Communicated on 20 June 2020 Published on 6 July 2020

FIRST SECTION

Application no. 45951/13 Pelagia Kazimiera BUGAJ and Zdzis Å‚ aw Antoni BUGAJ against Poland lodged on 5 July 2013

STATEMENT OF FACTS

A list of the applicants is set out in the appendix.

1 . The facts of the case, as submitted by the applicants, may be summarised as follows.

2 . The applicants were spouses. On 20 October 2014, the applicants ’ lawyer informed the Court that the second applicant, Z. Bugaj , had passed away on 16 November 2013 and that his wife, P. Bugaj – who is the first applicant, and their daughter, Ms W. Go ś ci ń ska , wished to pursue the application – the latter, in the second applicant ’ s stead. The inheritance certificate no. 1442/2014 delivered on 20 October 2014, which had been submitted to the Court, confirms that both women are the first applicant ’ s legal heirs.

3 . The applicants were pensioners whose total income in 2012 was around 653 euros (EUR) per month.

4 . The applicants lived for many years as tenants in an apartment which was owned by Szczecin Municipality ( Gmina ). That apartment measured 74 sq. m. and was situated on the ground floor. The hallway of the applicants ’ apartment was shared with their neighbour, with whom the applicants had been in conflict. The apartment was in poor condition. It was equipped with a coal kitchen stove and coal heaters. The area in which the apartment was located was not safe. The applicants submitted that the maintenance costs had been disproportionately high in comparison to the standard of the apartment and greatly exceeded their financial means.

5 . In May 2001 the applicants bought the apartment with the statutory 75% discount (and an additional 30% discount). The market value of the apartment was estimated to be 129,762 Polish zlotys (PLN, approximately EUR 32,440). The applicants bought it for PLN 22,708 (approximately EUR 5,677).

6 . The sale contract did not contain any clause referring to section 68 of the Law of 21 August 1997 on Land Administration ( Ustawa o gospodarce nieruchomościami ; “the 1997 Law”), which regulated the conditions for awarding and revoking the discount in question.

7 . The applicants submitted that they had not been made aware that in the event that the apartment was sold within 5 years and not used for housing purposes within the meaning of section 68 (1) 7 and (2) of the 1997 Law, the applicants would have to return the amount of the discount with adjustments.

8 . In July 2001 the applicants signed a contract with a third party, exchanging their apartment for an apartment of a higher standard and located in a better neighbourhood. No additional payments were effected for the purpose of this transaction.

9 . The applicants have been living in the apartment in question ever since.

10 . In September 2001 the new owners were granted a permit to transform the applicants ’ old apartment into a store. The request to that effect had been filed by the new owners in August 2001.

11 . On 25 May 2010 the Szczecin Mayor ( Prezydent ) ordered the applicants to return PLN 133,943 (approximately EUR 33,485), which corresponded to the discount with adjustments. The payment was to be made within 14 days.

12 . The applicants did not comply with the order and the municipality sued them for payment, arguing that by entering into the exchange contract with the third party the applicants had breached the conditions for the discount provided for by section 68 (1) and (2) of the 1997 Law.

13 . On 18 November 2011the Szczecin Regional Court ( Sąd Okręgowy ) dismissed the municipality ’ s action, holding that the applicants were not under a duty to return the discount. Firstly, the applicants had switched apartments in order to improve their housing conditions. They had thus complied with the purpose of the provision in question. Secondly, the municipality ’ s action went against the principles of co-existence with others ( zasady współżycia społecznego ) as protected by Article 5 of the Civil Code.

14 . On 22 February 2012 the Szczecin Court of Appeal ( SÄ…d Apelacyjny ) changed the first-instance judgment and ordered the applicants to pay back the adjusted amount of discount, namely PLN 108,123 (approximately EUR 27,030), with interest payable as from 12 June 2010. The court refused to allow payment in instalments.

15 . The appellate court held that section 68 of the 1997 Law should not have been interpreted in the light of its purpose but rather, strictly in the light of its actual wording. To that end, the appellate court made the following observations.

16 . According to the text of section 68 of the 1997 Law, as applicable at the material time, each time the discounted property owner transferred the ownership of that property to a third party (who was not his or her “close person”) prior to the lapse of the statutory time, a claim arose to have the discount returned. The lawmaker had not set out any other conditions in that context.

17 . It was only in the 2007 amendment of the 1997 Law that exceptions had been provided to the principle that a request could be made for return of the adjusted discount. Exchanging an apartment for another apartment or for another residential property was one such exception. Selling the apartment and using the profits to buy another apartment or residential property was another exception. The purpose of meeting someone ’ s residential needs was therefore taken into consideration by the lawmaker only in 2007.

18 . The 2007 amendment did not contain any transitional provisions.

19 . It followed that until the 2007 amendment, section 68 should have been interpreted strictly, according to its text as it stood at the material time, and not according to its implied purpose.

20 . Prior to the 2007 amendment the condition for claiming back the discount had been “the use of the property contrary to the reason for the award of the discount.” However, in the event that the property had been transferred to someone other than a “close person”, the right to claim the discount back arose in all cases, that is irrespective of the reason or purpose of the transaction. That inconsistency was rectified by the 2007 amendment.

21 . Despite the fact that according to section 68 as it stood before the 2007 amendment, the claim to have the discount returned was optional and not mandatory, it was not necessary to include a clause to that effect in a sale contract. In other words, such a claim did not arise from a contract but directly from the law, in the event certain conditions were met in the future.

22 . Claiming the return of the discount was not against the principles of co-existence with others. Article 5 of the Civil Code required exceptional circumstances which would be flagrantly unacceptable socially. Failure to instruct the applicants about the possibility of claiming the return of the discount did not fall into that category. Moreover, the change in the law and the liberalisation of the conditions for the discount later on in time could not, in and of itself, constitute grounds for considering the municipality ’ s claim to be in breach of Article 5 of the Civil Code.

23 . Article 5 of the Civil Code could not be validly relied on by persons who themselves acted contrary to the principles of co-existence with others. Granting the discount had a statutory aim of providing the applicants with stability, housing security and with a centre to their life for years to come. The applicants had acted disloyally and dishonestly. They had pretended that the apartment satisfied their housing needs whereas they had not had any intention of keeping it for themselves, and they had very quickly transferred it to a third party. Such conduct could not be accepted in the light of the principles of co-existence with others even though, at the end of the day, the applicants had found other means to meet their housing needs.

24 . On 6 December 2012 the Supreme Court refused to entertain the applicants ’ cassation appeal. That decision was served on the applicants ’ lawyer on 7 January 2013.

25 . Under section 68 of the Law of 21 August 1997 on Land Administration ( Ustawa o gospodarce nieruchomościami ; “the 1997 Law”), as applicable at the material time, if the buyer of a discounted tenancy apartment sold or otherwise disposed of the property within five years for purposes other than housing, the seller had to repay the amount of the discount. The obligation to repay the discount did not arise if the property was transferred to a “close person” ( osoba bliska ) such as a relative.

The text of the impugned provision, in so far as relevant, read as follows:

“1) The competent authority is free to grant (...) a discount from the price (...), if the property is sold:

...

(7) as a residential unit ( lokal mieszkalny )

...

2) The competent organ is free to claim the return of the amount of discount with adjustments, if the property buyer (...) disposed of the property or used it, prior to the lapse of five years [from the date of the property ’ s purchase] for purposes other than those set out in paragraph 1(7). [This] is inapplicable [if the property has been transferred] to a close person.

...”

26 . Since 2001 section 68 of the 1997 Law has been amended nine times.

27 . The amendment which entered into force on 22 October 2007 changed the wording of section 68 of the 1997 law in the following way, in so far as relevant.

“1) The competent authority is free to grant (...) a discount on the price (...), if the property is sold:

...

(7) as a residential unit

...

2) The property buyer is under a duty to return the adjusted discount, in the event that the buyer ... disposed of the residential unit or used it, prior to the lapse of five years [from the date of its purchase] for purposes other than those which had justified the grant of the discount. ...

2(a) Paragraph 2 is not applicable in the event:

...

(4) exchanging of the residential unit for a different residential unit or property destined or used for residential purposes;

...”

COMPLAINT

The applicants essentially complained under Article 1 of Protocol No. 1 to the Convention, that the obligation to return the adjusted discount constituted a disproportionate financial sanction, which was based on an ambiguous law and its erroneous interpretation by the domestic courts.

QUESTIONS TO THE PARTIES

1. Has there been an interference with the applicants ’ peaceful enjoyment of possessions, within the meaning of Article 1 of Protocol No. 1?

2. If so, was that interference necessary to control the use of property in accordance with the general interest, in accordance with the law and without imposing an excessive individual burden on the applicant (see Immobiliare Saffi v. Italy, [GC], no. 22774/93, § 59, ECHR 1999-V)?

3. The parties are asked to provide the Court with examples of domestic case-law which existed at the material time in the context of situations similar to that of the applicants in the instant case and section 68 of the Law of 21 August 1997 on Land Administration as applicable to transactions which occurred in 2001 ( Ustawa o gospodarce nieruchomościami ).

4. The applicants are asked to inform the Court whether or not - and if yes, what amount - they were made to pay on account of the obligation to return the discount in question.

APPENDIX

No.

Applicant ’ s Name

Birth year

Nationality

Place of residence

1Pelagia Kazimiera BUGAJ

1942Polish

Szczecin

2Zdzis Å‚ aw Antoni BUGAJ

1937Polish

Szczecin