Stefan KRAHULEC v Slovakia - 19294/07 [2011] ECHR 1029 (7 June 2011)

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The European Court of Human Rights (Third Section), sitting on 7 June 2011 as a Chamber composed of:

Josep Casadevall, President,
Corneliu Bîrsan,
Alvina Gyulumyan,
Ján Šikuta,
Luis López Guerra,
Nona Tsotsoria,
Mihai Poalelungi, judges,
and Marialena Tsirli, Deputy Section Registrar,

Having regard to the decision to grant priority to the above application under Rule 41 of the Rules of Court,

Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,

The applicant, Mr Štefan Krahulec, is a Slovakian national who was born in 1945 and lives in Zvolen. He was represented before the Court by Mr R. Procházka, a lawyer practising in Bratislava. The Government of the Slovak Republic (“the Government”) were represented by their Agent, Mrs M. Pirošíková.

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

After 1948, when the communist regime had been installed in the former Czechoslovakia, the housing policy was based on a doctrine aimed at the restriction and abolition of private ownership.

As regards flats in houses which were not owned by the State, tenancy was replaced by the “right of lasting use”.

The Flats Management Act 1964, which was in force until 1 January 1992, entitled public authorities to decide on the right of use of flats. Special regulations governed the sums which the users had to pay (denoted as rent from 1 January 1992).

Under the relevant law (for details see “Relevant domestic law and practice” below), owners of residential houses in a position similar to that of the applicant in the present case have been obliged to let their flats to tenants while charging no more than the maximum amount of rent fixed by the State (“the rent-control scheme”). Despite a repeated increase in the maximum rent which the domestic law entitles house owners in this position to charge, that amount has remained below the level of rent in similar housing premises which are let on the principles of a free-market economy.

The Government of the Slovak Republic have dealt with the issue of rent control on several occasions (further details are set out below).

Documents of the Ministry of Construction and Regional Development indicate that registration forms envisaged by Measure 02/R/2008, issued by the Ministry of Finance, have been submitted in respect of 923 flats where rent control is applied. 2,311 persons have lived in those flats, the average surface area of which is 71.38 square metres. The plan envisages that substitute accommodation will be made available to the persons concerned to the extent that this is justified by their social situation. 76.5% of the tenants thus registered lived in flats located in Bratislava.

On the basis of those data, the authorities have estimated that the rent-control scheme currently concerns approximately 1,000 flats, that is, 0.24% of rental flats in houses that existed in 1991 and 0.06% of the inhabited housing facilities which were available in Slovakia in 2001.

In 1929 the applicant’s grandfather built a house in Piešťany. The applicant’s predecessors retained ownership of the house, albeit with several restrictions, under the communist regime. The house was donated to the applicant by his mother on 21 December 1998.

The applicant’s house comprises four flats. Two of them have a surface area of 108 square metres and the other two 123 square metres each. At present they are inhabited by three tenants. Their or their predecessors’ right to use the flats had been established by decisions given by the municipal authority between 1953 and 1986, and the right of use had been transformed into a tenancy, pursuant to Article 871 of the Civil Code, for an indefinite period.

The fourth flat became vacant in March 2007. Pursuant to Ordinance no. V-1/2003 (“the 2003 Ordinance”), rent control ceased to be applicable to that flat after it had become free of any tenant.

The applicant has had no practical possibility of terminating the lease on his flats. Until one of the flats became vacant, he had to live, together with his mother, in a flat in a different town where the living costs were lower.

The applicant submitted that the maximum monthly rent which he was entitled to obtain under the rent-control scheme after 1 January 2004 amounted to approximately 115 euros (EUR) in respect of each of the smaller flats and EUR 124 in respect of the bigger ones. Similar flats in Piešťany to which the rent-control scheme did not apply were let for EUR 600 to 800 a month, the average rent in the town amounting to EUR 548.

The applicant further maintained that, between the date when he had acquired ownership of the house and the date of the application – a period of eight years and four months – the maximum rent which the relevant law permitted him to obtain amounted to a total of EUR 25,875. At the same time, the costs of maintenance and repairs of the flats amounted to EUR 5,373 a year. A total of EUR 7,970 was needed every year for maintenance of the house itself. As a result, according to the applicant, the rent which he is entitled to obtain under the law is lower than the costs of maintenance of the flats and the house.

The Government were in disagreement with the figures put forward by the applicant. They relied on the opinion of an expert indicating that the average market price for the lease of comparable flats in the wider centre of Piešťany amounted to EUR 214 for a three-room flat with a surface area of 91.07 square metres and EUR 297 for a four-room flat with surface area of 120.8 square metres. The Government were also opposed to the method which the applicant had used for calculating the maintenance costs for the house.

Provisions concerning the letting of flats are set out in Articles 685 to 716 of the Civil Code.

Pursuant to Article 687, a landlord is obliged to put a flat at a tenant’s disposal in a fit state for normal use and to secure to the tenant the full and uninterrupted enjoyment of rights in connection with the use of the flat.

Article 696 § 1 provides, inter alia, that the method of calculating the rent, the service charges related to the use of the flat, the method of paying the rent and service charges, and the conditions under which a landlord is entitled to unilaterally increase the rent and service charges and amend other terms of the occupational lease, are governed by special legal rules.

Under Article 706, after a tenant’s death the right to the lease passes to the tenant’s relatives if they can prove that they were living with the tenant in a shared household on the day of his or her death and do not have their own flat. The same right is to be enjoyed by persons who took care of a shared household and lived with the tenant in a shared household for at least three years and do not have their own flat.

Article 707 § 1 entitles the surviving spouse to become the sole tenant of a jointly leased flat upon the other spouse’s death.

The provisions of Article 706 and Article 707 § 1 are also applicable in the event that a tenant permanently leaves a shared household.

Pursuant to Article 871 § 1, enacted with effect from 1 January 1992, the right of use of flats and other premises under the law previously in force which subsisted on that date was transformed into a tenancy.

Section 16(1) governs the transfer of ownership of a flat. Where a flat is leased by an individual, unless the right to lease the flat was agreed for a fixed period, a landlord can transfer ownership of it to the tenant only. This provision does not affect the co-owner’s pre-emption right.

As a general rule, the price of goods, including the amount of rent, is determined on the basis of an agreement between the seller and the buyer (sections 1-3).

Part Three of the Price Act 1996 allows State measures to be taken in response to undesired price developments. They include regulation of prices and a prohibition on agreeing a price which is inappropriate.

Pursuant to section 4a (formerly section 4), price regulation is permissible where, inter alia, an extraordinary market situation arises, where there is a threat to the market as a result of an insufficiently developed competition environment, or where it is required for the purpose of protecting consumers or by another public interest.

Price regulation can be achieved through the fixing of prices by the authorities, the setting of conditions for agreements on prices or a combination of those two methods (section 5).

Section 8, enacted with effect from 1 November 2008, provides that, when regulating prices, the authorities should take into account justified costs and an appropriate profit.

Pursuant to section 20(1) and (2), the Ministry of Finance sets conditions for price regulation and decides on related matters. Until 1 March 2005 the Ministry of Construction and Regional Development was authorised to regulate rent. The scope of regulation is to be determined by a generally binding legal rule (section 11).

Law no. 68/2005 of 3 February 2005 introduced a number of amendments to the Price Act 1996. Pursuant to section I(12) of Law no. 68/2005, the 2003 Ordinance was repealed. Law no. 68/2005 became operative on 1 March 2005 with the exception of section I(12), which was to take effect on 1 July 2007.

Another amendment to the Price Act 1996 was introduced by Law no. 200/2007 of 29 March 2009, in effect as from 1 July 2007. Pursuant to that amendment, the date when the 2003 Ordinance would cease to have effect was postponed until 31 December 2008.

Decree no. 60/1964 of the Central Authority for the Development of Local Economy on payment for the use of flats and related services was in force from 1964 until the end of 1999. It divided flats into four categories according to their status and fixed the yearly price for their use.

On 12 March 1996 the Ministry of Finance issued Regulations no. 87/1996 on implementation of the Price Act 1996. They became operative on 1 April 1996.

In 1992, 2000 and 2001 and on 1 March 2003 the Ministry of Finance issued four subordinate instruments providing for an increase in controlled rent by 100%, 70%, 45% and 95% respectively.^¹

On 22 December 2003 the Ministry of Construction and Regional Development issued the 2003 Ordinance (Ordinance (výnos) no. V-1/2003 on Control of Rent for Lease of Flats). It fixes the maximum permissible amount of rent for a flat according to its surface area and category, without distinction as to its location. It provides for an increase of 60% in the maximum rent which can be charged by landowners in respect of the flats concerned.

On 23 April 2008 the Ministry of Finance issued Measure (opatrenie) no. 01/R/2008 on Control of Rent for Flats with reference to sections 11 and 20 of the Price Act 1996. It entered into force on 1 May 2008.

Similarly to the previous rules, it fixes the maximum amount of rent per square metre of inhabitable space and annexes (section 1). An increase or reduction is possible depending on the furnishings available.

Section 3 permits an increase of the maximum rent by 15% in houses built without public funding or those which were restored to owners or their successors by way of redress for past wrongs.

Pursuant to section 4, rent control does not apply to, inter alia, flats which are owned by individuals, or vacant flats in houses built without public funding or in houses restored to owners by way of redress for past wrongs, with the exception of cases which concern the transfer of a lease or the exchange of a flat (Articles 706-608 of the Civil Code). Similarly, rent control does not apply to houses built without any public funding where construction officially ended after 1 February 2001.

On 25 September 2008 the Ministry of Finance issued Measure no. 02/R/2008 amending the above Measure of 23 April 2008 on rent control. It entered into force on 1 October 2008. It does not affect the amount of permissible rent but specifies the conditions under which such rent can be charged after 31 December 2011.

In particular, the newly introduced section 4a(1) allows the rent-control scheme to continue to apply after the above date where (i) tenants or persons sharing their household did not own or co-own, on 1 October 2008, a comparable flat or inhabitable real property in the same municipality or within 50 kilometres of its boundaries; (ii) the landlord and the tenant have not reached a different agreement on rent before 1 January 2012; and (iii) the tenants concerned have submitted a registration form to the Ministry of Construction and Regional Development before 31 December 2008.

The Government’s plan on housing policy and construction of flats for the period between 1994 and 2000, drawn up in 1994, envisaged that rent in respect of flats owned by individuals should be increased with a view to covering the owners’ costs as from 1 January 1995. It further envisaged the introduction of rent levels based on market prices as from 1 January 1996.

Subsequent plans, drawn up in 2000 and 2005, also envisaged the introduction of market-level rent in the private sector. Housing capacity in municipal flats was to be increased so that substitute accommodation could be provided to indigent persons who would be affected by such liberalisation of rent.

The need for elimination of rent control was confirmed in the most recent plan of 2010, which covers the period until 2015. The document indicates that the private sector of rental housing is underdeveloped, particularly because of the past system of rent control and the excessive protection of tenants.

In decision no. 357/2008 the Ministry of Construction and Regional Development was instructed to prepare a plan for settling relations between landlords and tenants in flats where rent control had been applied. The plan was approved on 16 September 2009 (decision no. 640/2009). That decision instructed the ministers concerned to prepare, before 31 December 2010, draft statutes on termination and settlement of certain landlord/tenant relationships and on rent control in the public sector, as well as regulations on housing allowances, to offer substitute housing facilities to the tenants concerned and to lay down the scope, conditions and manner of their acquisition. In addition, compensation of a structural nature was envisaged for owners of residential houses.

Subsequently, the Minister of Construction and Regional Development asked the mayor of Bratislava to identify suitable plots on which substitute housing facilities could be built for persons in need.

In a petition to the Constitutional Court, lodged on 29 March 2007, the General Prosecutor challenged, inter alia, the 2003 Ordinance as being contrary to the Constitution. The petition expressed the view that the Price Act 1996 did not entitle the Ministry of Construction and Regional Development to issue an ordinance on rent control; that the Ordinance was discriminatory and restricted the right of house owners; that it was questionable whether such a restriction was in the public interest and necessary; and that the Ordinance should have ceased to have effect as from 1 March 2005.

On 7 June 2007 the General Prosecutor supplemented the petition by also challenging Law no. 200/2007 amending the Price Act 1996.

On 8 April 2009 the Constitutional Court discontinued the proceedings without examination of the merits, on the ground that the petition had been withdrawn. It noted that the Price Act 1996 had been amended and that the 2003 Ordinance had ceased to have effect.

On 19 June 2007 and 17 July 2007 the Constitutional Court rejected two petitions in which a company and an individual had complained under Article 1 of Protocol No. 1 of the impact on their property rights of the 2003 Ordinance and related legal rules. The Constitutional Court held that the plaintiffs lacked standing to bring proceedings under Article 127 of the Constitution, which involved the assessment of conformity of the relevant legal rules with the Constitution or international treaties (decisions III. ÚS 179/07 and III. ÚS 197/07).

The applicant complained that he was restricted in enjoying his property as a result of the rent-control scheme. He alleged a breach of Article 1 of Protocol No. 1, which reads as follows:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

The Government admitted that the rent-control scheme had resulted in a limitation on the use of the applicant’s property. Such a measure was in accordance with the relevant domestic law, which met the requirements of accessibility and clarity and was sufficiently foreseeable in effect.

The interference pursued a legitimate aim, namely to protect tenants against unaffordable increases in rent. The Government argued that the national authorities in principle had more direct knowledge of the general interest and that spheres such as housing, as a prime social need, often called for some form of regulation by the State.

As to the requirement of proportionality, the Government maintained that swift deregulation of rent would have had unfavourable social implications, and that therefore the rights of tenants which had been established in the earlier non-market environment had to be protected while the State found means of gradually resolving the issue. The rent-control scheme was therefore compatible with the general interest within the meaning of Article 1 of Protocol No. 1. There had been several increases in permissible rent levels and other measures had been taken with a view to resolving the issue.

The Government further pointed to the fact that many of the tenants were elderly and that the municipalities concerned did not have enough housing stock for those socially dependent on regulated rent schemes.

With respect to the amount of rent chargeable under the rent-control scheme, maintenance costs would also have had to be borne by owners if their flats had not been rented out at all. Thus, the amount of rent and the allegedly higher costs of maintaining the property could not automatically be associated.

The applicant had failed to submit detailed calculations of the maintenance and other costs during the relevant period. The Government objected to the example of calculation of maintenance costs based on methods used in the Czech Republic, and to the applicant’s estimation of the amount of rent he could have obtained had the rent-control scheme not applied to the flats in his house.

Since the rent-control scheme currently affected only about 1,000 dwellings, amounting to 0.06% of the overall number of permanently inhabited housing facilities, it was questionable whether there was a “systemic situation”.

The Government concluded that the rent-control scheme met the general interest of society and was compatible with the interests of house and flat owners as the maximum level of rent had been regularly increased and the number of houses to which the rent-control scheme would be applicable after 2011 had been reduced, while the legal framework for ending the rent-control system was currently being devised.

The applicant alleged that the interference with his right to peaceful enjoyment of his property was unlawful and that it did not pursue any legitimate aim. It imposed a disproportionate burden on him, for which there existed no relevant justification.

In particular, the applicant argued that the extent of the limitations imposed on the use of his property and their duration were capable of amounting to a de facto deprivation of property.

The interference complained of lacked a sufficient statutory basis. The relevant rules lacked consistency and were not sufficiently foreseeable. The applicant pointed to the fact that a large number of plans, measures and steps had been announced in the course of the last twenty years with a view to solving the problem. However, the only tangible result was a minimal index-linking of the regulated rent levels, which did not change the position of flat owners to a substantial degree.

Despite the above-mentioned index-linking, the interference complained of continued to be disproportionate to the aim pursued. The rent which the applicant was entitled to receive did not even suffice for the maintenance costs inherently associated with the house. The figures put forward by the Government did not allow a different conclusion to be reached.

The Court considers, in the light of the parties’ submissions, that the complaint raises serious issues of fact and law under the Convention, the determination of which requires an examination of the merits. The Court concludes therefore that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. No other ground for declaring it inadmissible has been established.

B. Article 13 of the Convention taken together with Article 1 of Protocol No. 1

The applicant further complained that he had no effective remedy available as regards his complaint under Article 1 of Protocol No. 1. He alleged a breach of Article 13 of the Convention, which provides:

“Everyone whose rights and freedoms as set forth in [the] Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity.”

The Government stated that the alleged breach resulted from the relevant law as such.

It has been confirmed by the Constitutional Court and it has not been disputed between the parties that the alleged breach of Article 1 of Protocol No. 1 stemmed from the legal framework governing the rent-control scheme in Slovakia.

In this respect the Court reiterates that Article 13 cannot be interpreted as requiring a remedy against the state of domestic law (see Iordachi and Others v. Moldova, no. 25198/02, § 56, 10 February 2009; or Leander v. Sweden, 26 March 1987, § 77(d), Series A no. 116).

It follows that this complaint is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.

C. Article 14 of the Convention taken together with Article 1 of Protocol No. 1

Upon communication of the application to the Government the Court decided, of its own motion, to put a question as to whether the applicant had been discriminated against, contrary to Article 14 of the Convention, in the enjoyment of his property rights.

Since the applicant did not reply to that question in his observations, the Court considers that no further examination of this issue is called for.

Declares admissible, without prejudging the merits, the applicant’s complaint under Article 1 of Protocol No. 1 concerning the restrictions which the rent-control scheme has imposed on his right to peacefully enjoy his possessions;

Declares inadmissible the complaint under Article 13 of the Convention in conjunction with Article 1 of Protocol No. 1;

Decides that it is no longer required to examine whether the facts of the case amount to a breach of Article 14 of the Convention in conjunction with Article 1 of Protocol No. 1.

11. Calculation by the Ministry of Construction and Regional Development in respect of a three-room flat in the first category with a surface area of 65 square metres.

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You are here: BAILII >> Databases >> European Court of Human Rights >> Stefan KRAHULEC v Slovakia - 19294/07 [2011] ECHR 1029 (7 June 2011) URL: http://www.bailii.org/eu/cases/ECHR/2011/1029.html Cite as: [2011] ECHR 1029