.S. to pay the judgment debts, and the application appears manifestly ill-founded in this respect.

21. In such circumstances, necessitating action by M.S. and by the applicant and where the State’s responsibility was not engaged, the Court shares the Government’s view that the subsequent proceedings for damages initiated by the applicant under the State Liability Act did not constitute an avenue capable of addressing the core of its complaints raised and of remedying the situation in which it had found itself after 2002. Consequently, the Constitutional Court’s decision of 4 June 2012, adopted within those proceedings for damages, cannot be deemed to have triggered the running of the six ‑ month time-limit provided under Article 35 of the Convention.

22. In view of the above, given that the applicant company failed to bring its application within six months from the Constitutional Court’s decision of 16 June 2005 (see paragraph 18 above), the Court agrees with the Government that the present complaint was lodged outside the six-month time-limit set forth in Article 35 § 1 of the Convention. It must therefore be rejected in accordance with Article 35 §§ 1 and 4 of the Convention.

23. As to the other complaints raised by the applicant under Article 14 taken in conjunction with Article 1 of Protocol No. 1 and under Articles 6 and 13 of the Convention, the Court considers that, in the light of all the material in its possession and in so far as the matters complained of are within its competence, these complaints either do not meet the admissibility criteria set out in Articles 34 and 35 of the Convention or do not disclose any appearance of a violation of the rights and freedoms enshrined in the Convention or the Protocols thereto.

24. It follows that this part of the application must be rejected in accordance with Article 35 § 4 of the Convention.

For these reasons, the Court, unanimously,

Declares the application inadmissible.

Done in English and notified in writing on 9 June 2022.

Martina Keller Stéphanie Mourou-Vikström Deputy Registrar President