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MINISTERS’ DEPUTIES |
Notes on the Agenda |
CM/Notes/1419/H46-11 |
2 December 2021 |
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1419th meeting, 30 November – 2 December 2021 (DH) Human rights
H46-11 Statileo group v. Croatia (Application No. 12027/10) Supervision of the execution of the European Court’s judgments Reference documents |
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Application |
Case |
Judgment of |
Final on |
Indicator for the classification |
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35444/12+ |
BEGO |
15/11/2016 |
15/11/2016 |
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25815/14 |
MIROŠEVIĆ-ANZULOVIĆ |
04/10/2016 |
04/10/2016 |
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37006/13 |
GOŠOVIĆ |
04/04/2017 |
04/04/2017 |
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23414/15+ |
SKELIN-HRVOJ AND ĐURIČIĆ |
10/06/2021 |
10/06/2021 |
Case description
These cases concern violations of the applicants’ right to the peaceful enjoyment of their property between 1997 and 2015 on account of statutory limitations on the use of private flats by landlords, including through the rent control scheme for flats subject to protected leases (violations of Article 1, Protocol No. 1).
The European Court noted that under domestic law a landlord who intended to move into the flat, or to install his or her children, parents or dependents in it, was entitled to terminate the contract for the letting of the flat to a protected lessee only if (i) the landlord did not have other accommodation for him or herself or his or her family, and was either entitled to permanent social assistance or was over 60 years of age, or (ii) the lessee owned a suitable habitable flat in the same municipality or township (Statileo, §§ 46, 126, 127). As a result of this, and in view of the statutory right of members of a lessee’s household to succeed to his or her status as a protected lessee, the restrictions could in many cases last for two or sometimes even three generations (Statileo, § 132).
The European Court indicated under Article 46 that the problem underlying the violation concerned shortcomings in the legislation itself, namely the inadequate level of protected rent, restrictive conditions for the termination of protected leases and the absence of any temporal limitation to the protected lease scheme. The Court therefore considered that the Croatian authorities “should take appropriate legislative and/or other general measures to secure a rather delicate balance between the interests of landlords, including their entitlement to derive profit from their property, and the general interest of the community – including the availability of sufficient accommodation for the less-well-off” (Statileo, § 165).
Status of execution
On 30 September 2021, in their action plan (DH-DD(2021)970), the authorities provided information which may be summarised as follows.
Individual measures:
The European Court awarded all applicants just satisfaction in respect of non-pecuniary damage. Apart from the applicants in Bego and Others, the European Court awarded the applicants pecuniary damages, covering the difference between the rent received under the protected lease contracts and the adequate rent. The amounts of just satisfaction awarded were paid in due time.
In Bego and Others, which concerns five applicants and four sets of proceedings, the European Court found that since the applicants had brought civil proceedings against the State seeking payment of the difference between the protected rent and the market rate, which claims had been rejected by domestic court, the most appropriate way of repairing the consequences of that violation would be to reopen the proceedings against the State (Bego and Others, § 41). The applicants or their heirs requested reopening of the impugned proceedings and their requests were granted. The outcome was the following:
- For Ante Bego, the civil claim was dismissed as the domestic courts found that it was lodged for unjust enrichment instead of for damages which prevented the domestic courts from deciding on damages. The authorities highlighted that the applicant can still lodge a civil action for damages.
- In the remaining three proceedings (concerning Jakica Bulić, Ivo Matas And Doris And Iris Knego) the domestic courts awarded the applicants or their heirs compensation covering the difference between the protected and the market rent for the three years prior to the lodging of lawsuits by the applicants. In one of these cases the State filed a request for leave to file a revision with the Supreme Court, which remains to be examined by the Supreme Court. In all the above cases the applicants or their heirs lodged constitutional complaints challenging the above decisions which are pending before the Constitutional Court.
- In the meantime, two of the applicants, Doris and Iris Knego, brought civil proceedings seeking eviction of the protected lessee from their dwelling. These proceedings are currently pending before the competent court.
The applicant in Gošović requested reopening of the proceedings in which the domestic courts had imposed a lease contract on him. His request was dismissed. The domestic court found that it did not concern damages against the Stateand instructed the applicant to file a separate action for damages against the State, pursuant to the applicable Civil Code. The applicant appealed this decision. The appellate proceedings are currently pending.
Concerning the possible repossession of flats, the authorities noted that full implementation of individual measures is closely linked to the general measures related to the possibility of landlords to regain possession of their flats and depend on the legislative measures envisaged to bring an end to the protected rent scheme.
General measures:
Overview of the execution process since 2014: At the outset it is noted that in 2014, the Ministry of Construction and Spatial Planning, issued a public call for registration of landlords and protected tenants. It established that there were 3,734 flats subject to the protected lease scheme, providing housing to approximately 9,000 protected lessees (for further details see: DH-DD(2018)968). In 2018, the authorities adopted amendments to the Lease of Flats Act. The amendments provided for a progressive increase in the amount of protected rent over a period of five years starting from 1 September 2018. Further, they provided that as of 1 September 2023 the right to a protected rent and all other rights conferred on the protected lessees would be abolished. If the protected lessees did not enter into a new lease contract with the owner, they would be obliged to vacate the flat they occupy by 1 September 2023 at the latest.
Last decision of the Committee: In December 2018, the Committee noted with interest the adoption of the above amendments and invited the authorities to regularly provide information on the application of the amended, protected tenancy-related legislation. The Committee stressed that it was essential that the Supreme Court ensured a well-functioning compensatory remedy during the transitional period and invited the authorities to provide further information in this respect.
Subsequent developments: In September 2020 the Constitutional Court invalidated the above legislative amendments as unconstitutional. It found that they failed to strike a fair balance between the landlords’ rights to peaceful enjoyment of their possessions and the protected lessees’ rights to respect of their private and family life. It concluded that these amendments placed a disproportionate burden on the protected lessees.
Domestic case-law on the protection of the landlords’ property rights: The domestic courts changed their practice with a view to providing more protection for landlords’ property rights at domestic level. In particular, in its decisions adopted between 2016-2019, the Supreme Court found that the protected tenancy scheme served the purpose of social protection and that domestic courts have to conduct a proportionality test when deciding whether to grant the protected tenancy right. It held in this regard that domestic courts have to examine whether the protected lessees are property owners in which case, the value of their properties should be taken into account when assessing whether the lessees can obtain other housing for themselves.
Between 2018-2020 the Constitutional Court continuously found violations of the landlords’ property rights on account of the civil courts’ failure to take into account the fact that protected lessees had been property owners. It held that the right to protected lease depends on whether the lessees or members of their household own a property and instructed the lower courts to take this into account.
As regards a compensatory remedy: In December 2018, the Supreme Court established the landlords’ right to a compensatory remedy. In particular, the landlords are now entitled to non-pecuniary damages for the violation of their property rights. In addition, the Supreme Court held that the protected tenancy scheme restricts the landlords’ property rights and that the State was therefore under an obligation to compensate them for pecuniary damage sustained, notably their financial loss covering the difference between the protected rent and the market rent. In its decision of January 2019, the Supreme Court held that landlords may also seek compensation for the remaining period of the duration of protected lease scheme. In addition, the Supreme Court took the view that pursuant to the domestic legislation, the three-year prescription period is applicable to claims for pecuniary damages resulting from the loss of rent, since it is a question of loss of earnings from the rent that fall due monthly. To date, in 220 cases the landlords made use of this possibility and the State is to pay approximately EUR 650,000 in total to the landlords.
Awareness raising measures: In 2020 the Judicial Academy organised trainings for judges and state attorneys covering relevant aspects of the present judgments and in particular issues related to the application of compensatory remedy.
Rule 9.1 and 9.2 communications:
In his submission dated 23 September 2021 (DH-DD(2021)898), the applicant in Gošović indicated that the appellate court has already dismissed his appeal against the decision rejecting the reopening of the impugned civil proceedings and that his subsequent constitutional complaint is currently pending before the Constitutional Court. In his submission of 7 September 2021, one of the applicants in Begović and Others complained about the position of the domestic courts to award the applicants damages for a limited period of three years while they allegedly claimed damages for five years back. Similar concerns were raised in the communications lodged by an NGO representing the landlords (DH-DD(2021)115). In addition, in their communications the NGO complained about the decision of the Constitutional Court abolishing the above amendments and the delay in the execution process while called upon the authorities to urgently adopt new amendments to the to the Lease of Flats Act.
Analysis by the Secretariat
Individual measures: Pending the adoption of the legislation aiming to prevent similar violations of the Convention, the Committee might wish to invite the authorities to rapidly provide information on:
- As regards Gošović, the appellate court’s decision on the applicant’s request for reopening of the impugned proceedings, including information on any other subsequently initiated proceedings by the applicant;
- As regards Bego and Others, the outcome of the pending civil proceedings seeking eviction of the protected lessees and the proceedings pending before the Constitutional Court;
General measures: In view of the significant number of landlords in a situation similar to that of the applicants (see status of execution above), it is regrettable that the 2018 amendments to the Lease of Flats Act aimed at providing the owners with a possibility to fully repossess their properties by September 2023 were invalided by the Constitutional Court. Thus, the appropriate legislative measures addressing the main shortcomings identified in the current legislation, namely, the inadequate level of protected rent in view of statutory financial burdens imposed on landlords, restrictive conditions for the termination of protected lease, and the absence of any temporal limitation to the protected lease scheme are required as a matter of priority.
It appears that pending a global solution to the issue of protected tenancies, which seems achievable only through the adoption of legislative amendments which the authorities find to be the most appropriate solution, the domestic courts have decided in a number of similar cases to uphold the landlords’ property rights. In that context, the Committee might wish to welcome the development of the domestic courts’ case-law aimed at taking into account lessees’ other properties when deciding whether to allow them benefits under the protected tenancies scheme.
Furthermore, as a result of the Supreme Court’s case-law developed as from December 2018 and January 2019 landlords are entitled to non-pecuniary as well as to pecuniary damages for their financial loss covering the difference between the protected and the market rent. Thus, it appears that the landlords are provided with means of redress until the envisaged abolishment of the protected tenancies scheme. Considering that the Court held that the compensation for the pecuniary damage sustained by the applicants should cover the difference between the protected rent and an adequate rent (Statileo, § 157), information on the introduction and wide application of such compensatory remedy should benoted with interest.
As regards the period of time covered by the damages awarded to landlords by courts, it seems that pursuant to the domestic law and the above-mentioned case-law of the Supreme Court, the three-year prescription period is applicable to all claims for damages that fall due periodically such as loss of earnings from the monthly rent. Given that it may reasonably be assumed that the Constitutional Court, in deciding upon the applicants’ complaints in Bego and Others will examine the efficiency of the aforementioned compensatory remedy, the Committee might wish to invite the authorities to keep it informed about further developments of the domestic case-law in this respect.
Noting with concern that more than seven years have passed since the first judgment delivered by the Court in Statileo, the authorities might be urged by the Committee to finalise the legislative process as a matter of priority to respond to the Court’s indications. The authorities might be encouraged to cooperate closely with the Secretariat with a view to ensuring that the new legislative amendments are Convention-compliant. Lastly, the Committee might invite the authorities to regularly provide it with information on all the outstanding issues and by 31 March 2022 at the latest.
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Financing assured: YES |