CASE OF R & L, S.R.O. AND OTHERS v. THE CZECH REPUBLIC
Violation of Article 1 of Protocol No. 1 - Protection of property (Article 1 para. 1 of Protocol No. 1 - Peaceful enjoyment of possessions)
Angelika Nußberger;Ann Power-Forde;Ganna Yudkivska;Helena Jäderblom;Karel Jungwiert;Mark Villiger
6. The first applicant is a limited liability company with its registered seat in Brno. It owns a five-storey tenement house in Brno, which it bought in 1994 for 1,450,000 Czech korunas (CZK 52,920 euros (EUR)). There is a shop on the ground floor and one flat on each remaining floor. In three of these four flats the rent was regulated. The rent in those three flats was CZK 2,037 (EUR 74), CZK 2,007 (EUR 73) and CZK 1,392 (EUR 50.80) respectively per month. The monthly rent for the fourth flat was fixed at CZK 5,200 (EUR 190). 7. On 10 February 2004 the first applicant sued the State for damages in the amount of CZK 229,563 (EUR 8,378) corresponding to the difference between the regulated rent and the usual rent in the given area as estimated by the first applicant for the period between February 2002 and end of January 2004. 8. On 22 December 2004 the Prague 1 District Court (obvodní soud) dismissed the first applicant’s action. It held that it was not possible to award damages under the State Liability Act since failure to enact deregulating legislation could not be qualified as an “incorrect official procedure” within the meaning of the Act. Moreover, the adoption by the Ministry of Finance of decrees nos. 01/2002 and 06/2002 could not be qualified as an incorrect official procedure either. 9. On 28 February 2006 the Prague Municipal Court (městský soud) dismissed an appeal by the first applicant. It held that the impossibility of reaching an agreement on deregulating legislation in Parliament could not be qualified as an “incorrect official procedure” within the meaning of the State Liability Act. The court added that in respect of the period from February 2002 to 20 March 2003 rents had been regulated by Government Decree no. 567/2002. Although that decree had subsequently been repealed by the Constitutional Court, the latter’s judgments were not of retroactive effect and thus previous contractual relationships remained unchanged. Accordingly, there was no legal basis for compensation for that period. 10. On 24 October 2007 the Supreme Court (Nejvyšší soud) dismissed an appeal on points of law lodged by the first applicant. It found that the legislative procedure in Parliament could not be described as an “administrative procedure” under the State Liability Act and that it was impossible to engage liability on the part of the State for the result of voting in Parliament. 11. On 27 November 2008 the Constitutional Court (Ústavní soud) dismissed a constitutional appeal lodged by the first applicant as manifestly ill-founded, holding that actions for damages against the State had a subsidiary character and that the applicant company should have started by bringing an action for rent increase. 12. The applicant owns a tenement house in Prague consisting of eleven flats and three non-residential premises. The application concerns seven of these flats for which the applicant collected regulated rent in the total amount of CZK 398,196 (EUR 14,533) for the period between 1 January 2002 and 31 December 2004 while the usual rent in the given locality would have amounted to CZK 1,757,160 (EUR 64,130) according to an expert report commissioned by the applicant. The applicant and his sister acquired the house under the restitution law in 1992. The applicant’s sister later transferred her share to the applicant. 13. On 4 January 2005 the applicant sued the State for damages in the amount of CZK 1,358,964 (EUR 49,597) corresponding to the difference between the regulated rent and the usual rent in the given locality for the period between 1 January 2002 and 31 December 2004. 14. On 12 October 2005 the Prague 1 District Court dismissed the applicant’s action. It held that it was not possible to qualify the failure by Parliament to enact deregulating legislation as an “incorrect official procedure”. While the previous regulations had been repealed by the Constitutional Court, this did not produce a retroactive effect and thus no damages could be awarded for the period of time during which they were in force. The applicant should have brought an action against the tenant requesting the court to determine the amount of rent according to the local and material conditions (nahrazení projevu vůle nájemců k určení výše nájemného, které by odpovídalo všem místním i věcným podmínkám). 15. On 2 February 2006 the Prague Municipal Court dismissed an appeal by the applicant. It held that the impossibility of reaching an agreement on deregulating legislation in Parliament could not be qualified as an “incorrect official procedure” within the meaning of the State Liability Act. As regards the period until 20 March 2003, the court added that rents had been regulated by Government Decree no. 567/2002. Although it had subsequently been repealed by the Constitutional Court, the latter’s judgments did not have retroactive effect and thus the previous contractual relationships remained unchanged. Accordingly, there was no legal basis for compensation for that period. 16. On 28 February 2008 the Supreme Court declared inadmissible an appeal on points of law lodged by the applicant. 17. On 30 October 2008 the Constitutional Court dismissed the applicant’s constitutional appeal as manifestly ill-founded, holding that actions for damages against the State had a subsidiary character and that the applicant should have started by bringing an action for rent increase. 18. The applicant owns a tenement house in Brno consisting of seven flats and two non-residential premises. She became the sole owner of the house on 11 July 2004 as a result of restitution (in March 1992), gifts (in October 1994), inheritance (in September 1997) and purchases from five other family members (July 2004). She collected regulated rent for three of those flats in the total amount of CZK 251,484 (EUR 9,178) for the period between 1 July 2002 and 31 August 2005 while the usual rent in the given locality would have amounted to CZK 1,158,059 (EUR 42,265) according to an expert report commissioned by the applicant. The applicant occupied one flat and let two flats to her son and daughter. 19. On 14 October 2005 the applicant sued the State for damages in the amount of CZK 906,575 (EUR 33,087) corresponding to the difference between the regulated rent and the usual rent in the given locality for the period between 1 July 2002 and 31 August 2005. On 19 January 2006 she withdrew her claim in respect of an amount of CZK 166,077 (EUR 6,061). 20. On 9 May 2006 the Prague 1 District Court dismissed the applicant’s action. It held that it was not possible to qualify the failure by Parliament to enact deregulating legislation as an “incorrect official procedure”. The applicant should have brought an action against the tenant requesting the court to determine the amount of rent according to the local and material conditions. 21. On 24 January 2007 the Prague Municipal Court upheld that decision. In respect of the period up to 20 March 2003, it held that rents had been regulated by several regulations. Although these had subsequently been repealed by the Constitutional Court, its judgments were not of retroactive effect and thus the previous contractual relationships remained unchanged. As a result, no compensation could be awarded for that period. As regards the subsequent period, the court held that the impossibility of reaching an agreement on deregulating legislation by Parliament could not be qualified as an “incorrect official procedure” within the meaning of the State Liability Act. State responsibility could however flow from general liability under civil law. Yet, it would be very difficult to establish a causal link between the damage and an unconstitutional failure on the part of the State to enact deregulating legislation. Referring to the Constitutional Court’s judgments nos. Pl. ÚS 20/05 and I. ÚS 489/05 (see paragraphs 105 and 118 of Annex II), the court held that as of 2 June 2006 at the latest the applicant could have brought an action pro futuro. As regards the period between 20 March 2003 and 2 June 2006 the Municipal Court stated that the applicant should have brought an action against the tenants for forfeiture of the proceeds of unjust enrichment. Given that the litigation stemmed from an unlawful situation which was to a substantial extent caused by the State’s inactivity, and the persisting evolution of the case-law, which had not yet been settled, the applicant was exempted from payment of the costs of the proceedings incurred by the State both for the first-instance and the appellate proceedings. 22. On 26 March 2008 the Supreme Court declared inadmissible the applicant’s appeal on points of law. It found that the legislative procedure in Parliament could not be described as an “administrative procedure” within the meaning of the State Liability Act and that it was impossible to engage liability on the part of the State for the result of voting in Parliament. 23. On 21 April 2008 the applicant lodged a constitutional appeal. She explained, inter alia, that an action against the State was the only avenue she could use. It was not possible to bring an action against the tenants. First of all, the lower courts had been dismissing such actions between 1 July 2002 and 31 August 2005, which was the period to which her claim related. Moreover, that judicial practice corresponded to the established case-law of the Supreme Court (see paragraph 167 of Annex II) and the result of any action against the tenant was thus fully foreseeable. Further, the possibility of bringing an action for rent increase had been created by the Constitutional Court only in its landmark judgment no. Pl. ÚS 20/05 of 2 June 2006. In any event, contrary to the opinion of the Municipal Court, it was not possible to use that avenue in the applicant’s case. Referring to the Constitutional Court’s judgment no. I. ÚS 489/05 (see paragraph 118 of Annex II), the applicant argued that her only option was to bring actions against the tenant pro futuro whereas her action concerned the past. 24. On 18 December 2008 the Constitutional Court dismissed a constitutional appeal by the applicant as manifestly ill-founded, holding that actions for damages against the State had a subsidiary character, and the applicant should have started by bringing an action for rent increase. 25. On 15 May 2003 the applicant bought a tenement house in Domašov nad Bystřicí at public auction. The rent was regulated in nine out of the twelve flats. The rent in one of the flats was set at CZK 1,081 (EUR 39) per month. The non-regulated rent for a smaller flat was CZK 2,000 (EUR 73). Had there been no rent regulation, then rent in a flat affected by the control would be CZK 2,541 (EUR 93) a month (calculation based by compering yield per sq. m. of regulated and non-regulated flat). 26. On 26 April 2006 the Olomouc District Court (okresní soud) ordered the tenant of that flat to vacate it. On 30 August 2006 the applicant filed a request for enforcement of that decision. 27. On 9 October 2007 he lodged an action for payment of CZK 14,650 (EUR 530) corresponding to the outstanding rent for the period between 1 July 2006 and 30 April 2007. On 14 December 2007 the District Court dismissed that action on the ground that the tenant had actually vacated the flat on 30 June 2006. 28. In 2008 the applicant lodged an action for payment of CZK 14,514 (EUR 530) for the period between 1 February and 31 July 2006 corresponding to the difference between the regulated rent and the rent that he considered usual in the given locality. 29. On 28 April 2008 the District Court dismissed the applicant’s claim. It referred to the case-law of the Constitutional Court and the Supreme Court and held that rent could be increased only pro futuro. Moreover, the applicant’s action could not be granted on the basis of forfeiture of the proceeds of unjust enrichment either because the parties had concluded a valid tenancy agreement. 30. On 4 December 2008 the Ostrava Regional Court (krajský soud) upheld the District Court’s analysis and dismissed an appeal by the applicant. 31. On 21 May 2009 the Constitutional Court dismissed a constitutional appeal lodged by the applicant, holding that landlords were not entitled to claim retroactively from tenants the difference between the regulated rent and the usual rent in the given locality. It noted that previous opinions to the effect that it was possible to lodge retroactive claims against tenants had been overruled by its Opinion no. 27/09 of 28 April 2009. 32. The applicant owns numerous other tenement houses where the rent was regulated. He introduced separate domestic proceedings regarding those houses and ultimately lodged eleven other applications (nos. 25463/05, 32090/06, 36658/09, 36687/09, 38720/09, 39868/09, 43750/09, 46064/09, 53957/09, 3968/10, 8463/10) before the Court where he complains of the rent regulation scheme in the Czech Republic. 33. The applicants own a tenement house in Prague consisting of six flats, one of which was rented under the rent-control scheme. The rent was set at CZK 2,396 (EUR 87) per month. The applicants bought the house in May 2001 for CZK 4,000,000 (EUR 145,985). 34. On 17 July 2003 the applicants informed the tenants of an increase in rent that would newly be CZK 9,000 (EUR 328) monthly, which the tenants refused to pay. On 22 September 2003 they sent a letter of reminder to the tenants, who, on 5 October 2003, again refused to pay the increased rent. 35. On an unspecified date the applicants brought the case before the Prague 8 District Office, which was empowered to determine the level of the rent according to the rent agreement (dohoda o užívání bytu). On an unspecified date the District Office had declined jurisdiction and informed the applicants that they should bring an action before the courts. The final reminder before the court action was sent to the tenants by the applicants on 19 June 2005. 36. On 30 June 2005 the applicants thus lodged an action for payment of the increase in rent for the period from July 2003 to December 2004 amounting to CZK 118,874 (EUR 4,338). 37. On 22 February 2006 the Prague 8 District Court dismissed their action. 38. On 25 October 2006 the Prague Municipal Court upheld the first-instance judgment. Referring to the case-law of the Constitutional Court, and especially its judgment no. I. ÚS 489/05 of 6 April 2006 (see paragraph 118 of Annex II), it held that rent could not be increased retroactively. 39. On 8 April 2009 the Supreme Court declared inadmissible an appeal on points of law lodged by the applicants. 40. On 16 July 2009 the Constitutional Court, referring to its Opinion no. 27/09 of 28 April 2009, dismissed a constitutional appeal lodged by the applicants, holding that a rent increase could be claimed only pro futuro from the date of lodging the action against the tenants. 41. On 2 January 2008 the applicants also lodged a claim for damages against the State under the State Liability Act for the period from July 2004 to December 2006. The proceedings are pending before the Prague 1 District Court.