BEGO AND OTHERS v. CROATIA - 35444/12 (Judgment (Merits and Just Satisfaction) : Court (Second Section Committee)) [2016] ECHR 999 (15 November 2016)

In the case of Bego and others v. Croatia,

The European Court of Human Rights (Second Section), sitting as a Committee composed of:

          Paul Lemmens, President,
          Ksenija Turković,
          Jon Fridrik Kjølbro, judges,
and Hasan Bakırcı, Deputy Section Registrar,

Having deliberated in private on 11 October 2016,

Delivers the following judgment, which was adopted on that date:

PROCEDURE

1. The case originated in five applications against the Republic of Croatia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by five Croatian nationals (“the applicants”), on the dates listed in Appendix to this judgment.

2. The applicants were all represented by Mr N. Dorbić, an advocate practicing in Šibenik. The Croatian Government (“the Government”) were represented by their Agent, Ms Š. Stažnik.

3. The applicants alleged, in particular, that that their inability to charge market rent for their flats subject to the protected lease scheme had violated their property rights.

4. By a letter of 15 December 2014 the applicants’ representative informed the Court that the second applicant, Ms Jakica Bulić, had died on 5 July 2012 and that her statutory heirs, Ms Marija Lučić and Ms Mira Kalajžić, wished to pursue the application (see paragraphs 22-23 below).

5. On 17 February 2015 the complaints concerning the right of property were communicated to the Government, and the remainder of the applications was declared inadmissible pursuant to Rule 54 § 3 of the Rules of Court.

THE FACTS

I. THE CIRCUMSTANCES OF THE CASE

6. The applicants live or lived (the second applicant) in Split. The applicants’ other personal details are set out in the Appendix.

7. Except for the third and the fourth applicants who are the co-owners of the same flat, each applicant is (and the second applicant was before her death) the owner of a flat in Split occupied by “protected lessees” (zaštićeni najmoprimci). Under the Lease of Flats Act (Zakon o najmu stanova), which entered into force on 5 November 1996, such lessees are subject to a number of protective measures, such as the duty of landlords to contract a lease of indefinite duration, payment of protected rent (zaštićena najamnina), the amount of which is set by the Government and significantly lower than the market rent; and better protection against termination of the lease.

A. Civil proceedings

8. In 2005 the applicants brought civil actions before the Split Municipal Court (Općinski sud u Splitu), seeking to obtain judgements ordering the State to pay them the difference between the protected rent they were entitled to receive under the domestic legislation and the market rent they could have obtained if their flats were not subject to the protected lease scheme. The applicants argued that the inadequate level of the protected rent imposed on them under the Lease of Flats Act unduly restricted their right of ownership. The applicants relied, inter alia, on Article 48 § 1 and Article 50 of the Croatian Constitution (see paragraph 18 below).

9. The Split Municipal Court dismissed the applicants’ actions as unfounded. These judgements were upheld by the Split County Court (Županijski sud u Splitu), and in case of the third and fourth applicants, also by the Supreme Court (Vrhovni sud Republike Hrvatske). In their complaints lodged with the Constitutional Court (Ustavni sud Republike Hrvatske), the applicants alleged violations of their right to a fair hearing guaranteed by Article 29 § 1 and of their right to compensation in case of ownership restrictions guaranteed by Article 50 § 1 of the Croatian Constitution while referring also to its Article 48 § 1 (see paragraph 18 below). By decisions of 25 January and 14 December 2011 and 29 March and 9 February 2012 the Constitutional Court dismissed the applicants’ constitutional complaints, respectively.

B. The protected rent

10. According to the information submitted by the applicants, the level of the monthly protected rent for their flats changed in the period after the entry into force of the Convention in respect of Croatia (5 November 1997) in the manner indicated below. The Government did not contest this information

The amount of the protected rent for the first applicant’s flat

Application no. 35444/12
Size of the flat in square metres	The amount of the protected rent in HRK	Period
59.63	99.05	5 November 1997 - 31 October 2005
	152.85	1 November 2005 - 8 May 2008
	169.20	9 May 2008 - 4 September 2012
	174.80	5 September 2012 - onwards

The amount of the protected rent for the second applicant’s flat

Application no. 35576/12
Size of the flat in square metres	The amount of the protected rent in HRK	Period
88.73	165.57	5 November 1997 - 31 October 2005
	255.50	1 November 2005 - 8 May 2008
	282.83	9 May 2008 - 4 September 2012
	292.18	5 September 2012 - 31 December 2012
	350.62	1 January 2013 - onwards

The amount of the protected rent for the third and fourth applicants’ flat[1]

Application nos. 41555/12 and 41558/12
Size of the flat in square metres	The amount of the protected rent in HRK	Period
59.29	90.71	5 November 1997 - 31 October 2005
	139.98	1 November 2005 - 8 May 2008
	154.96	9 May 2008 - 4 September 2012
	160.08	5 September 2012 - onwards

The amount of protected rent for the fifth applicant’s flat

Application no. 48914/12
Size of the flat in square metres	The amount of the protected rent in HRK	Period
83.74	174.81	5 November 1997 - 31 December 2004
	218.51	1 January 2005 - 31 October 2005
	337.19	1 November 2005 - 8 May 2008
	373.27	9 May 2008 - 4 September 2012
	385.61	5 September 2012 - onwards

11. According to the applicants, the condominium fee paid into the common reserve fund by the owners of the flat for maintenance etc., for the first applicant’s flat was set at 140 Croatian kunas (HRK) on 1 March 1998 and has not been changed since. For the third and fourth applicants, as the co-owners of the same flat, the condominium fee was set at HRK 101.20 on 1 January 1998 and has not changed since. As to the second and the fifth applicants’ flats, the condominium fee has never been set. The Government did not contest this information.

12. According to the applicants, they never paid any income tax on the income generated by renting out their flats subject to the protected lease scheme.

C. The average monthly market rent

13. The applicants furnished information as regards the monthly market rent for renting out flats in the vicinity of theirs.

14. The first applicant submitted:

- a copy of a lease agreement of 30 September 2013 for a flat in the same building with the surface area of 32.9 m² rented out for HRK 2,000 per month,

- an advertisement from the newspapers of 4 September 1999 offering for rent a flat in Split of a similar size as his (60 m²) for 650 German Marks (DEM) per month,

- an advertisement from the Internet dated 15 November 2013 offering for rent a furnished flat of 50 m² for EUR 300 per month, and another one dated 9 December 2014 of 60 m² for EUR 500 per month,

- an advertisement from the Internet dated 21 November 2014 offering for rent a two bedroom flat for EUR 112 per day in the high season, and for EUR 60 per day in the low season.

15. The second and fifth applicants submitted:

- an advertisement from the newspapers of 16 December 1998 offering for rent a furnished flat of 78 m² for DEM 800 per month,

- an advertisement from the Internet dated 4 December 2014 offering for rent a furnished flat of 85 m² for EUR 1,200 per month, and another one of 8 July 2014 offering for rent a furnished flat of 80 m² for EUR 1,000 per month,

- an advertisement of a real-estate agency offering for rent a flat of 80 m² for EUR 1,000 per month.

These applicants also claimed that their flats could be offered for rent during high season for EUR 150 per day.

16. The third and fourth applicants submitted:

- an advertisement from the newspapers of 25 September 1999 offering for rent a non-furnished flat in Split of 80 m² for DEM 600 per month, and another one of 2 October 1999 offering for rent a flat of 93 m² for DEM 1,000 per month,

- an advertisement from the Internet dated 8 December 2014 offering for rent a furnished flat of 60 m² for EUR 500 per month, and another one dated 3 December 2014 offering for rent a flat of 55 m² for EUR 400 per month. These applicants also claimed that their flat could be offered for rent during high season for a minimum of EUR 50 per day.

17. The Government submitted that the applicants had not demonstrated that they would have been able to rent out their flats at all or to rent them out for the monthly rent indicated above (see paragraphs 14-16), pointing out to the negative effect the financial crisis had had on the real-estate market. The Government furnished information from the tax authorities according to which the monthly market rent for flats in the vicinity of those of the applicants ranged, in the period between 2005 and 2015, from HRK 750 to HRK 5,320. The data submitted referred to nine flats and read as follows:

Size in square metres	Monthly rent in HRK	Relevant period
38	1,850.00	2009 - 2012
60	4,777.37	2007 - 2010
26	750.00	2011 - 2012
30	900.00	2005 - 2012
36	1,473.12	2011 - 2012
62	5,320.00	2015
62	3,800.00	2010 - 2014
47	1,475.00	2010 - 2012
56	1,000.00	2008 - 2009

II. RELEVANT DOMESTIC LAW

A. The Constitution

18. The relevant provisions of the Constitution of the Republic of Croatia (Ustav Republike Hrvatske, Official Gazette no. 56/1990 with subsequent amendments) read as follows:

Article 48 §§ 1 and 2

“The right of ownership shall be guaranteed.

Ownership implies duties. Owners and users of property shall contribute to the general welfare.”

Article 50 §§ 1 and 2

“Property may be restricted or taken in accordance with the law and in the interest of the Republic of Croatia subject to payment of compensation equal to its market value.

... property rights may, on an exceptional basis, be restricted by law for the protection of the interests and security of the Republic of Croatia, nature, the environment or public health.”

B. The Civil Procedure Act

19. The relevant provision of the Civil Procedure Act (Zakon o parničnom postupku, Official Gazette of the Socialist Federal Republic of Yugoslavia no. 4/1977, with subsequent amendments, and Official Gazette of the Republic of Croatia no. 53/91 with subsequent amendments), reads:

5.a. Reopening of proceedings following a final judgment of the European Court of Human Rights in Strasbourg finding a violation of a fundamental human right or freedom

Section 428a

“(1) When the European Court of Human Rights has found a violation of a human right or fundamental freedom guaranteed by the Convention for the Protection of Human Rights and Fundamental Freedoms or additional protocols thereto, ratified by the Republic of Croatia, a party may, within thirty days of the judgment of the European Court of Human Rights becoming final, file a petition with the court in the Republic of Croatia which adjudicated at first instance in the proceedings in which the decision violating the human right or fundamental freedom was rendered, to set aside the decision [in question].

(2) The proceedings referred to in paragraph 1 of this section shall be conducted by applying, mutatis mutandis, the provisions on the reopening of proceedings.

(3) In the reopened proceedings the courts are required to observe the legal views expressed in the final judgment of the European Court of Human Rights finding a violation of a fundamental human right or freedom.”

C. The other relevant domestic law

20. The other relevant domestic law is set out in the case of Statileo v. Croatia, no. 12027/10, §§ 23-87, 10 July 2014.

THE LAW

I. JOINDER OF THE APPLICATIONS

21. Given that the five applications at hand concern similar facts and complaints and raise identical issues under the Convention, the Court decides to join them, pursuant to Rule 42 § 1 of the Rules of the Court.

II. AS TO WHETHER THE SECOND APPLICANT’S HEIRS CAN PURSUE THE APPLICATION

22. In his letter of 15 December 2014 the applicants’ representative informed the Court that the second applicant, Ms Jakica Bulić, had died on 5 July 2012 and that her daughters, Ms Marija Lučić and Ms Mira Kalajžić, wished to pursue the application (see paragraph 4 above). He submitted a decision issued by a notary public of 18 October 2012 declaring Ms Marija Lučić and Ms Mira Kalajžić as the only statutory heirs of the second applicant. The Government did not contest this.

23. Having regard to its case-law on the subject (see Statileo, cited above, § 90), and given that the second applicant’s heirs inherited the flat in question and thereby became its owners, the Court holds that they have standing to pursue the present proceedings in the second applicant’s stead. However, the Court’s examination is limited to the question of whether or not the complaints, as originally submitted by Ms Jakica Bulić, disclose a violation of the Convention (ibid., loc. cit.).

III. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1 TO THE CONVENTION

24. The applicants complained that they had been unable to charge the market rent for the lease or their flats. They relied on Article 1 of Protocol No. 1 to the Convention, 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.”

25. The Government contested that argument.

A. Admissibility

26. The Government argued that the applicants had never complained before the domestic authorities about violation of their property rights. Instead, in their constitutional complaint they had essentially complained about violation of their right to a fair hearing (see paragraph 9 above).

27. The applicants did not reply to this argument.

28. The Court notes that the applicants brought civil actions against the State before the domestic courts arguing that the inadequate level of the protected rent they were entitled to receive under the Lease of Flats Act unduly restricted their right of ownership. In so doing they relied, inter alia, on Article 48 and Article 50 of the Croatian Constitution guaranteeing the right of ownership and providing for compensation in case of its deprivation or restriction (see paragraphs 8 and 18 above). In their constitutional complaints the applicants again relied on those Articles of the Constitution (in addition to its Article 29 § 1) and advanced the same Constitution-based arguments regarding their right of ownership as before the civil courts, and thus provided the Constitutional Court with the opportunity of putting right the alleged violation (see, a fortiori, Lelas v. Croatia, no. 55555/08, §§ 45 and 47-52, 20 May 2010). The Government’s objection as to the non-exhaustion of domestic remedies must therefore be dismissed.

29. The Court further notes that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention. It also notes that it is not inadmissible on any other grounds. It must therefore be declared admissible.

B. Merits

30. The Court notes that it has already found a violation of Article 1 of Protocol No. 1 to the Convention in a case raising similar issues to the present one (see Statileo, cited above, §§ 116-145).

31. Having examined all the material submitted to it, the Court considers that the Government have not put forward any fact or argument capable of persuading it to reach a different conclusion in the present case.

32. There has accordingly been a breach of Article 1 of Protocol No. 1 to the Convention.

IV. APPLICATION OF ARTICLE 41 OF THE CONVENTION

33. Article 41 of the Convention provides:

“If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.”

A. Damage

1. The parties’ submissions

34. The applicants claimed EUR 370,317 (the first applicant), EUR 493,075 (the third applicant), EUR 270,125 (the fourth applicant) and 1,035,335 (the fifth applicant) in respect of pecuniary damage.

35. The applicants also claimed EUR 20,000 (the first applicant), EUR 30,000 (the third and fifth applicants each) and EUR 25,000 (the fourth applicant) in respect of non-pecuniary damage.

36. The second applicant’s heirs each claimed EUR 546,113 in respect of pecuniary damage and EUR 15,000 in respect of non-pecuniary damage.

37. The Government contested these claims.

2. The Court’s assessment

(a) Pecuniary damage

38. The Court considers that the applicants must have suffered pecuniary damage as a result of their inability to charge the adequate rent for their flats starting from 5 November 1997 (the date of the entry into force of the Convention in respect of Croatia). The Court had already stated in the Statileo case (cited above, § 157), that the compensation for such pecuniary damage should cover the difference between the protected rent, which the Court had found to be inadequate, and the adequate rent.

39. The Court notes that in the present case (a), unlike in the Statileo case, in the civil proceedings complained of the applicants sought compensation for inadequate level of the protected rent (see paragraphs 8-9 above), and (b) that under section 428a of the Civil Procedure Act (see paragraph 19 above) the applicants may now file a petition for reopening of those proceedings relying on the Court’s above finding (see paragraphs 30-32) of a violation of Article 1 of Protocol No. 1 to the Convention.

40. The Court reiterates that a judgment in which it finds a breach imposes on the respondent State a legal obligation to put an end to the breach and make reparation for its consequences. If national law does not allow - or allows only partial - reparation to be made, Article 41 empowers the Court to afford the injured party such satisfaction as appears to it to be appropriate (see Iatridis v. Greece (just satisfaction) [GC], no. 31107/96, §§ 32-33, ECHR 2000-XI).

41. Given the nature of the applicants’ complaints under Article 1 of Protocol No. 1 to the Convention, the Court considers that in the present case the most appropriate way of repairing the consequences of that violation would be to reopen the proceedings complained of. As domestic law allows such reparation to be made, the Court considers that there is no call to award the applicants any sum in respect of pecuniary damage.

42. In the light of the foregoing considerations, the Court rejects the applicants’ claims for pecuniary damage.

(b) Non-pecuniary damage

43. The Court also finds that the applicants must have sustained non-pecuniary damage (see Statileo, cited above, § 159). Ruling on an equitable basis, the Court awards under that head:

- EUR 5,000 to the first and fifth applicants each,

- EUR 5,000 to the third and fourth applicants jointly,

- EUR 1,500 to the second applicant’s heirs jointly,

- plus any tax that may be chargeable on those amounts.

B. Costs and expenses

44. For the costs and expenses incurred before the domestic courts and those incurred before the Court the applicants claimed EUR 2,562 (the first applicant), EUR 3,031.23 (the third and fourth applicants) and EUR 2,236 (the fifth applicant), and the second applicant’s heirs jointly EUR 3,392.

45. The Government contested these claims.

46. According to the Court’s case-law, an applicant is entitled to the reimbursement of costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and were reasonable as to quantum.

47. In the present case, regard being had to the documents in its possession and the above criteria, the Court considers it reasonable to award the applicants and the second applicant’s heirs jointly the sum of EUR 3,420 for costs and expenses incurred in the proceedings before it, plus any tax that may be chargeable to the applicants.

48. However, the claim for costs and expenses incurred in the domestic proceedings must be rejected, given that the applicants will be able to have those costs reimbursed in the proceedings following their petition for reopening (see paragraphs 39-41 above, and Vinčić and Others v. Serbia, nos. 44698/06 and 30 other applications, § 65, 1 December 2009).

C. Default interest

49. The Court considers it appropriate that the default interest rate should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points.

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

1. Decides to join the applications;

2. Declares the applications admissible;

3. Holds that there has been a violation of Article 1 of Protocol No. 1 to the Convention;

4. Holds

(a) that the respondent State is to pay the applicants, within three months the following amounts, to be converted into Croatian kunas at the rate applicable at the date of settlement:

(i) EUR 5,000 (five thousand euros) to the first and fifth applicants each, plus any tax that may be chargeable, in respect of non-pecuniary damage;

(ii) EUR 5,000 (five thousand euros) to the third and fourth applicants jointly, plus any tax that may be chargeable, in respect of non-pecuniary damage;

(iii) EUR 1,500 (one thousand five hundred euros) to the second applicant’s heirs jointly, plus any tax that may be chargeable, in respect of non-pecuniary damage;

(iv) EUR 3,420 (three thousand four hundred twenty euros), to the applicants and the second applicant’s heirs jointly, plus any tax that may be chargeable to them, in respect of costs and expenses;

(b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;

5. Dismisses the remainder of the applicants’ and the second applicant’s heirs’ claims for just satisfaction.

Done in English, and notified in writing on 15 November 2016, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

Hasan Bakırcı Paul Lemmens
Deputy Registrar President

APPENDIX

1. Application no. 35444/12 lodged on 16 April 2012 by Ante BEGO who was born on 16 June 1932

2. Application no. 35576/12 lodged on 14 May 2012 by Jakica BULIĆ who was born on 1 September 1926

3. Application no. 41555/12 lodged on 15 June 2012 by Doris KNEGO who was born on 12 May 1963

4. Application no. 41558/12 lodged on 15 June 2012 by Ingrid KNEGO who was born on 8 January 1960

5. Application no. 48914/12 lodged on 17 July 2012 by Ivo MATAS who was born on 13 December 1951

[1] The third and fourth applicants are the co-owners of the same flat.

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