CASE OF RAITA v. FINLAND
Violation of Art. 6-1
David Thór Björgvinsson;Ján Šikuta;Lech Garlicki;Mihai Poalelungi;Nicolas Bratza;Päivi Hirvelä
4. The applicant was born in 1960 and lives in Wittenborn. 5. The applicant and his siblings inherited real property from their father. The property is situated in Piispankylä, Vantaa. At the time, a master plan (yleiskaava, generalplan) had been drawn up for the area but it had not reached the town planning stage. 6. On 17 June 1996 they sold the property for 210,000 Finnish marks (FIM) (some 35,420 euros) (EUR). The buyer was a company which was to be set up later and it was represented by the applicant. 7. On 26 August 1996 the city decided to use its first call on the property, since it had already negotiated the purchase of the surrounding properties and the purchase price was considered advantageous. 8. On 24 September 1996 the applicant challenged the city’s decision. 9. On 2 May 1997 the Uusimaa County Administrative Court (lääninoikeus, länsrätten) rejected his appeal, finding that pursuant to the Pre-emption Act (etuostolaki, förköpslagen; Act no. 608/1977) the city had a first call on the property since the sellers and the buyer were not close relatives (sections 1 and 5). It did not uphold the applicant’s argument that the pre-emption was manifestly unfair (section 6). 10. On 26 June 1997 the applicant appealed. On both parties’ request, the consideration of the case was postponed pending negotiations with a view to reaching a friendly settlement. 11. On 10 March 1999 the Supreme Administrative Court (korkein hallinto-oikeus, högsta förvaltningsdomstolen) rejected the appeal. 12. On 10 September 1999 the applicant lodged an extraordinary appeal, arguing that the parties had been taken by surprise by the decision of March 1999 since they had been given to understand that the proceedings would be stayed until a settlement was reached. 13. On 18 June 2001 the Supreme Administrative Court upheld the applicant’s appeal and annulled its earlier decision. Having examined the applicant’s procedural complaint, and since the case file contained clarifications which had not been available to the County Administrative Court when it took its decision on 2 May 1997, the case was referred back to the lower court. 14. The Helsinki Administrative Court (hallinto-oikeus, förvaltningsdomstolen, which had replaced the County Administrative Court), received the parties’ submissions, including, inter alia, a certificate according to which the property had a taxation value of FIM 611,776 in 1994 and an appraisal document according to which the property’s market value was FIM 2.5 million. Both documents were lodged by the applicant. The city contested the appraisal document’s relevance, arguing that it started from the wrong assumptions as to, inter alia, the size of the property and the planning situation. The city maintained that the purchase price, FIM 210,000, reflected the real value at the time of the purchase. The applicant also relied on a draft preliminary agreement (drawn up in 1998) between his father’s estate and the city of Vantaa, which stated an aggregate purchase price of FIM 3.36 million concerning the property in issue and another property. However, that price had been fixed on the understanding that the area would be the subject of town planning before the conclusion of the contract. 15. On 13 February 2002 the Administrative Court revoked the city’s decision. Although there was no evidence before it showing the market value of the property, it could however be concluded on the basis of an overall assessment of the case that the purchase price was below the market value. Having regard to the purchase price and the relationship between those who had signed the deed of sale, the court held that the pre-emption was manifestly unfair. It however rejected the applicant’s complaint that the city had failed to duly inform him of its decision to pre-empt (sections 9 and 10 of the Pre-emption Act). Having noted that the buyer was not the applicant but a company to be set up later, it also rejected his complaint that the city could not pre-empt the property as the sellers and the buyer were close relatives (sections 1, 5 and 21a). The fact that the deed of sale had subsequently been altered to the effect that the applicant stated that he had taken the place of the company did not detract from this position. The alteration had been made only on 24 June 1997, that is, after the lower court had rejected the applicant’s appeal. 16. The city appealed, arguing that the taxation value of 1994 had no relevance to the case as the taxation value did not follow the fluctuations in the economic situation of the country or the demand for real property at a given time. It was to be noted that during the period from 1993 to 1997 real property prices had dipped to one third of what they had been in 1990 and 1991 and that the taxation value was confirmed periodically and did not therefore reflect the situation in 1997. The city also argued that no relevance could be given to the relationship between those who had signed the deed of sale. 17. The applicant replied to the appeal, arguing that the market value was considerably higher than the taxation value. Furthermore, there had been no intention on the part of his family to sell the property to an outsider. He also argued that, following the entry into force of the Real Property Code (maakaari, jordabalken; Act no. 540/1995), on 1 January 1997, he was to be considered the owner under Chapter 2, section 4 since no company had been established. 18. Pursuant to the practice in the Supreme Administrative Court, it invited the city’s submissions in reply. The city argued (submission dated 12 August 2003) that the property’s taxation value had dropped as follows: in 1996 to FIM 428,000; in 1997-2001 to FIM 250,000-270,000 and in 2003 to FIM 323,400. Furthermore, the fluctuations in the market value were reflected in the taxation value with a delay of several years. The drop in the relevant property’s value followed the general price development. The city maintained that in considering whether the conditions for pre-emption were met at the time of the purchase in 1996, no relevance could be given to facts occurring thereafter. It also noted that no town plan had yet been drawn up. 19. On 4 November 2004 the Supreme Administrative Court overturned the lower court’s decision. Referring to the Government Bill on the enactment of the Pre-emption Act and on subsequent amendments thereto, the court noted that the aim of the said Act was, inter alia, to slow the increase in value of real property and to reduce the number of cases in which the parties to the purchase, in order to evade tax, did not state the full price in the deed of sale. It also noted that a considerably lower price than the market value could be relevant to the assessment of whether the conditions for pre-emption were fulfilled. The purchase price had, however, to be assessed in the light of the situation on the real estate market and the planning of the area at the time of the pre-emption. The court considered that the taxation value as such did not attest the property’s market value and that the afore-mentioned appraisal document and draft preliminary agreement were in part based on wrong assumptions. It noted that no town plan had been drawn up and that the property consisted of vacant land, whose price was affected by the advantageous location as to traffic communication and the expectations as regards future lucrative use of the property. The assessment of the value, however, could not have been based on the price of the permitted building volume expected to be allocated by a town plan. 20. The Supreme Administrative Court considered that in assessing whether the pre-emption was manifestly unfair, the purchase price had to be considered in relation to the prevailing planning and real property market situation at the time of the pre-emption. The court found that no credible and undisputed evidence as to the relationship between the purchase price and the market value had been presented. It could not be concluded that the purchase price had been considerably lower than the market value simply on the basis of the location of the property and the existence of a master plan which lacked legal effect. Furthermore, manifest unfairness within the meaning of section 6 of the Pre-emption Act could not arise solely from an advantageous purchase price. Nor was a court required to make precise comparisons of purchase prices. The Supreme Administrative Court concluded that the use of the city’s first call on the property was not manifestly unfair, having regard in addition to the content of section 6 and the aim of the Pre-emption Act, as explained in the travaux préparatoires, to improve the land situation of the municipality by guaranteeing the availability of vacant land to be used for building purposes and for forwarding, to check real property speculation and to reduce the number of cases in which, in order to evade tax, the full price was not stated in the deed of sale. The court also noted that there was no evidence to the effect that the parties to the purchase had a special bond with the property in question. As to the other complaints raised by the applicant, it confirmed the lower court’s view. The decision ran to 21 pages, of which 9 pages contained reasons. 21. On 3 May 2005 the applicant lodged an extraordinary appeal with the Supreme Administrative Court claiming, inter alia, that the court had not invited his submissions in reply to the city’s second set of representations of 12 August 2003. 22. In its decision of 14 December 2006 the Supreme Administrative Court noted that the city’s above-mentioned second set of representations had not been sent to the applicant for comment. Nor had he received them for information, which was the practice in the Supreme Administrative Court. The applicant had received the second set of representations after the decision of 4 November 2004 and he had been given an opportunity to comment on them during the extraordinary proceedings. Bearing in mind that the applicant had already been able to express his views in two sets of proceedings before the Administrative Court and the Supreme Administrative Court, and that the representations had not affected its decision of 4 November 2004 in such a way that the case should be reopened, the court rejected the applicant’s extraordinary appeal.