Information Note on the Court’s case-law 72

February 2005

Hutten-Czapska v. Poland - 35014/97

Judgment 22.2.2005 [Section IV]

Article 1 of Protocol No. 1

Article 1 para. 1 of Protocol No. 1

Peaceful enjoyment of possessions

Impossibility of recovering property or obtaining adequate rent from tenants: violation

[This case was referred to the Grand Chamber on 6 July 2005]

Facts : The applicant is one of around 100,000 landlords in Poland affected by a restrictive system of rent control (from which some 600,000 to 900,000 tenants benefit), which originated in laws adopted under the former communist regime. The system imposes a number of restrictions on landlords ’ rights, in particular, setting a ceiling on rent levels which is so low that landlords cannot even recoup their maintenance costs, let alone make a profit.

The property in question was taken under state management after the entry into force of a 1946 dec ree giving the Polish authorities power to assign flats in privately-owned buildings to particular tenants. The applicant’s parents tried unsuccessfully to regain possession of their property. In 1974 a new regime on the state management of housing entered into force, the so‑called “special lease scheme”. In 1975, the mayor issued a decision by which the ground floor of the house was leased to another tenant. In the 1990s the applicant tried to have that decision declared null and void but only succeeded in obtaining a decision declaring that it had been issued contrary to the law.

In 1990 the District Court declared that the applicant had inherited her parents’ property and, in 1991, she took over the management of the house. She then brought several unsucc essful sets of proceedings – civil and administrative – to regain possession of her property and to relocate the tenants.

In 1994 a rent control scheme was applied to private property in Poland, under which landlords were both obliged to carry out costly m aintenance work and prevented from charging rents which covered those costs. According to one calculation, rents covered only about 60% of the maintenance costs. Severe restrictions on the termination of leases were also in place. The 1994 Act was replaced by a new act in 2001, designed to improve the situation, which maintained all restrictions on the termination of leases and obligations in respect of maintenance of property and also introduced a new procedure for controlling rent increases. For instance, it was not possible to charge rent at a level exceeding 3% of the reconstruction value of the property in question. In the applicant’s case this amounted to 1,285 Polish zlotys (PLN) in 2004 (equivalent to 316 euros).

In 2000 and 2002 the Constitutional Court found that the rent-control scheme under both the 1994 Act and the 2001 Act was unconstitutional and that it had placed a disproportionate and excessive burden on landlords. The provisions in question were repealed and from 10 October 2000 until 31 December 2004 the applicant was able to increase the rent she charged by about 10% to PLN 5.15 a square metre (approximately 1.27 euros). On 1 January 2005, new provisions (the “December 2004 amendments”) entered into for ce which allowed, for the first time, rents exceeding 3% of the reconstruction value of the property being rented to increase by not more than 10% a year.

The applicant complained under Article 1 of Protocol No. 1 to the Convention that the situation creat ed by the implementation of the laws imposing tenancy agreements on her and setting an inadequate level of rent amounted to a continuing violation of her right to the enjoyment of her possessions. The very essence of her right of property had been impaired because she was not only unable to derive any income from her property but also, owing to restrictions on the termination of lease of flats subject to the rent-control scheme, she could not regain possession and use of her property.

Law : Article 1 of Prot ocol No. 1 – The Court recalled that it could only consider the possible effect on the applicant’s property rights of decisions taken, or laws applicable, from 10 October 1994, the date when Poland ratified Protocol No. 1 to the European Convention on Huma n Rights.

The Court noted that the applicant had never lost her right to sell her property. Nor had the authorities applied any measures resulting in the transfer of her ownership. It was true that she had not been able to exercise her right of use in term s of physical possession as the house had been occupied by the tenants and that her rights in respect of letting the flats, including her right to receive rent and to terminate leases, had been subject to a number of statutory limitations. The measures tak en could not be considered a formal or even de facto expropriation but constituted a means of State control of the use of her property, to be examined under the second paragraph of Article 1 of Protocol No. 1 (references to Mellacher and Others v. Austria , Series A no. 169, and Immobiliare Saffi v. Italy , ECHR 1999-V).

The rent-control scheme in Poland originated in the continued shortage of dwellings, the low supply of flats for rent and the high costs of acquiring a flat. The Court therefore accepted that, in the social and economic circumstances of the case, the legis lation in question had a legitimate aim in the general interest. Concerning the 1994 Act, the Court further accepted that, given the exceptionally difficult housing situation in Poland and the inevitably serious social consequences involved in the reform o f the lease market, the decision to introduce laws restricting levels of rent in privately-owned flats to protect tenants was justified, especially as it put a statutory time-limit on this measure. However, no procedures enabling landlords to recover maint enance costs were available under the 1994 Act and Polish legislation did not secure any mechanism for balancing the costs of maintaining the property and the income from the controlled rent, which covered only 60% of maintenance costs. Against that backgr ound and having regard to the consequences that the various restrictive provisions had on the applicant, the Court found that the combination of restrictions under the 1994 Act impaired the very essence of the applicant’s right of property.

In addition, th e provisions of the 2001 Act, which had been intended to ameliorate the situation by introducing a new procedure for controlling rent increases, unduly restricted the applicant’s property rights and placed a disproportionate burden on her, which could not be justified in terms of the legitimate aim pursued by the authorities in implementing the relevant remedial housing legislation. Concerning the period between 10 October 2002 and 31 December 2004, the Court did not see how the possibility of increasing re nt up to the statutory ceiling could ameliorate the situation of the applicant or the other landlords. Nor did the Court consider that it provided them with any relief for the past state of affairs. Neither did the December 2004 Amendments provide the appl icant with any kind of relief that could compensate for the violation that had already occurred, because being able to raise the rent charged by 10% of the current rent did not amount to a significant increase.

The Court acknowledged that the difficult hou sing situation in Poland, in particular an acute shortage of dwellings and the high cost of acquiring flats on the market, and the need to transform the extremely rigid system of distribution of dwellings inherited from the communist regime, justified not only the introduction of remedial legislation to protect tenants during the reform of the country’s political, economic and legal system but also the setting of a low rent, at a level below the market rate. Yet it found no justification for Poland’s contin ued failure to secure to the applicant and other landlords throughout the entire period under consideration the sums necessary to cover maintenance costs, not to mention even a minimum profit from the lease of flats. It was incumbent on the Polish authorit ies to eliminate or at least to find a prompt remedy for the problem. Furthermore, the principle of lawfulness in Article 1 of Protocol No. 1 and of the foreseeability of the law ensuing from that rule required the State to repeal the rent-control scheme, which by no means excluded the adoption of procedures protecting the rights of tenants in a different manner.

Having regard to all the foregoing circumstances and, more particularly, to the consequences which the operation of the rent-control scheme entail ed for the exercise of the applicant’s right to the peaceful enjoyment of her possessions, the Court held that the authorities imposed a disproportionate and excessive burden on her.

Conclusion : violation (unanimously).

Article 46 – The applicant’s case, w hich – like Broniowski v. Poland [GC], no. 31443/96, ECHR 2004 – had been chosen by the Court as a pilot case for determining the compatibility with the Convention of a domestic scheme that affected large numbers of people, revealed an underlying systemic problem, in that Polish housing legislation imposed, and continues to impose, on individual landlords, restrictions on increases in rent for their dwellings, making it impossible for them to receive rent reasonably commensurate with the general costs of pr operty maintenance.

The Court considered that Poland had to, above all, through appropriate legal and/or other measures, secure a reasonable level of rent to the applicant and those similarly affected, or provide them with a mechanism mitigating the conseq uences of State control over rent increases on their right of property. It was not for the Court to indicate what would be the “reasonable” level of rent in the present case or in Poland in general, or in what way the mitigating procedures should be set up ; under Article 46 Poland remained free to choose the means by which it would discharge its obligations arising from the execution of the Court’s judgments.

Article 41 – The question of the application of Article 41 (just satisfaction), concerning pecuniar y or non-pecuniary damage, was not ready for decision (six votes to one). The Court made an award for costs and expenses.

© Council of Europe/European Court of Human Rights This summary by the Registry does not bind the Court.

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