Seeking compensation for expropriation before the county executive
A decision on compensation for real property taken by the state may also be issued by the county executive, according to Art. 129(5)(3) of the Real Estate Administration Act of 21 August 1997. When can this provision constitute a basis for determining the compensation due for expropriated property?
In Poland, some claimants have still not received due compensation for properties expropriated many years ago or taken over by the state by operation of law. In such situations, Art. 129(5)(3) of the Real Estate Administration Act may prove helpful, as it provides that the county executive (starosta), performing tasks within the scope of government administration, can issue a separate decision on compensation when a claimant was deprived of rights to real property without receiving the established compensation and the applicable regulations provide for establishment of compensation.
Therefore, it is worth analysing the cases where this provision can be applied.
What if a property was expropriated before 1998?
First of all, it is necessary to answer the question whether Art. 129(5)(3) of the Real Estate Administration Act applies only to situations arising after entry into force of that act (i.e. on or after 1 January 1998), or it also covers earlier cases of deprivation of ownership of real property without establishing compensation.
Initially, the views were divergent, but in the case law the view has become established that Art. 129(5)(3) of the Real Estate Administration Act is also applicable to facts occurring before entry into force of that act (e.g. Supreme Administrative Court judgment of 26 August 2014, case no. I OSK 147/13, among others).
What if the law did not provide for compensation for expropriation?
The next question concerns whether under Art. 129(5)(3) of the Real Estate Administration Act it is now possible to establish compensation for taking of real property by the state when the law did not provide for any compensation for such taking. These are cases where real estate was taken for the benefit of the State Treasury by operation of law, but in the aftermath of an individual administrative act.
An example of a regulation providing for taking of real property by operation of law for the benefit of the State Treasury without compensation is Art. 11 of the Construction Sites Act (Act on Areas for Construction of Single-Family Dwellings in Towns and Housing Estates of 22 May 1958), which stated: “Out of the land subject to subdivision, 33% of the total area is to be taken by the State Treasury without compensation for public use and as building plots enabling the presidiums of national councils to manage the land properly. The transfer of such land to the ownership of the State shall take place free of any encumbrances as of the date on which the decision on the approval of the subdivision becomes final. This decision shall be the basis for disclosing the ownership right in the land and mortgage register.”
Thus, Art. 11 of the Construction Sites Act provided for expropriation of real estate by operation of law without compensation. The citizen was left without property and without compensation. The most recent case law of the administrative courts has established the view that in such a case, compensation should be determined, and the appropriate procedure for this is Art. 129(5)(3) of the Real Estate Administration Act. As the administrative courts have held, “There are no grounds for differentiating the legal situation of entities that fell within the scope of Art. 11 of the [Construction Sites] Act from other entities which should receive compensation based on the provisions in force prior to entry into force of the Real Estate Administration Act, e.g. Art. 7(1) of the Act on the Rules and Procedure for Expropriation of Real Property of 12 March 1958)” (judgment of the Province Administrative Court in Gdańsk of 13 June 2018, case no. II SA/Gd 231/18).
Lack of compensation in breach of the Constitution and the European Convention on Human Rights
As held in the case law, the key condition for applying Art. 129(5)(3) of the Real Estate Administration Act is the absence of already established compensation for deprivation of rights to real property. Such an approach allows the constitutional principle of protection of property (Constitution Art. 64) to be observed and, more specifically, the principle expressed in Constitution Art. 21(2) guaranteeing the right to compensation in the event of expropriation.
Furthermore, failure to award compensation for deprivation of property would be contrary to Art. 1 of Protocol no. 1 to the European Convention on Human Rights (signed on 20 March 1952 and ratified by Poland on 10 October 1994). This article emphasises the need to maintain the legally justified trust of citizens in the state and the law emanating from the state as an element of the rule of law (Supreme Administrative Court judgment of 21 July 2020, case no. I OSK 3326/19).
The need to implement the constitutional principle of fair compensation for expropriated real property was also stressed in the recent resolution of seven judges of the Supreme Administrative Court of 22 February 2021 (case no. I OSK 1/20), holding that Art. 129(5)(3) of the Real Estate Administration Act concerns situations where expropriation has already taken place, but without establishing compensation, or when the real property was taken for the benefit of the State Treasury or a local government unit without a decision on expropriation, e.g. by operation of law.
But the starosta will not always help
In some cases, even though compensation for expropriated real property has not been determined, Art. 129(5)(3) of the Real Estate Administration Act will not apply.
In accordance with the well-established view in the case law, Art. 129(5)(3) concerns only claims for damages which are not time-barred (see e.g. judgments of the Supreme Administrative Court of 7 May 2021, case no. I OSK 2959/18, and the Province Administrative Court in Poznań of 4 April 2018 II, case no. SA/Po 947/17). In this respect, the limitations period on the claim for damages must result from a specific provision of substantive law, such as Art. 39(1) of the Decree on Purchasing and Transferring Property Necessary to Carry Out National Economic Plans of 26 April 1949, stating that compensation claims become time-barred three years after the decision on expropriation become final and in the course of proceedings.
Art. 129(5)(3) of the Real Estate Administration Act also does not apply in cases where the loss of the ownership of property occurred on the basis of general nationalisation acts, such as the Agrarian Reform Decree of the Polish Committee of National Liberation of 6 September 1944 (see judgments of the Supreme Administrative Court of 26 February 2020, case no. I OSK 3938/18, and the Province Administrative Court in Bydgoszcz of 7 March 2018, case no. II SA/Bd 1457/17).
And what if the compensation was determined but not paid?
The question remains whether Art. 129(5)(3) of the Real Estate Administration Act can be applied in cases where compensation for expropriated real property was indeed determined in a decision, but the decision grossly violated the law, as a result of which compensation was never paid to the entitled person.
One example of a decision that grossly violates the law is a decision granting compensation for expropriated real property addressed to a person who was not alive on the date the decision was issued, and as a result the compensation was never paid to the entitled persons, i.e. the legal successors of the deceased former owner of the property.
Another example of a decision “determining” compensation for expropriated real property that grossly violates the law is a decision from the 1950s awarding compensation for expropriated built-up land of several hundred square metres in the amount of just a few zlotys (instead of several thousand zlotys) (Supreme Administrative Court judgment of 21 July 2020, case no. I OSK 3102/19). This token compensation was awarded as the result of an oversight by the authority, caused most likely by the failure of the typewriter to record a keystroke on the paper. Under settled case law, such oversights cannot be rectified, since the rectification must not lead to a substantive change in the ruling, which would undoubtedly be the case here (see e.g. Supreme Administrative Court judgment of 4 May 1988, case no. III SA 1466/87, OSP 1990 vol. 11 item 398). Awarding compensation of just a few zlotys cannot be regarded as establishing compensation in the amount due for the expropriated property.
Could Art. 129(5)(3) of the Real Estate Administration Act be applied in the cases described above? Although the decision established compensation, in the case where the decision awarded compensation to a deceased person the compensation was never paid to the entitled persons. It follows from the extensive case law of the administrative courts based on Art. 129(5)(3) of the Real Estate Administration Act that when the courts refer to “determination” of compensation, it is understood primarily to mean payment of due compensation, as it is meaningless to establish compensation in a decision if the entitled person never receives it (e.g. judgment of the Province Administrative Court in Szczecin of 21 June 2018, case no. II SA/Sz 380/18).
On the other hand, a case awarding a few zlotys of “compensation” for expropriated real property does not qualify as establishing compensation at all, so it should be deemed that the property was taken without establishing compensation.
Therefore, it seems that Art. 129(5)(3) of the Real Estate Administration Act could also apply in the cases discussed above. It should be stressed that this provision was intended to be interpreted in a pro-constitutional manner. As stated in the justification for the amending act of 28 November 2003 introducing the provision in question, “It regulates the procedure for determining compensation for expropriated property in a situation where the expropriation has already taken place, but without determining the compensation or where the property was taken over for the benefit of the State Treasury or a local government unit without a decision on expropriation, e.g. by operation of law…. This proposal will make it possible to solve specific existing problems and, in the aforementioned cases, will enable implementation of the constitutional principle of fair compensation for expropriated property” (4th Sejm, print no. 1421, p. 79).
Therefore, when issuing decisions pursuant to Art. 129(5)(3) of the Real Estate Administration Act, administrative bodies should be guided by the principle of fair compensation for expropriated real property, so that the entitled person is not left without property and without compensation.
Dr Magdalena Niziołek, attorney-at-law, State Claims practice, Wardyński & Partners
