VOMOČIL AND ART 38, A.S. v. THE CZECH REPUBLIC

FIFTH SECTION

DECISION

Applications nos. 38817/04 and 1458/07
Jan VOMOČIL against the Czech Republic

and Art 38, a.s. against the Czech Republic

The European Court of Human Rights (Fifth Section), sitting on 5 March 2013 as a Chamber composed of:

Mark Villiger, President,
Angelika Nußberger,
Boštjan M. Zupančič,
Ann Power-Forde,
Ganna Yudkivska,
Helena Jäderblom, judges,
Zdeněk Kühn, ad hoc judge,
and Claudia Westerdiek, Section Registrar,

Having regard to the above applications lodged on 20 October 2004 and 4 January 2007,

Having regard to the observations submitted by the respondent Government, the observations in reply submitted by the applicants and the comments received from the third parties (Article 36 § 2 of the Convention and Rule 44 § 2).

Having deliberated, decides as follows:

PROCEDURE

1. The first applicant, Mr Jan Vomočil, is a Czech national who was born in 1944 and lives in Litomyšl. The second applicant, Art 38, a.s., is a joint-stock company with its registered office in Karlovy Vary. They were represented before the Court by Ms K. Samková, a lawyer practising in Prague, and Ms J. Šindelářová, a lawyer practising in Pilsen.

2. The Czech Government (“the Government”) were represented by their Agent, Mr V.A. Schorm, from the Ministry of Justice.

3. The Association of owners of houses, flats and other immovable property in the Czech Republic and the Association for Defence against the Prague Real Estates Administration were granted leave to intervene in the written procedure (Article 36 § 2 of the Convention and Rule 44 § 2). The former association, which was also represented by Ms K. Samková, used this opportunity only to present itself, without addressing any aspects of the cases which concerned the Association, and it subsequently joined the applicants’ observations. As the second Association did not submit any observations, on 23 June 2008 the Registry informed its representative that it appeared that it no longer wished to act as a third party to the proceedings. No response to this letter has been received.

4. Mr Karel Jungwiert, the former judge elected in respect of the Czech Republic, withdrew from sitting in the Chamber (Rule 28). The Government accordingly appointed Mr Zdeněk Kühn to sit as an ad hoc judge (Article 27 § 2 of the Convention and Rule 29 § 1).

THE FACTS

A. The circumstances of the case

1. Application no. 38817/04 lodged by Jan Vomočil

(a) History of the ownership of the applicant’s house

5. The property is situated in an affluent district of Brno. It was built in 1932 and owned by a private person who, in 1962, made an “offer of voluntary transfer of an immovable property” to the State. The house consists, according to the applicant, of eleven dwellings and of a commercial ground floor. The eleven dwellings were subject to the rent-control-scheme whereas the non-residential premises located on the ground floor were rented out at non-regulated rents.

6. In 1991 the house was returned to the heirs of the former owner under the Extra-Judicial Rehabilitation Act. In 1992 they decided to sell it to a private company.

7. On 15 December 1995 the applicant acquired the tenement house for the price of 6,500,000 Czech korunas (CZK, 264,335 euros (EUR)). In the purchase agreement, it was stated as follows:

“The purchaser explicitly declares that he is familiar with the condition of the purchased immovable property, that he has examined it prior to the conclusion of the present purchase agreement and that he purchases the property in question in a condition which he has ascertained. ...

From the date that the decision on the registration of ownership rights takes effect, all the interests, risks, obligations ..., as well as all rights related to the ownership of the purchased property, shall pass to the purchaser.”

Ownership passed to the applicant on 7 February 1996 when the registration in the Land Register came into effect. The applicant took over the existing tenancy agreements. According to him, the house was in need of extensive repair work and therefore underwent reconstruction. Until October 2004 the investment to improve the quality of the dwellings exceeded CZK 1,000,000 (EUR 40,667).

8. According to the applicant, as a result of the rent ceilings provided for by law, in particular by Decree no. 176/1993 of the Ministry of Finance on rents for flats and reimbursement of charges related to the use of flats, the rents which, for instance, two tenants were paying for the lease of first‑category flats in the applicant’s house, of 111.51 and 104.92 square metres respectively, were determined at CZK 3,055 (EUR 124) and CZK 2,877 (EUR 117) per month respectively, and another tenant was paying CZK 1,875 (EUR 76) per month for the lease of a second‑category flat of 91.11 square metres. In other words, the rent paid by tenants for one square metre of usable surface area of the dwellings in the applicant’s house was CZK 27.42 (EUR 1.12), whereas the average market rent in Brno, at CZK 110 (EUR 4.5), was almost four times higher.

9. The applicant states that given that the annual aggregate rent for flats subject to the rent-control scheme amounted to about CZK 233,544 (EUR 9,497), it did not cover the maintenance costs or even the cost of the loan, amounting to CZK 252,000 (EUR 10,248) per annum, by means of which the applicant had financed the reconstruction of his house and the subsequent maintenance work.

10. On 12 December 2003 the applicant transferred his house into the registered capital of the company JOHNY, s.r.o., of which he was the sole owner. The registration of ownership rights in favour of this company took effect on 5 May 2004.

(b) Proceedings on the applicant’s action for the imposition of an obligation to sign an amendment to the tenancy agreement

11. On 14 July 2004 the applicant brought actions with the Brno Municipal Court (městský soud) against six tenants (flats nos. 2, 4, 6, 7, 10, 11) requesting it to order them to sign amendments to their respective lease agreements with the aim of increasing the rent. On 20 September 2004 the applicant’s actions were joined to a common procedure.

12. In a judgment of 14 July 2005 the Municipal Court dismissed the applicant’s actions stating, inter alia, that under Article 696 § 1 of the Civil Code, a landlord was entitled to increase the rent only if a specific law so provided or if the tenants agreed, which was not so in the present case. Although such legal provisions existed - Decree no. 176/1993 and Ordinances nos. 01/2002 and 06/2002 of the Ministry of Finance - they had been successively repealed by the Constitutional Court (Ústavní soud). Relying on Article 493 of the Civil Code, the Municipal Court found that it had no jurisdiction to intervene in matters of tenancy agreements between private parties by substituting its consent for that of the tenants. On the basis of these arguments and with reference to Government Decree no. 567/2002 on rent moratoria, it saw no scope for increasing controlled rents unless such an increase was agreed between the parties.

13. On 30 August 2006 the Brno Regional Court (krajský soud) quashed this judgment, and remitted the case to the Municipal Court for further consideration. It held, inter alia, as follows:

“... [It] appears that the court of first instance rejected the action largely for the reason that since the repeal of Decree no. 176/1993, as well as that of Ordinances nos. 01-02 and 06/02, the contracting parties may arrange for payment of rent only in an agreement, unilateral rent increases by a landlord are not admissible and the court is not entitled to substitute a declaration of the tenant’s will, because the relationship between the participants may not be amended without the parties’ consent.

The appellate court would point out that the conclusion of the first-instance court corresponds to the former case-law of the Supreme Court (see, e.g., decision no. 867/2004 of 31 August 2005), which concluded that unless the tenancy agreement provided otherwise, the landlord was not entitled to increase the rent unilaterally ..., not even after the repeal of the regulations making provision for the rent control.

However, during the appellate proceedings the Constitutional Court concluded in its finding no. I. ÚS 717/2005 of 21 March 2006 that the rent-control scheme constituted a restriction on ownership rights that was admissible only if it had a statutory basis, pursued a legitimate aim in the public interest approved by the Constitution and if it observed the principle of proportionality. Ownership rights may be restricted only by law, but no such law exists as regards the issue of determination of rent, because normative provisions of rent regulation have been repeatedly ruled unconstitutional by the Constitutional Court. In the light of the case-law of the European Court of Human Rights, which regards the case-law of the courts also as law in the substantive sense, it is incumbent upon the courts to fill the vacuum legis by their case-law and create law that could be considered substantive. The distortion of the market caused by the long-lasting lack of a solution to the problem of dwellings subject to the rent-control scheme cannot, according to the Constitutional Court, be perpetuated by the case-law of ordinary courts. It is the latter’s function to protect the individual’s rights and fundamental freedoms.

With regard to the above case-law of the Constitutional Court (see also judgments no. Pl. 20/2005 of 28 February 2006 and no. IV. ÚS 611/2005), the appellant’s objections must be accepted in respect of the fact that if there was no agreement between the landlord and the tenant on a change in the tenancy agreement as to the amount of rent and if there was no separate regulation allowing a unilateral rent increase, ..., the ordinary court was entitled to intervene in the tenancy relationship and to determine the rent ...

In the light of the legal reasoning of the appellate court, based on the case-law of both the Constitutional Court and the Supreme Court, it follows that the decision of the first-instance court is based on an incorrect legal assessment of the case. However, it is evident that in this situation it is necessary to request the claimant to describe all the relevant facts and to propose evidence necessary to support his disputed assertions ... This supplement should especially concern the assertion that the amount of the rent proposed by the claimant ... is the appropriate one.”

14. On 2 February 2007 the applicant informed the Regional Court that he was no longer the house owner and suggested that the company JOHNY, s.r.o., be entered as taking his place in the proceedings. On 9 March 2007 the request was granted.

15. JOHNY, s.r.o. and the tenants subsequently entered into settlements regarding the rents. The exact details of the settlement agreements are disputed between the parties.

16. On 27 June 2007 the Municipal Court discontinued the proceedings, following the withdrawal of the action by JOHNY, s.r.o. The applicant appeared to suggest that he had lost some proceedings and had withdrawn some of his other claims since it seemed that “though he might succeed before the Constitutional Court he would not succeed before the general courts, i.e. the appellate courts”. Taking into account the costs of the proceedings and “the loss of time which would greatly exceed the amount of the disputes”, he withdrew his claims.

2. Application no. 1458/07 lodged by Art 38, a.s.

17. The tenement house was built apparently in 1913 and was originally owned by two individuals. On 20 August 1960 it passed into the ownership of the State under Government Order no. 15/1959 and Decree no. 88/1959 on measures relating to certain property used by organisations of the socialist sector. In 1991 the house was returned to a person entitled under the restitution law, who sold it shortly afterwards to an individual for the price of CZK 1,350,000 (EUR 54,900). The latter mortgaged the property as security for a debt of CZK 1,500,000 (EUR 61,000) owed to a private company. In 1999 a court ordered the enforcement of a decision that the house be sold for the purpose of settling the debt owed to the company. An expert opinion of 13 December 2000 estimated the value of the house at CZK 3,143,450 (EUR 127,834). In a decision of 31 May 2001 the final value of the house for the purpose of public auction was fixed at CZK 1,500,000 (EUR 61,000). The court stated, inter alia, as follows:

“The present case concerns a three-storey block of flats, 87 years old, with a basement under part of the building ... There are commercial premises (on the ground floor) and six flats, two per floor, each with two or one bedrooms, 2+1 or 1+1.

The fact that the case concerns the sale of an occupied block of flats has an impact on the range of interested parties, because the functional utility of the building is limited owing to the existing tenancy rights of individuals .... This situation creates a considerable impediment as regards the marketability of the whole property and that is necessarily reflected in the final value. ... [I]t is a non-standardised residential building in which more than one half of the floor area is taken up by flats. The rent revenue from the flats (controlled rent) amounts to CZK 61,380 per year. There are no encumbrances related to the immovable to the detriment of the property owner.

After assessment of the decisive criteria to provide an idea about the real value, the court determined the final value of the property at CZK 1,500,000 taking into account its location in the downtown area of a regional town with very good accessibility [to the public transport service]. A factor that decreases the aggregate market demand for this building is the fact that after the sale by auction the tenancy rights in relation to the flats will not cease to exist, including the related inheritance rights, another such factor being the present technical condition, which requires significant financial investment for the reconstruction and renovation of the whole building.

... Since the purpose of determining the final value is to establish the closest possible approximation of the market value, the court concluded, after assessment of the decisive criteria for determining the real value and therefore the marketability of the immovable property under consideration (location, third-party rights, utility value, nuisances and other disturbing effects, etc.), that the final value of the property in question corresponded to the amount of CZK 1,500,000.”

18. On 23 August 2001 the court issued a notice of auction (dražební vyhláška) in which the reserve price was fixed at CZK 1,000,000 (EUR 40,667) pursuant to Article 336e § 1 of the Code of Civil Procedure, which provides that the court fixes the reserve price at two-thirds of the value.

19. On 26 September 2001 a public auction took place. The court confirmed the applicant company’s auction bid by which it acquired a tenement house and the plot of land on which it had been built. The decision became final on 30 October 2001. The title passed to the applicant company on 16 January 2002.

20. The applicant company stated that it had not instituted any judicial proceedings to adjust or increase the rents for the relevant flats in the building and stressed that no effective remedy in that respect existed under domestic law.

B. Relevant domestic law and practice (general overview)[1]

21. The roots of the legislation providing for a rent-control scheme in the Czech Republic can be traced back to laws enacted by former Czechoslovakia in 1920, 1922 and 1928, respectively which were aimed at the protection of tenants and included certain restrictions on rent increases.

22. Following the communist takeover in February 1948, a radical legal reform of private law, including in the field of rent control, was introduced by the Government in order to restrict, and ultimately eliminate, individual property rights. Hence, the Civil Code of 1950 introduced “personal property” as a new legal concept which was henceforth to be distinguished from the traditional concept of “private property”.

23. Under the rent-control scheme, rents were administratively set under the secondary legislation and the landlord-tenant relationship originated in an administrative decision rather than a lease contract. The existing secondary legislation on rents remained in force until 1 July 1993, when it was superseded by Decree no. 176/1993 of the Ministry of Finance providing, inter alia, for restrictive rent ceilings. The Decree divided flats into four categories, depending on their quality, and fixed a maximum basic monthly rent per square metre. A fixed amount of rent per square meter was set according to the size of the town and the category of the flat. The rents were regularly increased by an amount reflecting the annual rate of inflation, on the basis of ordinances issued annually by the Ministry of Finance. Moreover, as the lease-contract regulations provided for by the Civil Code were not amended, lease contracts could not be terminated or renegotiated in order to increase rents beyond the rent ceilings without the consent of the contracting parties.

24. On 21 June 2000 the Constitutional Court, on a petition by senators, repealed the Decree, finding it to be unconstitutional and in breach of Article 1 of Protocol No. 1, as it froze rents on a level that made it impossible for landlords to cover their maintenance costs and to derive a profit from their property. It left the Parliament the period until 31 December 2001 to enact a new rent‑control law. In 2002 the Ministry of Finance and the Government subsequently issued three regulations designed to fill up the vacuum legis created by the Constitutional Court’s judgment. All these regulations were consecutively repealed by the Constitutional Court.

25. On 31 March 2006 Act no. 107/2006 on unilateral rent increases and amendments to the Civil Code entered into force. It provided for new rent ceilings and amended the provisions of the Civil Code governing lease contracts. However, it did not remedy interferences with landlords’ property rights which had occurred prior to its entry into force. The act envisioned gradual annual increases of regulated rents, which at the end of 2010, and in bigger cities end of 2012, should reach approximately the level of market rents.

26. As regards the period of vacuum legis, the Constitutional Court obliged the lower courts not to perpetuate the unconstitutional situation and to decide on actions for rent increase lodged by the owners. However, inconsistencies remained both between the approach of lower courts and between different chambers of the Constitutional Court. The approach was ultimately clarified in the Constitutional Court’s judgment no. Pl ÚS 27/09 of 28 April 2009 where the court held that the ordinary courts could grant rent increases for a period from the day of lodging the action until 31 December 2006, date after which rent increases were authorised by Act no. 107/2006. If the action for rent increase failed, the owners were authorised to claim damages against the State. In respect of the period preceding the date of lodging the action, the owners were authorised to claim damages from the State directly.

COMPLAINTS

27. Under Article 1 of Protocol No. 1 alone and in conjunction with Article 14 of the Convention, the applicants complained that the rent-control violated their property rights as owners of the houses and was discriminatory.

28. Relying on Article 13 of the Convention in conjunction with Article 1 of Protocol No. 1, the applicants complained that they had no effective remedy against interference with their property rights posed by the rent-control scheme.

THE LAW

29. The Court considers that, given their common factual and legal background, the applications should be joined in accordance with Rule 42 § 1 of the Rules of Court.

30. The applicants complained that their property rights had been infringed by the rent-control scheme, which precluded them from covering the maintenance costs relating to their property and from making a reasonable profit. They argued that the domestic court system constituted a wholly inefficient instrument for defending landlords’ constitutional rights and their rights guaranteed by the Convention. They invoked in this respect Article 1 of Protocol No. 1 alone and in conjunction with Articles 13 and 14 of the Convention.

31. These provisions, so far as relevant, provide as follows:

Article 1 of Protocol No. 1

“Every natural or legal person is entitled to the peaceful enjoyment of her possessions. No one shall be deprived of her 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.”

Article 13 of the Convention

“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.”

Article 14 of the Convention

“The enjoyment of the rights and freedoms set forth in [the] Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”

A. The parties’ observations

32. The Government raised several objections to the admissibility of the applications. In particular they claimed that the applicants failed to exhaust domestic remedies and they had lodged the applications partly outside the six-month time-limit. Regarding applicant Vomočil the Government further maintained that that application was incompatible ratione personae with the provisions of the Convention given that he had lost ownership of the house in question on 5 May 2004. Lastly, they maintained that the applicant Vomočil abused the right of individual application because he had submitted incomplete and misleading information to the Court.

33. The Government maintained that there were two principal remedies available to the applicants. In particular, the applicants could have brought an action for a rent increase against the tenants as a preventive remedy and an action for damages against the State as a compensatory remedy.

34. Regarding the preventive remedy, the Government referred, in particular, to the Constitutional Court’s judgments of 8 and 28 February 2006 (see paragraphs 105-108 of the annex). Moreover, it appeared from the Constitutional Court’s judgment of 8 June 2006 that the landlords could claim higher rent on the basis of an action for surrender of unjust enrichment (see paragraph 121 of the annex).

35. The Government also made reference to judgments of the Supreme Court and decisions of lower courts. They admitted a certain lack of uniformity in the lower courts’ decisions as regards their duty to protect the rights of landlords and the manner of dealing with their actions seeking to have rents increased. In their opinion, this lack of uniformity should not, however, lead the Court to conclude that the applicants were not required to exhaust this remedy. Moreover, the landlords could have turned to the Constitutional Court which would have quashed decisions of lower courts which did not observe the principles indicated in its case-law.

36. The Government further maintained that the applicants could dispute the constitutionality of their inability to terminate the tenancy unilaterally and of the right of succession to tenancy, namely in the context of court proceedings concerning approval of the notice of termination of the tenancy. The case could have been submitted to the Constitutional Court directly by the ordinary courts or could have been brought before the Constitutional Court in connection with a constitutional appeal lodged against the lower courts decisions in the proceedings in question and to which the landlords could have added an application for the repeal of the relevant provisions of the Civil Code on grounds of a lack of constitutionality.

37. According to the Government, the Court should not take into consideration the applicants’ assertion that the proceedings would have been unreasonably long and that given the number of landlords concerned, the judiciary would have collapsed. This assertion is merely speculative and as such cannot justify a failure to comply with the obligation to exhaust all domestic remedies.

38. The Government further referred to the possibility to bring an action for damages against the State under the State Liability Act (no. 82/1998) or under Article 11 § 4 of the Charter of fundamental rights and freedoms.

39. The Government further noted that on 14 July 2003 the applicant Vomočil had brought an action against six tenants requesting the court to order them to agree to an amendment to their tenancy agreements on the basis of which the existing rent would have been increased with effect from 1 April 2003. In the proceedings at first instance the claimant company, which had replaced the applicant as claimant, and the defendants had entered into settlements whereby the latter had agreed to a rent increase pro futuro and retroactively with effect from 5 May 2004, in return for which the claimant had undertaken to withdraw the action.

40. In their additional observations, the Government referred to the further development of the Constitutional Court’s case-law relating to landlords’ actions against tenants for rent increases and actions for damages against the State, culminating in opinion no. Pl ÚS-st 27/09 of 28 April 2009 in which the Constitutional Court had indicated that landlords could claim a rent increase with effect from the date on which they brought their actions. The Constitutional Court had explicitly limited the ordinary courts’ obligation to decide on actions for rent increases to those brought until 31 December 2006 because since 1 January 2007 landlords could unilaterally increase rent under Act no. 107/2006. Moreover, actions for damages against the State should be examined as claims for compensation for a restriction imposed on ownership rights under Article 11 § 4 of the Charter of fundamental rights and freedoms. The Constitutional Court had not rigidly restricted the period of time for which landlords could claim such compensation. It had only noted that a claim against the State for the period covered by the action against the tenant for rent increases was tied to non-satisfaction of the claim against the tenant.

41. The applicants and the third-party intervener, in their common observations, referring to the high number of applicants who had already brought similar applications to the Court argued that the use of the remedies suggested by the Government was unrealistic. In their submission, landlords own about 80,000 flats and would, therefore, introduce the corresponding number of actions seeking to increase rents, thus certainly causing the collapse of the judicial system. The applicants and the third-party intervener particularly doubted the effectiveness of the action for rent increases claiming that this remedy was uncertain and procedurally lengthy and complex. As to the action for unjust enrichment and the action to determine the level of rent and increase in rent suggested by the Government as two other legal avenues intended to solve the rent-control problem, the applicants and the third-party intervener underlined that by way of these actions landlords could retroactively claim unjust enrichment or an increase in rent only for the last two and three years respectively, because of the statutory time-bar.

42. In their additional observations, the applicants and the third-party intervener welcomed the initiative of the Constitutional Court to clarify the legal situation in order to allow landlords to resolve their problems with the rent-control scheme. They considered, however, that the constitutional court’s last opinion did not cover certain important points. Moreover, even though the owners of houses met usually with success at the Constitutional Court and its practice confirmed that it would protect their rights, the practice of the ordinary courts ran contrary to those decisions.

43. The applicants and the third-party intervener maintained that the existence of any remedies was purely theoretical and the practice of the national courts did not prove their effectiveness.

B. The Court’s assessment

44. The Court notes at the outset that the Government submitted a number of preliminary objections concerning the admissibility of the applications. They argued, in particular, that the application lodged by the first applicant was incompatible ratione personae with the provisions of the Convention given that he had lost ownership of the house in question on 5 May 2004, when the registration of the transfer of his house into the registered capital of the company JOHNY, s.r.o. took effect (see paragraph 10 above). The Government further maintained that the applicants did not exhaust domestic remedies at their disposal.

The Court, however, does not consider it necessary to examine all the admissibility objections as the present applications are in any event inadmissible for the reasons outlined below.

45. The Court reiterates that under Article 35 § 1 it may only deal with a matter after all domestic remedies have been exhausted. Applicants must have provided the domestic courts with the opportunity, in principle intended to be afforded to Contracting States that have the primary responsibility for implementing and enforcing the guaranteed rights, of preventing or putting right the violations alleged against them. In this way, it is an important aspect of the principle that the machinery of protection established by the Convention is subsidiary to the national systems safeguarding human rights (see McFarlane v. Ireland [GC], no. 31333/06, § 112, 10 September 2010; Kudła v. Poland [GC], no. 30210/96, § 152, ECHR 2000-XI; and Selmouni v. France [GC], no. 25803/94, § 74, ECHR 1999‑V).

46. The burden of proof is on the Government claiming non-exhaustion to satisfy the Court that an effective remedy was available in theory and in practice at the relevant time; that is to say, that the remedy was accessible, capable of providing redress in respect of the applicant’s complaints and offered reasonable prospects of success. However, once this burden of proof has been satisfied it falls to the applicant to establish that the remedy advanced by the Government was in fact exhausted or was for some reason inadequate and ineffective in the particular circumstances of the case or that there existed special circumstances absolving him or her from the requirement (see Akdivar and Others v. Turkey, 16 September 1996, §§ 65-68, Reports of Judgments and Decisions 1996‑IV and V. v. the United Kingdom [GC], no. 24888/94, § 57, ECHR 1999‑IX).

47. An applicant cannot be regarded as having failed to exhaust domestic remedies if he or she can show, by providing relevant domestic case-law or any other suitable evidence, that an available remedy which he or she has not used was bound to fail or had a negligible prospect of success in pursuing it (see, inter alia, Kleyn and Others v. the Netherlands [GC], nos. 39343/98, 39651/98, 43147/98 and 46664/99, § 156, ECHR 2003‑VI; Akdivar and Others v. Turkey, 16 September 1996, § 73, Reports 1996‑IV; and Keegan v. Ireland, 26 May 1994, § 39, Series A no. 290). However, the existence of mere doubts as to the prospects of success of a particular remedy which is not obviously futile, is not a valid reason for failing to exhaust domestic remedies (see Scoppola v. Italy (no. 2) [GC], no. 10249/03, § 70, 17 September 2009).

48. Furthermore, as regards legal systems, such as that of the Czech Republic, which provide constitutional protection for human rights, it is incumbent on the aggrieved individual to test the extent of that protection (see Mirazović v. Bosnia and Herzegovina (dec.), no. 13628/03, 16 May 2006, and Vinčić and Others v. Serbia, nos. 44698/06, et seq., § 51, 1 December 2009). The Court has also held previously that the Czech constitutional review, as a rule, satisfies the requirements of Article 35 § 1 of the Convention and it usually requires, in respect of applications against the Czech Republic, that the applicants lodge a constitutional appeal unless they can provide cogent reasons that it is not an effective remedy in their case (see Choc v. the Czech Republic (dec.), no. 25213/03, 29 November 2005); Miler v. the Czech Republic (dec.), no. 56347/10, § 24, 25 September 2012; and Buishvili v. the Czech Republic, no. 30241/11, §§ 54 and 56, 25 October 2012).

49. Lastly, the requirement of exhaustion of domestic remedies should in principle be assessed with reference to when the application was lodged (see Scordino v. Italy (no. 1) [GC], no. 36813/97, § 144, ECHR 2006‑V and Vokurka v. the Czech Republic (dec.), no. 40552/02, § 49, ECHR 16 October 2007).

50. The Court notes that after the political changes in 1989 the Czech Republic had to face severe structural tasks such as building democracy, solving social problems and creating rule of law. The State had to adapt to the new situation and to create functioning systems in the sphere of health and social security protection, education but also in the field of housing which was particularly obsolete and unsatisfactory. This naturally required fundamental legislative changes which, indeed, often form a lengthy and complex process. In such a situation, like in the present cases, it may well be left to the judiciary to surmount a period of lack of new legislative norms - full or partial - by their judicial activity in order to develop an established case-law until a new law is adopted and comes into force.

51. The Court observes that the Constitutional Court’s case-law underwent a complex evolution since 2000 regarding the issue of judicial rent increase and the nature of remedies available to landlords under domestic law. In 2003 the Constitutional Court made clear that in case of further inactivity of the legislator, it would have no other possibility than to fulfil its duties in individual cases and assure observation of principles guaranteed by the Constitution and international treaties (see paragraph 100 of the annex). Moreover, the rich Constitutional Court’s case-law indicates that at least two remedies were open to the landlords, in particular the action for rent increase pro futuro and an action for damages against the State.

52. The applicants are unable to point to an established case-law at the time of lodging their applications that would absolve them from using any of the suggested remedies including, ultimately, a constitutional appeal. Such a conclusion cannot be reached even with hindsight. Admittedly, there were inconsistencies in the case-law of the Constitutional Court itself and not all constitutional appeals of landlords were successful. Yet, and as even the applicants acknowledge, in the vast majority of cases the Constitutional Court ruled in favour of landlords. The Court notes in this respect that what is relevant from the point of view of the rule of exhaustion of domestic remedies is that the remedy offers a reasonable prospect of success and not absolute certainty of success.

53. The Court is also aware of the difficulties the landlords were facing in the domestic legal system as it was far from clear in 2004 or even in 2007 which proceedings exactly they should institute. The Court also notes certain inconsistencies in the legal opinions of the national courts which not always respected the leading opinions of the highest constitutional instance. Nonetheless, it cannot be said that the State, while taking time to adopt a new legislation in order to solve problems connected with the housing and with the rent control scheme in particular, did not offer the applicants any concrete legal avenue to remedy their respective situations which, according to them, contravened the Convention. The Court is rather of the opinion that the applicants had access to different procedures, and ultimately access to the Constitutional Court, which offered a reasonable prospect of success to their complaints in the circumstances of the present case.

54. However, the applicants did not avail themselves of any of those opportunities. The first applicant instituted proceedings against his tenants but they were later discontinued on the applicant’s own request. He thus deprived himself of the opportunity to submit the matter to the Constitutional Court. The second applicant did not bring any proceedings at all. The Court thus concludes that none of the applicants provided the domestic courts, including the constitutional jurisdiction, with the opportunity of preventing or putting right the violations alleged.

55. Lastly, the Court notes the applicants’ argument that instituting individual proceedings for every landlord in the country cannot constitute an effective remedy as the domestic court system would inevitably collapse and the proceedings would be taking too long. It is true that the effectiveness of a remedy can be undermined by its excessive duration (see, inter alia, Doran v. Ireland, no. 50389/99, § 57, ECHR 2003‑X (extracts); and Golha v. the Czech Republic, no. 7051/06, § 49, 26 May 2011). Nevertheless, the Court does not see any excessive duration in the present case. As it has already mentioned above, Art 38, a.s. remained completely inactive, in respect of undertaking any procedural step in order to solve or at least to improve its situation. Regarding the applicant Vomočil, the Court does not consider that the length of the court proceedings which was less than three years for two levels of jurisdiction, was so excessive as to make the remedy ineffective in his case. Therefore, the applicants’ argument is a mere speculation and not supported by the facts of the present case.

56. It follows that the present applications must be rejected under Article 35 §§ 1 and 4 of the Convention for non-exhaustion of domestic remedies.

For these reasons, the Court unanimously

Decides to join the applications;

Declares the applications inadmissible.

Claudia WesterdiekMark Villiger
RegistrarPresident

ANNEX

RELEVANT DOMESTIC LAW AND CASE-LAW

A. Relevant domestic law

1. The Constitution

1. Under Article 89 § 1 of the Constitution, decisions of the Constitutional Court are enforceable as soon as they are delivered in the manner provided for by statute, unless the Constitutional Court decides otherwise with regard to enforcement.

2. The Charter of Fundamental Rights and Freedoms

2. Article 2 § 2 of the Charter stipulates that State authority may be asserted only in cases and within the limits provided for by law and only in the manner prescribed by law.

3. Under Article 3 § 1 everyone is guaranteed the enjoyment of his or her fundamental rights and freedoms without regard to gender, race, colour of skin, language, faith and religion, political or other convictions, national or social origin, membership of a national or ethnic minority, property, birth, or other status.

4. Article 4 § 1 provides that duties may be imposed upon persons only on the basis of and within the limits of the law, and must respect the fundamental rights and freedoms of the individual. Under the second paragraph, limitations may be placed upon fundamental rights and freedoms only by law and under the conditions prescribed in the Charter. Under the third paragraph, any statutory limitation on fundamental rights and freedoms applies in the same way to all cases which meet the specified conditions. The fourth paragraph states that in implementing the provisions concerning limitations on fundamental rights and freedoms, the essence and significance of those rights and freedoms must be preserved. Such limitations are not to be applied for purposes other than those for which they were laid down.

5. Under Article 11 § 1 everyone has a right to own property. The property rights of each owner shall have the same subject matter and enjoy the same protection. Under the fourth paragraph, expropriation of property or any interference with property is permissible only in the public interest, on the basis of a statute, and against compensation.

6. Under Article 11 § 4 expropriation or forced restriction on ownership rights is allowed in general interest, on the basis of a law and against indemnification.

3. Civil Code (Act no. 40/1964, as in force until 30 March 2006)

(a) Replacement of the right of personal use with the right to lease

7. Under Article 871 § 2, introduced by the amendment to the Civil Code (Act no. 509/1991) which entered into force on 1 January 1992, the right to personal use of a dwelling was in future to be regarded as a tenancy. A legal relationship based on mutual consent between contracting parties was thereby instituted in contract law, replacing consent to an administrative decision by virtue of which a national authority granted the use of a flat to an individual. The term “personal use of property” ceased to exist with this amendment. Some of the restrictions imposed on landlords by the Civil Code of 1964 concerning, in particular, succession to the tenancy of a flat, rent ceilings, landlords’ obligations in respect of property maintenance and termination of leases, remained in force.

(b) Creation of a tenancy

8. Under Article 685 § 1, a tenancy in respect of a flat was created by means of a tenancy agreement, under which a landlord handed over a flat to a tenant for his or her use for a definite or indefinite period of time.

(c) Succession to the right to lease a flat

9. The Civil Code granted the right to succeed to a tenancy to the relatives of tenants and to persons living with them in flats rented by them. Article 706 § 1 provided as follows:

“Upon a tenant’s death, where a flat is not rented jointly by a married couple, the right to lease the property shall pass to the deceased’s children, grandchildren, parents, siblings, son-in-law or daughter-in-law, if they can prove that they were living with him or her in a shared household on the date of his or her death and do not have their own flat. The same right shall be enjoyed by persons who were looking after the shared household and had been living with the tenant in a shared household for at least three years and do not have their own flat.”

10. Article 707 § 1 provided:

“The surviving spouse shall become the sole tenant of a common flat upon the other spouse’s death.”

11. Article 708 provided:

“The provisions of Article 706 §§ 1 and 2 and Article 707 shall also apply in the event that a tenant permanently leaves a shared household.”

(d) Controlled rents

12. Article 686 § 1 stipulated, inter alia, that the written tenancy agreement should provide details of the flat, its facilities, the scope of its use and the method of calculating the rent and service charges related to use of the flat, or the amounts thereof.

13. Under Article 671 § 1 a tenant had to pay the rent laid down in the tenancy agreement, or the rent usually payable at the time the lease was agreed, regard being had to the value of the leased property and the mode of its use.

14. Article 696 § 1 provided, 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 was entitled unilaterally to increase the rent and service charges and amend other terms of the tenancy agreement, were governed by a special Act.

15. Article 877 read as follows:

“1. Prices, payments and other pecuniary transactions governed by this Act, and falling within the scope of application of the generally binding Act on prices, shall be considered to constitute prices within the meaning of this Act.

2. Where the term ‘generally binding legal Act’ is used herein, it shall be taken to mean Act no. 526/1990 on prices.”

(e) Duties of landlords in respect of property maintenance

16. Under Article 687, a landlord had to hand over a flat to a tenant in a fit state for normal use and to secure to the tenant the full and uninterrupted enjoyment of the rights linked to the use of the flat. Where an occupational tenancy agreement did not provide otherwise, small repairs to the flat linked with its use and the costs associated with ordinary maintenance were met by the tenant. The terms “small repairs” and “ordinary maintenance” were defined in a special law (Government Decree no. 258/1995).

17. Under Article 695 a landlord was entitled to make structural alterations to a flat with the approval of the tenant.

(f) Termination of a lease in respect of tenants paying controlled rent

18. Under Article 493 § 1 no obligation could be modified without the mutual consent of the parties, unless the law stipulated otherwise.

19. Under Article 685 § 1 the tenancy was protected. The landlord could terminate it only on the grounds provided for by law.

20. Under Article 686 § 2 if a tenancy agreement did not indicate its duration, its term was presumed to be indefinite.

21. Article 710 stated that the tenancy could cease on the basis of a written agreement between the landlord and the tenant, or on written notice of termination of the lease given by the tenant or the landlord. If the tenancy agreement was entered into for a fixed period of time, the tenancy ceased on the expiry of that period. The written notice had to give the date on which the lease was to be terminated and the notice period had to be at least three months.

22. Article 711 § 1 specified the grounds that would justify the serving of notice on a tenant and made such notice subject to prior approval by a court. The lease could be terminated if:

(a) the landlord needed the flat for himself or herself, his or her spouse, his or her children, grandchildren, son- or daughter-in-law, parents or siblings;

(b) the tenant ceased to work for the landlord and the latter needed the flat for the replacement worker;

(c) the tenant, or persons sharing the flat with him, acted contra bonos mores, despite a prior written warning;

(d) the tenant substantially contravened his duties under the tenancy agreement, in particular by a failure for more than three months to pay rent or charges for use of the flat;

(e) the use of the flat or house was precluded in the public interest or owing to reconstruction;

(f) the flat was connected to premises designed for commercial use and the landlord or tenant of such premises intended to use it;

(g) the tenant had two or more flats, except where their use was justified on exceptional grounds;

(h) the tenant did not use the flat, or used it only occasionally, without any serious justification; or

(i) the tenant of a specially-assigned flat was not a disabled person.

23. Under Article 711 § 2 if the court approved the notice of termination of a lease, it also fixed the date on which the tenancy relationship was to end, taking into account the period of notice which commenced as late as the first day of the calendar month following that in which the judgment became final. At the same time the court decided that the tenant was obliged to vacate the flat within 15 days at the latest after the expiry of the period of notice. If the tenant was entitled to a substitute flat or accommodation, the court held that the tenant was obliged to vacate the flat within 15 days after the provision of the substitute flat, and if provision of the substitution accommodation was sufficient, then within 15 days after its provision.

24. Under Article 712, a person whose tenancy agreement was terminated under Article 711 § 1(a),(b),(e),(f) or (i) was entitled to be provided with substitute housing in the form of a flat or other accommodation.

(g) Exchange of flats

25. Under Article 715 tenants could, with their landlords’ assent, agree in writing to exchange their respective flats. If either landlord disagreed with the exchange, the tenant could appeal to a court; a ruling by the court in the tenant’s favour replaced the consent of the landlord to the exchange.

4. Act no. 265/1991 on the powers of the State authorities in relation to prices

26. Section 2(2) provides, inter alia, that the Ministry of Finance issues legal acts to regulate and negotiate prices, to define disproportionate economic profit and unjust enrichment in connection with violations of price regulations, and to control prices.

5. Decree no. 60/1964 on payment for the use of a flat and for services related to the use of a flat, as amended by Decree no. 15/1992 (in force until 31 December 1993)

27. With effect from 16 January 1992 the decree as amended stipulated in section 1(1) the method of calculating the rent for a flat and the manner of negotiating and paying for the rent and for the service charges for the use of the flat between the owners, or housekeepers as landlords, and the tenants.

28. The decree did not apply to flats built with financial, credit or other assistance provided under regulations on financial and credit assistance to cooperative housing construction, or to flats under the Administration of Diplomatic Services (Správa služeb diplomatického sboru).

29. Section 5(2) stated that the amount of rent determined under section 5(1) should be increased by 100% starting with the rent for July 1992. The landlord had to notify the new rent, in a manner that was standard in the place concerned, within 60 days at the latest from the entry into force of the decree.

30. Section 16 provided for the rent and prices for services in dwelling houses owned by natural persons, with a limited number of dwelling rooms or a limited floor area. Under subsection 1 the amount of rent for a dwelling house with 5 rooms at most, excluding the kitchen, or with more dwelling rooms but with a floor area not exceeding 120 square metres, should be negotiated in an agreement between the landlord and the tenant. As to the kitchen, the floor area should include kitchens exceeding 12 square metres. Under section 16(2) if the rent for dwelling houses under subsection 1 did not reach the amount determined under section 5, the landlord could increase the rent up to the latter amount.

6. Decree no. 176/1993 of the Ministry of Finance on rents for flats and reimbursement of charges related to the use of flats (entered into force partly on 1 July 1993 and partly on 1 January 1994; and was repealed on 1 January 2002)

31. The decree established rent ceilings, provided guidelines on how to calculate them and laid down rules regulating certain aspects of the conduct of landlords and tenants. It did not apply to flats in housing cooperatives established after 1958, if built with financial, credit and other assistance provided under regulations on financial, credit or other assistance for cooperative housing construction, for which the rent was determined under separate regulations, and the decree did not apply to flats managed by the Administration of Diplomatic Services.

32. Moreover, under section 2, flats owned by housing cooperatives, leased by foreign legal persons or built after 30 June 1993, or those for which a tenancy agreement had been concluded with a new tenant, fell outside its scope of application (except in cases involving the legal transfer of tenancy, the exchange of flats and substitute housing).

33. The break-up of flats into the categories stipulated in section 4 was, except for minor differences, essentially the same as under Decree no. 60/1964, flats being classified into four categories according to their quality.

34. Sections 5 and 6 provided for two types of basic rent: maximum basic rent and cost-based regulated basic rent. Rent was regulated on a cost basis for flats whose construction was approved after 30 June 1993 where public funds were used in their financing, and for flats whose reconstruction or modernisation was approved after 30 June where public funds were used in their financing.

35. For the first case of cost-based regulated rent, it was calculated by multiplying the purchase price of the flat by a monthly coefficient (k = 0.00375), while the purchase price of the flat was to be calculated from the actual purchase costs for the building of the house according to the ratio of the flat’s floor area to the floor areas of all flats and commercial premises. This rent could not exceed double the maximum basic rent determined under section 5.

36. In the second case, the rent was calculated by multiplying the replacement purchase price of the flat by a monthly coefficient (k = 0.00375), while the replacement purchase price of the flat was the price of the flat according to its category before the reconstruction or modernisation as determined under section 3a of Ministry of Finance Decree no. 393/1991, as amended, and raised by the actual costs of the reconstruction or modernisation of the flat. This rent could not exceed double the maximum basic rent for the category of a flat after reconstruction or modernisation as determined under section 5. The provisions on cost-based regulated basic rent came into force on 1 July 1993.

37. The maximum basic rent was calculated by multiplying the flat’s floor area by the maximum basic monthly rent per square metre of floor, as set for each category and listed in the annex to the decree as follows:

- first-category dwelling (flats with central heating in all dwelling rooms and basic accessories): CZK 6 (EUR 0.24) per square metre;

- second-category dwelling (flats without central heating, with basic accessories, or flats with central heating and partial basic accessories): CZK 4.50 (EUR 0.18) per square metre;

- third-category dwelling (flats without central heating with partial basic accessories or flats with central heating without basic accessories): CZK 3.50 (EUR 0.14) per square metre;

- fourth category dwelling (flats without central heating and without basic accessories): CZK 2.50 (EUR 0.101) per square metre.

38. Both maximum and cost-based regulated basic rent calculated under sections 5 and 6 could be modified depending on the quality of the flat, the location of the building and the flat’s equipment. The prices of services were not included in the rent.

39. Section 5a provided for annual rent-ceiling increases in line with the average monthly index of price growth in the construction industry, as assessed by the Ministry of Finance.

40. Under section 9, municipalities were empowered to increase or decrease rents by up to 20%, to reflect an “advantageous or disadvantageous” location of the housing. According to the applicant, between 1998 and 2002 the rents were increased only by amounts reflecting the annual rate of inflation. Since 2002 the real value of controlled rents has decreased due to inflation, being now significantly below the reconstruction costs of the housing resources.

41. Under section 16(2), the rent control under sections 5, 6, 8, 9 and 10 also applied to rents originating before 1 January 1994. If the controlled rent applying as of 31 December 1993 was higher than the rent calculated under the decree, the higher rent was applicable and it was considered to be the maximum until the change in conditions for rent calculation provided for in sections 6(2), 9, 10, 12(3), 15 and 16(1)(b). Under section 16(1) the landlord could enter into an agreement with the tenant on the new rent under agreements concluded prior to 1 July 1993 in family houses with 5 dwelling rooms at most, excluding the kitchen, or with more dwelling rooms but with a floor area not exceeding 120 square metres, including a kitchen area exceeding 12 square metres, and for which the area of commercial premises was not more than one third of the total of all areas, both residential and commercial. If they did not reach an agreement, then the landlord could increase the rent:

(a) up to the rent determined under section 5, modified under sections 8 and 9 and then increased by the rent for the flat equipment under section 10, from 1 January 1994 at the earliest,

(b) on the basis of a valuation authority’s decision, to a maximum level of double the rent determined under section 5, modified under sections 8 and 9 and then increased by the rent for the flat equipment under section 10, and at the earliest from the first day of the month after twelve months from the landlord’s written notice to the tenant concerning the change in rent.

7. Decree no. 30/1995 of the Ministry of Finance of 8 February 1995 (entered into force partly on 1 March and partly on 1 July 1995; and was repealed on 1 January 2002)

42. The new section 5a entered into force on 1 March 1995. Under its subsection 1 the maximum level of the basic monthly rent per square metre of the floor area of a flat of the relevant category under section 5 was annually determined according to the following formula with effect from 1 July to 30 June of the subsequent year:

Nt+1 = Nt x Ki x Kv x Kr, where

Nt+1 was the new maximum level of basic monthly rent per square metre of the flat’s floor area as valid from 1 July of the current year,

Nt was the maximum level of basic monthly rent per square metre of the flat’s floor area as valid until 30 June of the current year,

Ki was the coefficient of rent increase reflecting the rate of inflation for the whole previous calendar year,

Kv was the coefficient of rent increase depending on the size of the municipality,

Kr was the decision coefficient.

43. The coefficient of rent increase reflecting the rate of inflation Ki was calculated from the running average of change in the level of consumer prices (the rate of inflation) for the previous calendar year according to the index of the Czech Statistical Office; the Ministry of Finance determined the coefficient Ki in its decision and published it in the Price Journal until 1 March (incl.) of the current year. The value of the coefficient Kr was 1.00. The Ministry fixed the coefficient Kr at a level lower than 1.00, if the rate of inflation expressed as coefficient Ki was higher than 1.15, or at a level higher than 1.00, if the rate of inflation expressed as coefficient Ki was lower than 1.10. The maximum coefficient of rent increase depending on the size of the municipality Kv was determined in the following way:

Prague 

1.19

Municipality with at least 100,000 habitants

1.15

Municipality with 50,000 to 99,000 habitants

1.11

Municipality with 10,000 to 49,999 habitants

1.08

Municipality with less than 10,000 habitants

1.06

44. The municipality falling under the relevant group according to its number of inhabitants fixed the specific amount of the coefficient Kv for the whole territory of the municipality in a generally binding decree that came into effect on 1 July of the current year at the latest; the municipality could decrease the maximum coefficient Kv applicable to it to a minimum value of 1.00 or in justified cases it could use the coefficient fixed for the next highest category of municipalities up to its maximum value.

45. Under the amended section 9 of the decree, the municipality could also, in a generally binding decree, change the basic rent modified under section 8 of the decree in parts of the municipality or in individual houses chosen for their advantageous or disadvantageous location, especially from the point of view of traffic access, technical and civic amenities and environment, in the following way:

(a) increase it by 20% at most or decrease it by 15% at most in municipalities with at least 50,000 inhabitants, in Františkovy Lázně, Luhačovice, Mariánské Lázně and Poděbrady,

(b) increase it by 10% at most or decrease it by 10% at most in municipalities with at least 1,000 inhabitants and less than 50,000 inhabitants,

(c) increase it by 10% at most in the territory of national parks and zone one protected landscape areas.

46. With effect from 1 July 1995, Decree no. 30/1995 amended the existing section 2(2)(b) of Decree no. 176/1993. In consequence, the rent regulation under this decree, in effect from 1 July 1995, did not apply from that date onwards to all flats in respect of which a tenancy agreement was negotiated with a new tenant, with the exception of statutory transfer of tenancy, exchange of flats, replacement flats and more recently also service flats for professional soldiers. With the exception provided for in the amended section 2(2)(b) of Decree no. 176/1993, the rent regulation under Decree no. 30/1995 also applied to tenancies that existed on 1 March 1995.

47. From 1 July 1995 rent was regulated on a cost basis in the relevant manner for flats whose reconstruction or modernisation was approved after 30 June 1993 with the help of public funds, and for flats whose reconstruction or modernisation was approved after 30 June 1993. If the cost-based regulated basic rent determined under section 6(1) and (2) was lower than the maximum basic rent determined under sections 5 and 5a, then the rent control under these sections applied.

8. Decree no. 274/1995 of the Ministry of Finance of 13 November 1995 (entered into force on 1 January 1996 and was repealed on 1 January 2002)

48. The decree further amended and supplemented Decree no. 176/1993. Under the previous section 3(8), public funds meant above all financial means provided from the State budget and funds, municipal budgets, and budgets of district offices or of organisations dependent on these resources, while it also meant resources, credits in particular, in which such offices or organisations participated. These latter resources were no longer mentioned and, by contrast, in the new section 3(9) it was explicitly stipulated that public funds did not refer to funds provided under the Act on building savings and State subsidies for building savings or under the Government order requiring State financial support for mortgage credit in respect of flat construction.

49. At the same time, for the flats subject to cost-based regulated basic rent under section 6(1), the maximum limit of cost-based regulated rent changed from double to triple the maximum basic rent. Moreover, the rent regulation under this decree applied also to tenancies originating before the entry into force of this decree.

9. Decree no. 86/1997 of the Ministry of Finance of 27 February 1997 (entered into force on 30 April 1997 and was repealed on 1 January 2002)

50. The decree again amended Decree no. 176/1993. Section 5a(5) newly stipulated that for the period from 1 July 1997 to 30 June 1998 the maximum coefficient of rent increase Kv would be 1.67 for Prague and 1.35 for municipalities with at least 100,000 inhabitants. Moreover, Prague could, from 1 July 1998 onwards, use a maximum coefficient Kv higher than 1.19 and up to 1.30. Section 6(1) of the decree was amended so that the cost-based regulated rent under this provision applied to flats whose construction or completion was approved after 30 June 1993 and public funds were used in the financing thereof, or approved even before this date and public funds were used in the financing thereof from 1995. Furthermore, the rent regulation under this decree also applied to tenancies originating before its entry into force.

10. Decree no. 41/1999 of the Ministry of Finance of 22 February 1999 (entered into force on 28 February 1999 and was repealed on 1 January 2002)

51. The decree amended in particular section 5a of Decree no. 176/1993. The maximum level of basic monthly rent per square metre of the floor area of a flat of the relevant category under section 5 of the Decree was now to be determined annually according to the following formula, with effect from 1 July to 30 June of the following year:

Nt+1 = Nt x Ki, where

Nt+1 was the new maximum level of basic monthly rent per square metre of the flat’s floor area as valid from 1 July of the current year,

Nt was the maximum level of basic monthly rent per square metre of the flat’s floor area as valid until 30 June of the current year,

Ki was the coefficient of rent increase.

52. The maximum coefficient of rent increase Ki reflecting the average monthly index of price growth in the construction industry in the previous year was fixed by the Ministry of Finance and published in the Price Journal until 1 March of the current year. The specific amount of this coefficient for the whole territory of a municipality was to be determined by the municipality in a generally binding decree that would come into effect on 1 July of the current year at the latest; the municipality could decrease the maximum coefficient Ki to a minimum value of 1.00.

11. Ordinance no. 01/2002 of the Ministry of Finance on the list of goods with controlled prices (entered into force on 1 January 2002 and was repealed on 1 January 2003)

53. The ordinance introduced, inter alia, a maximum level of monthly rent and service charges to be paid by tenants occupying flats which had been subject to the controlled rent scheme on 31 December 2001. It stipulated, inter alia, as follows:

“1. From 1 January 2002 to 30 June 2002 the maximum level of monthly rent for a flat including a flat in a family house ..., for which on 31 December 2001 the rent was regulated by a maximum price under Decree no. 176/1993 ... is the rent as valid on 31 December 2001 with appropriate modifications under points 5 to 7.

2. With effect from 1 July 2002 the maximum level of basic monthly rent in a flat mentioned in point 1 shall be determined by multiplying the flat’s floor area by the maximum level of basic monthly rent in the municipality per square metre of the relevant flat category under point 3.

3. The maximum level of basic monthly rent in the municipality per square metre of the floor area of a flat of the relevant category as valid from 1 July 2002 shall be determined according to the following formula:

Nt+1 = Nt x Ki

Nt+1 = the new maximum level of basic monthly rent in the municipality per square metre of the floor area of a flat of the relevant category as valid from 1 July 2002,

Nt = the maximum level of basic monthly rent in the municipality per square metre of the floor area of a flat of the relevant category as valid on 31 December 2001,

Ki = the coefficient of rent increase reflecting the average monthly index of price growth in the construction industry in the previous year, determined by the decision of the Ministry of Finance and published in the Price Journal until 1 March 2002. ...”

54. From 1 July 2002 to 31 December 2002 the coefficient of rent increase Ki reflecting the rate of inflation was determined in Ministry of Finance Ordinance no. 02/2002 at 1.04.

12. Ministry of Finance Ordinance no. 06/2002 on maximum rents for flats, maximum service charges and rules for controlled rents (entered into force on 15 November 2002 and was repealed on 18 December 2002)

55. The Ordinance fixed a new maximum level of monthly rent and maintenance costs in respect of flats which had been subject to the controlled rent scheme under Ordinance no. 01/2002 on 14 November 2002. Point 1 of the Ordinance stipulated, inter alia, the following:

“1. From 15 July 2002 to 30 June 2003 the maximum level of basic monthly rent in a flat, including a flat in a family house with one flat (hereinafter “in a flat”), in which as of 14 November 2002 the rent was regulated by the maximum level under Ministry of Finance Ordinance no. 01/2002 on the list of goods with controlled prices, shall be the rent determined by multiplying the flat’s floor area by the maximum level of basic monthly rent in the municipality per square metre for a flat of the relevant category as valid from 1 July 2002 with the appropriate modifications under points 6 and 7.

2. With effect from 1 July 2003 the maximum level of basic monthly rent in a flat mentioned in point 1 shall be calculated by multiplying the flat’s floor area by the maximum level of basic monthly rent in the municipality per square metre for a flat of the relevant category under point 4. ...

4. The maximum level of basic monthly rent in the municipality per square metre of the floor area of a flat of the relevant category as valid from 1 July 2003 shall be determined according to the formula:

Nt+1 = Nt x Ki

Nt+1 = the new maximum level of basic monthly rent in the municipality per square metre of the floor area of a flat of the relevant category as valid from 1 July 2003

Nt = the maximum level of basic monthly rent in the municipality per square metre of the floor area of a flat of the relevant category as valid on 30 June 2003

Ki = the coefficient of rent increase reflecting the average monthly index of price growth in the construction industry in the previous year, determined by the decision of the Ministry of Finance and published in the Price Journal until 1 March 2003.”

13. Government Decree no. 567/2002 on rent moratoria (entered into force on 20 December 2002 and was repealed on 20 March 2003)

56. The Government ordered that rents which, on 17 December 2002, were fixed and unchangeable under binding regulations, and rents paid in respect of flats whose extension, completion or reconstruction had been approved after 30 June 1993 using public funds, could not be increased for a period of three months after the entry into force of this decree.

14. Act no. 107/2006 on unilateral rent increases and amendments to the Civil Code (entered into force on 31 March 2006)

(a) Creation of tenancy

57. Article 685 § 1 of the Civil Code provides that a tenancy agreement may be concluded for the period of the tenant’s work for the landlord.

58. Article 685a § 1 of the Civil Code states that when the lease is agreed the landlord is entitled to request the tenant to provide funds as security for the rent and service charges for the use of the flat and as payment for other liabilities in connection with the lease.

59. Article 687 § 2 of the Civil Code provides that in the tenancy agreement it may be stipulated that the landlord will hand the flat over to the tenant in a condition that is not fit for proper use, if the tenant has agreed with the landlord that the former would carry out the renovation of the flat.

(b) Termination of tenancy

60. Article 711 § 1 of the Civil Code continues to specify the grounds for which the landlord may serve notice of termination of the tenancy. Its subparagraph newly provides that the landlord may do so without the court’s approval if:

“(a) the tenant or persons residing with him/her, have acted contra bonos mores in the house, despite a prior written warning;

(b) the tenant has grossly violated his/her obligations arising under the tenancy, in particular by a failure to pay rent or charges for the use of the flat in an amount corresponding to triple the monthly rent and service charges for the use of the flat or if he has not supplied funds to the account under Article 686a § 3;

(c) the tenant has two or more flats, except where he cannot be fairly requested to use only one flat;

(d) the tenant leaves the flat unused without any serious justification or uses it only occasionally;

(e) the flat is specially-assigned or in a specially-assigned house and if the tenant is not a disabled person.”

61. Article 711 § 3 of the Civil Code specifies that the landlord’s written notice must be served on the tenant and it must include the ground for the notice, the period of notice, advice to the tenant concerning the possibility, within sixty days, of bringing an action before a court for a declaration that the notice is void, and if the tenant is entitled to a replacement flat under this Act then it must also mention the landlord’s obligation to secure to the tenant a corresponding replacement flat.

62. Under Article 711a § 1 of the Civil Code the landlord may serve notice of termination of the tenancy only with the court’s approval in the following cases:

“(a) the landlord needs the flat for him-/herself, his/her spouse, his children, grandchildren, son-in-law or daughter-in-law, his/her parents or siblings;

(b) the tenant has ceased to be employed by the landlord and the flat was tied to this employment and the latter needs the flat for his/her replacement;

(c) owing to public interest the flat or the house needs to be disposed of in a way that the flat cannot be used, or if the flat or the house need repairs during which the flat or the house cannot be used for an extended period of time;

(d) the flat is connected to premises designed for the purpose of a shop or other commercial use and the tenant or owner of these commercial premises wants to use this flat.”

63. Under Article 711 § 4 of the Civil Code if the tenant is entitled to a substitute flat or substitute accommodation, then he is obliged to vacate the flat within 15 days from the moment the corresponding substitute flat or accommodation is secured. Subparagraph 5 provides that the tenant is not obliged to vacate the flat, if, within 60 days from the service of the notice, he brings an action seeking to declare the notice null and void and the proceedings are not terminated by a final court decision.

(c) Succession to the right to lease a flat

64. Under the amended Article 706 § 1 of the Civil Code if the tenant dies and if the tenancy does not concern a flat in spouses’ joint tenancy, then the tenant’s children, parents, siblings, son-in-law and daughter-in-law become its tenants (joint tenants), if they can prove that they lived with the original tenant in a common household on the day of his/her death and that they do not have their own flat.

65. Under the new Article 706 § 2 of the Civil Code, the tenant’s grandchildren and persons taking care of the common household of the deceased tenant or persons dependent on him/her as regards their upbringing also become tenants (joint tenants), if they can prove that they had lived with him/her in the common household continuously for at least three years prior to his/her death and if they do not have their own flat. In the case of the tenant’s grandchildren, the court may decide for reasons worthy of special consideration that they could become the tenants, even if their stay in the common household with the tenant had not lasted for three years. In the case of persons whom the flat tenant housed after the conclusion of the tenancy agreement, the first sentence applies to them only if the tenant and the landlord concluded a written agreement on that matter; this condition does not apply in the case of the tenant’s grandchildren. Under Act no. 115/2006 partners of the deceased tenant are also covered by paragraph 1 with effect from 1 July 2006.

(d) Rent

66. Article 696 of the Civil Code newly provides as follows:

“1. The rent at the time the lease is agreed or any change in the rent during the tenancy relationship shall be provided for in an agreement between the landlord and the tenant, unless this Act or a separate regulation stipulate otherwise.

2. The method of calculating the amount of service charges for the use of the flat and the method of their payment shall be stipulated by a separate regulation.”

67. Section 1 of Act no. 107/2006 provides for a procedure for unilateral rent increase; nevertheless, it does not apply to rent for the flats mentioned in subsection 2, i.e. flats:

“(a) leased to partners, members or founders of a legal entity created for the purpose of becoming an owner of a house containing flats,

(b) of housing cooperatives established after 1958, if the flats in question have been built with financial, credit or other assistance provided under regulations on financial, credit and other assistance to cooperative housing construction, these flats being leased to their members,

(c) of housing cooperatives labelled under the regulations at the material time as people’s housing cooperatives, these flats being leased to their members,

(d) whose construction or completion was approved after 30 June 1993 and the municipalities received subsidies for their construction from the State budget or from State funds for the construction of tenement flats for the period of validity of the conditions of the provided subsidy,

(e) that are specially assigned and in flats in specially-assigned houses whose construction was approved before 30 June 1993.”

68. Section 3 defines the method of unilateral rent increase as follows:

“1. Unilateral rent increases by the landlord can be applied in the period starting on the date of the entry into effect of this Act and ending on 31 December 2010.

2. The landlord shall be entitled to increase the rent unilaterally once a year, from 1 January 2007 onwards and in subsequent years from 1 January, or from a later date, but not retroactively to cover the period since 1 January of the year in question, unless the landlord agrees on a different arrangement with the tenant.

3. Unilateral rent increases in each of the specified periods of 12 months may not be higher than the maximum increase in the monthly rent determined for each specific value of the present rent per square metre of the flat’s floor area in relation to the corresponding target value of the monthly rent per square metre of the flat’s floor area.

4. The method of calculating target values of the monthly rent per square metre of the flat’s floor area and maximum increases in monthly rent is stipulated in the annex to this Act.

5. The landlord’s notice of unilateral rent increase must be done in writing and it must include justification that the rent was duly determined on the basis of a maximum increase in monthly rent.

6. The obligation to pay the increased rent shall come into existence on the date given in the notice of increase, but no sooner than the first day of the calendar month three months after the delivery of the notice to the tenant. Within this time limit the tenant is entitled to bring an action before a court for a declaration that the rent increase is void.”

69. Under section 4 the Ministry for Regional Development issues and publishes in the form of a notice in the Collection of Laws, with effect from 1 July every year, the following information:

“(a) basic prices per square metre of a flat’s floor area reflecting average rates of purchase prices of real estate based on statistics of real-estate prices,

(b) target monthly rents per square metre of a flat’s floor area calculated using the formula stipulated in the annex to this Act, according to classification into size groups of the municipalities for individual regions, and in the case of Prague and Brno according to classification based on town districts,

(c) the maximum increases in monthly rent calculated using the formula stipulated in the annex to the present Act,

(d) regional classification of municipalities by grouping cadastral areas taken over from the classification used for the purpose of property valuation,

(e) classification of municipalities into size categories according to the number of inhabitants,

(f) procedure for establishing the maximum increase in monthly rent in the case of a specific flat.”

70. To date, the Ministry of Regional Development has issued four notices (nos. 333/2006, 151/2007, 214/2008 and 180/2009) which entered into force on 1 January 2007, 1 January 2008, 1 January 2009 and 1 January 2010 respectively, and were repealed on 1 January 2008, 1 January 2009 and 1 January 2010 respectively.

15. Act no. 102/1992 on certain questions relating to the enactment of Act no. 509/1991 amending the Civil Code (entered into force on 5 March 1992)

71. Section 1(1) provides that if a landlord who gave notice of termination with the court’s approval, or a person in whose favour the court has decided on another person’s obligation to vacate a flat, cannot secure replacement accommodation, then he may request the provision of such accommodation from the municipality on whose territory the flat to be vacated is located.

72. Under section 2(1) the municipality provides a replacement flat by offering the tenant a tenancy agreement concerning a flat or a room in a house owned by it, or by concluding a tenancy agreement in respect of a flat in a house of another legal or natural person for the benefit of the person who is obliged to vacate the flat.

73. The Act came into effect on 5 March 1992 and Part One thereof, providing inter alia for the competence of the municipalities in securing replacement flats, has not been amended since then.

16. Government Order no. 258/1995 to apply the Civil Code (entered into force on 3 November 1995)

74. Section 5 defines the term “minor repairs in the flat”, as mentioned in Article 687 § 2 of the Civil Code, as amended by Act no. 509/1991, as follows:

“1. Repairs to the flat and its interior equipment, if this equipment forms part of the flat and is owned by the landlord, are considered to be minor repairs according to their physical definition or according to the amount of costs.

2. The following repairs and replacements are considered to be minor repairs according to the physical definition:

(a) repairs to individual top parts of floors, repairs to floor coverings and replacements of thresholds and mouldings,

(b) repairs to individual parts of windows and doors and their components and replacements of locks, hardware, handles, shades and Venetian blinds,

(c) replacements of switches, sockets, circuit-breakers, bells, illuminators and house telephones, including electric locks,

(d) replacements of cocks in the gas plumbing with the exception of the main gas seal for the flat,

(e) repairs to stop valves on water plumbing, replacement of water and grease traps,

(f) repairs to heat metres and hot water metres.

3. The following repairs are considered minor: repairs to water plumbing outlets, siphons, hoods, mixer taps, showers, water heaters, bidets, basins, baths, sinks, kitchen sinks, flushing systems, cooking stoves, baking ovens, cookers, infrared radiators, kitchen units, fitted wardrobes and wardrobes. In the case of heating equipment the following repairs are considered minor: repairs to gas, electric and solid fuel fires, solid, liquid and gas fuel boilers for floor heating, including stop and regulation fittings and thermostat controls in floor heating; however repairs to radiators and central heating plumbing are not considered minor.”

75. Section 6 defines the term “costs related to the routine maintenance of the flat” under Article 687 § 2 of the Civil Code as follows:

“Costs related to the routine maintenance of the flat are costs for maintaining and cleaning the flat usually carried out in cases of long-term use of the flat. These include, in particular, regular checks and cleaning of objects mentioned in section 5(3) (gas appliances etc.), painting including plaster repairs, wallpapering and cleaning of floors including floor coverings, wall facing, cleaning of clogged waste pipes up to ascending pipes and interior painting.”

17. Act no. 82/1998 on State liability for damage caused in the exercise of public authority by an irregularity in a decision or the conduct of proceedings, as amended by Act no. 160/2006 (entered into force on 15 May 1998 and 27 April 2006 respectively)

76. Under section 1, subject to the conditions stipulated by this Act, the State shall be liable for damage caused during the exercise of the State’s power. Under section 2, this liability cannot be excluded.

77. Under section 3, the State shall be liable for damage caused by:

(a) the State authorities,

(b) legal and natural persons in the exercise of public administration that has been conferred on them by law or on the basis of law,

(c) authorities of autonomous regional governments, if the damage occurred during the exercise of public administration that was transferred to them by law or on the basis of law.

78. Under section 5 as amended, subject to stipulated conditions, the State is liable for damage caused by:

(a) a decision delivered in civil court proceedings, in administrative proceedings, in proceedings pursuant to the Administrative Code or in criminal proceedings,

(b) incorrect official procedure.

79. Section 13(1) provides that the State is liable for damage caused by an incorrect official procedure (first sentence), while incorrect official procedure consists also in non-compliance with an obligation to perform an act or deliver a decision within the statutory time limit (second sentence). The third sentence newly incorporated by Act no. 160/2006 specifies that provided there is no statutory time limit for performing an act or delivering a decision, an incorrect official procedure shall include a failure to comply with an obligation to perform an act or deliver a decision within a reasonable time.

80. Under section 14(1) the claim for damages shall be raised with the authority specified in section 6 of the Act (prior to the entry into effect of Act no. 160/2006 this “preliminary hearing” of the claim before the competent authority was not required for claims for compensation for damage caused by incorrect official procedure). Under subsection 3, the raising of the claim for damages under this Act is a pre-requisite for the eventual raising of the claim for damages before a court.

81. Under section 15(2) the aggrieved party may claim damages before a court only if the claim is not fully satisfied by the competent authority within six months after the filing of the request.

82. Section 26 provides that certain aspects of the nature and extent of damages to be paid are specified in sections 27 to 31 of the Act; the Civil Code is then applied subsidiarily.

83. Section 31a(1), newly incorporated by Act no. 160/2006, provides that reasonable satisfaction for non-pecuniary damage suffered shall be also awarded, regardless of whether any damage was caused by an unlawful decision or an incorrect official procedure.

84. Under section 32(1) the limitation period for claiming damages under this Act is three years from the date when the aggrieved party learned about the damage and about the person liable for it. If the quashing of a decision is a precondition for claiming a right to damages, then the limitation period commences on the date of delivery (notification) of the quashing decision. Nevertheless, the latest that the aggrieved party can claim his/her right is ten years from the date when he/she received (was notified of) the unlawful decision whereby he/she suffered damage; this does not apply in case of damage to health (section 32(2)).

85. The limitation period for claiming compensation for non-pecuniary damage under this Act is six months from the date the aggrieved party learned about the non-pecuniary damage, but not later than ten years from the date of legal fact as a result of which the non-pecuniary damage occurred; if non-pecuniary damage was caused by incorrect official procedure under section 13(1), second and third sentences, or under section 22(1), second and third sentences, then the limitation period ends no sooner than six months after the termination of the proceedings in the course of which this incorrect official procedure occurred (section 32(3)).

86. Under section 35 the limitation period is frozen from the date the claim for damages is filed until the end of the preliminary hearing, but for no longer than six months.

87. Section 36 provides that liability under this Act relates to damage caused by decisions delivered after the date of entry into effect of this Act and to damage caused by incorrect official procedure after the date of entry into effect of this Act; the liability for damage caused by decisions delivered prior to the entry into effect of this Act and damage caused by incorrect official procedure prior to the entry into effect of this Act is governed by existing regulations (Act no. 58/1969).

18. Act no. 150/2009 on amendments to Act no. 107/2006 on unilateral rent increases (entered into force on 1 June 2009)

88. The Act extends the period during which the “target rent” is to be reached until 2012 (from the originally expected 2010). This amendment concerns flats in Prague, in municipalities in Central Bohemia with a population of more than 9,999 as at 1 January 2009, and in the cities of České Budějovice, Plzeň, Karlovy Vary, Liberec, Hradec Králové, Pardubice, Jihlava, Brno, Olomouc and Zlín. The reasons for this distribution of the last stage of the deregulation over three years was the fact that in the above locations excessive levels would be reached owing to increases in the prices of flats from which the target rent is calculated.

19. Amendment to the Civil Code (Act no. 132/2011)

89. An amendment to the Civil Code came into force on 25 May 2011. Selected amended provisions read now as follows:

“Article 689

(1) The landlord shall have the right to request that the number of persons living in the flat is such that it is adequate to the surface area of the flat and does not prevent any of these persons from using the flat duly and living in satisfactory sanitary conditions.

(2) The landlord shall have the right to reserve, in the lease contract, his consent to the acceptance of additional persons to the flat. This shall not apply if it concerns a closely connected person or other cases worthy of special consideration.

(3) The tenant shall inform the landlord in writing and without undue delay of changes in the number, first names, surnames and dates of birth of persons in the flat if it can be assumed that such change will last for more than two months; the tenant shall also inform the landlord of his marriage or passage of tenancy. If the tenant fails to do so within two months from the day on which the change occurred it shall be understood that he has grossly violated his obligation.

(4) If the tenant is aware in advance of his long-lasting absence from the flat, combined with complicated contacts with him, he shall inform the landlord thereof. At the same time he shall specify a person who will provide for the possibility of entering the flat if necessary.

[...]

Article 696

(1) The rent at the moment of conclusion of the lease contract or change in the rent during the tenancy relationship shall be arranged for in an agreement between the landlord and the tenant, unless this Act or a separate regulation stipulate otherwise.

(2) If the rent is not agreed, the landlord can propose a rent increase to the tenant in writing. If the tenant agrees with the proposed rent increase, the rent shall be increased as of the third calendar month following the delivery of the proposal. If the tenant does not notify the landlord in writing, within two months of the delivery of the proposal, that he agrees with the rent increase the landlord shall have the right to propose, within another period of three months, that the rent be determined by a court. Upon the landlord’s motion the court shall decide on the determination of the rent that is customary at the given place and time. The court shall determine the rent as from the day on which the motion was filed with the court.

(3) The court can decide, pursuant to subsection 2, also in the case of tenancy in which the rent was agreed and which is a tenancy for an indefinite period of time if the circumstances that formed the basis from which the landlord or tenant proceeded when agreeing on the rent have changed substantially.

(4) If the tenant proposes a rent decrease, subsections 2 and 3 shall apply mutatis mutandis.

(5) Subsections 2 to 4 shall not apply when determining rents in the case of flats in housing cooperatives.

(6) The method of calculating the amount of service charges for the use of the flat and the method of their payment shall be stipulated by a separate regulation, unless the landlord and the tenant agree otherwise.

[...]

Article 706

(1) If the tenant dies and the flat is not in spouses’ joint tenancy, then the rights and obligations under the tenancy shall pass to the person who lived with the original tenant in a common household on the day of the tenant’s death and who does not have his own flat. If that person is not the tenant’s spouse, partner, parent, sibling, son-in-law, daughter-in-law, child or grandchild, the rights and obligations under the tenancy shall pass to that person only if the landlord had consented to that person’s living in the flat. The consent shall be given in writing.

(2) After its passage under subsection 1, the lease of the flat shall end in two years from the moment of the passage of the tenancy at the latest. This provision shall not apply if the person to whom the tenancy has passed is at least 70 years old at the moment of the passage of the tenancy. This provision shall not apply also if the person to whom the tenancy has passed is less than 18 years old at the moment of the passage of the tenancy; in that case the tenancy shall end on the day when that person is 20 years old at the latest, unless the landlord and the tenant agree otherwise.

(3) If several persons satisfy the conditions for passage of the tenancy, then the rights and obligations under the tenancy shall pass to all of them jointly and severally. However, if there is the tenant’s child among those persons, then the rights and obligations under the tenancy shall pass to that child.

(4) Everyone satisfying the conditions for passage of the tenancy can notify the landlord in writing within one month of the tenant’s death that he does not intend to continue with the tenancy; that person’s tenancy shall end on the day of the notification.

(5) If the tenant of a flat in a housing cooperative dies and this flat is not in spouses’ joint tenancy, then upon the tenant’s death his membership of the housing cooperative and the tenancy of the flat shall pass to the heir to whom the membership share was conveyed.”

B. The Constitutional Court’s case-law concerning the constitutionality of the rent-control legislation

Judgment no. Pl. ÚS 3/2000 of 21 June 2000 (published in the Official Gazette under the number 231/2000)

90. Ruling on a constitutional appeal lodged by fourteen Senators, the Constitutional Court found Ministry of Finance Decree no. 176/1993 to be contrary to Article 1 of Protocol No. 1 and Article 11 § 1 of the Charter. It held, inter alia:

“The major challenges faced and the substantive restrictions on property rights adopted from 1950 to 1980 made it necessary to put an end to discrimination against certain classes of owners so as to restore their right to the peaceful enjoyment of their possession within the meaning of Article 1 of Protocol No. 1 and Article 11 § 1 of the [Charter]. The essence of the discrimination lies in the fact that, in contrast with other owners, some of the substantive aspects of their property rights are denied to the aforementioned owners and, further, ... in the fact that in many cases, where their only income is derived from rent, those owners are being obliged to subsidise what in the Constitutional Court’s view is a major social problem, ... that is, a burden which cannot be shouldered by a certain section of society but requires a reasonable and balanced solution by the State and society as a whole. ...

In other words ... as a result of existing legislation, certain groups in our society are bearing costs which ... should be covered by the State. The rent-ceiling scheme, if it is to be compatible with the Constitution, must not keep rents at a level which eliminates any possibility of an economic return on all the established and necessary costs. [Otherwise]... it would imply the denial of all the principles of ownership.

91. The decree was repealed on 31 December 2001 in order to provide the legislature with time to legislate on the subject anew.

Judgment no. Pl. ÚS 8/02 of 20 November 2002 (published in the Official Gazette on 18 December 2002 under the number 528/2002)

92. The Constitutional Court, ruling on two constitutional appeals from the Ombudsman and a group of Senators, annulled Ministry of Finance Ordinance no. 06/2002, finding that the Ministry had not been empowered to regulate rents for dwellings by means of that form of secondary legislation and, moreover, that the ordinance violated Article 1 of Protocol No. 1, Article 2 § 2 of the Charter and Articles 1, 2 § 3 and 15 of the Constitution read in conjunction with Articles 1, 4 §§ 3, 4 and 11 § 1 of the Charter, as the rent ceilings which they introduced froze the rent-control scheme in force before 1 January 2002.

93. As regards the procedure used for the adoption of the ordinance, the Constitutional Court noted that the Ministry, in issuing the ordinance, had relied on Act no. 265/1991 on the powers of the authorities of the Czech Republic in relation to prices and Act no. 526/1990 on prices. Whilst these legal acts empowered certain State authorities to adopt measures regulating the prices of goods defined therein, they did not entitle them to regulate the conduct of landlords and tenants subject to the legislation in any other manner.

94. The court found that the Ministry had acted beyond and contrary to these laws when imposing its regulations across the board on landlords and tenants within the meaning of the Civil Code and in regulating certain aspects of their conduct in a manner which was reserved only for statutory regulations in accordance with the Charter, and which infringed the principle of contractual autonomy of private parties.

95. Moreover, the court ruled that the impugned ordinance lacked proportionality and discriminated against a certain class of owners. In its reasoning it stated, inter alia, that a rent-control scheme could generally be said to be in conformity with constitutional law if it reflected market prices based on the location of dwellings and if it struck a fair balance between the public interest and the fundamental rights of individuals.

96. Relying on differences between Czech law and the European standards, the court further held that, although the legal concept of personal use of dwellings had been replaced by the concept of lease within the meaning of the Civil Code, effective reform of the lease-control scheme to reflect the free-market economy had not yet been introduced. With regard to the rent-control scheme, it observed that it was based on so-called command prices which were fixed administratively, whereas in other European countries controlled rents were related to market prices.

97. According to the Constitutional Court, the Ministry of Finance Ordinance, which reflected only the trend in costs and inflation, had ignored the trend in prices on the market.

Judgment no. Pl. ÚS 2/03 of 19 March 2003 (published in the Official Gazette on 20 March 2003 under the number 84/2003)

98. Ruling on a constitutional appeal by twenty-five Senators, the Constitutional Court annulled Government Decree no. 567/2002, finding in particular:

“... in general, it can be said that the object [of the regulation] is to ‘freeze’ rents for a definite period of time. The regulation does not apply to all rents but only to those which were subject to rent ceilings on 17 December 2002, that is, rents within the meaning of Section 1 of Ordinance no. 06/2002, annulled on 18 December 2002 by Constitutional Court judgment no. 528/2002, and to those paid for dwellings with regulated rent ... On the basis of these findings, it can be observed that this moratorium represents continuity with Ordinance no. 06/2002 and that the objectives of both regulations are basically identical. ...

In that respect the question arises what is the current state; more exactly at what level are rents currently regulated. It can be presumed that the Ordinance no. 06/2002 ceased to be in force as of 18 December 2002 and since that date nothing prevented the contractual parties from agreeing on rent by mutual consent; to the contrary, unilateral rent increases ceased to be permissible... Another possibility should not be omitted i.e. that one of the contractual parties would bring the issue of rent to a court; this would concern cases of disagreement over level of rent namely when the landlord would claim the level of rent common in the given locality on the ground that the parties did not agree on the price (§ 671 Civil Code); this would however not be the case of rent increase properly speaking... It is possible to presume that it was not possible to increase rent unilaterally after the repeal of Ordinance no. 06/2002, unless the parties agreed so by mutual consent. This is, however, rather a theoretical possibility, owing not only to the limited time available to negotiate such a tenancy agreement but also – and most importantly – to the obvious economic disadvantage of such an arrangement for tenants. It follows that the impugned regulation effectively freezes in time the rent-control scheme which was declared unconstitutional by Constitutional Court judgment no. 528/2002 on the ground of the rent ceilings it imposed and the method of their calculation. ...”

99. Having regard to the identical objectives and subject matter of the moratorium and of the legislation providing for the rent-control scheme, which had been annulled by the Constitutional Court in the past on grounds of unconstitutionality, and given that the Government had regulated rents again by means of secondary legislation lacking an adequate statutory basis notwithstanding the fact that the Constitutional Court had found this legislative technique to be illegal, the latter ruled that Government Decree no. 567/2002 was in breach of the Constitution, the Charter and Article 1 of Protocol No. 1 taken in conjunction with Article 14 of the Convention.

100. It further noted in an obiter dictum that should a rent control scheme compliant with the Constitution not be adopted by the legislator, the Constitutional Court would have no other possibility than to fulfil its duties and assure observation of principles guaranteed by the Constitution and international treaties at least in individual cases, although such solution would be insufficient and provisory, the only satisfactory solution being adoption of a regulation.

C. Constitutional Court’s judgments in individual cases

Judgment no. IV. ÚS 524/03 of 23 September 2004

101. The Constitutional Court found that Czech rent law was based on a high level of protection for tenants, prompted in particular by social considerations, as housing served a basic human need. However, it was unacceptable simply to transfer a social burden from one group of persons (tenants) to another (landlords). In the current housing market, landlords did not have any legal means of obtaining a rent-controlled flat as substitute housing for a tenant whose tenancy they sought to terminate.

102. Moreover, the fact that there was no rent-control law leading to rent deregulation should not be detrimental to landlords. The distortion of the market in consequence of the long-term failure to solve the problem of rent-controlled flats could not be perpetuated by the national courts’ case-law. It was not permissible to create inequality between tenants of rent-controlled flats and those renting flats not subject to rent control, or between landlords who owned flats with controlled rents and those who owned flats not subject to control.

Judgment no. IV ÚS 8/05 of 1 June 2005

103. Some landlords lodged a constitutional appeal against the decisions of ordinary courts dismissing their action for vacation of a flat against a deceased tenant’s granddaughter, who had claimed that the right of tenancy had passed to her on the basis of the Civil Code. The Constitutional Court held as follows:

“On the basis of the constitutional appeal under consideration the Constitutional Court was called to decide whether the ordinary courts, by making an extreme interpretation of Article 706 § 1 of the Civil Code, had interfered with the applicants’ ownership rights, which are guaranteed by Article 11 § 1 of the Charter and which did not receive judicial protection contrary to Article 36 § 1 of the Charter. ...

A fortiori, it cannot be accepted in a case where the facts, ascertained in such a careless way, are to be subsumed under Article 706(1) of the Civil Code which, as explained above, significantly restricts the applicants’ basic ownership right in relation to the flat. By this course of action not only is Article 36 § 1 of the Charter violated, but Article 11 § 1 of the Charter, which provides protection to ownership rights at the constitutional level, is also violated in consequence of the extension of the purpose of Article 706 § 1 of the Civil Code (i.e. in consequence of a failure to observe Article 4 § 4 of the Charter). From the constitutionality perspective it is true that not even an established practice is enough to justify an expansive interpretation of grounds for succession to tenancy by which landlords’ ownership rights are restricted beyond the law. If such interpretation is to protect the right to housing, then the Constitutional Court must observe that in its finding of 21 June 2000 no. Pl. ÚS 3/2000 it held that although the European Social Charter embodied the right to housing, in case of competition of this right with other rights these clashes need to be measured against the principles of fair balance and proportionality ... In case of a clash between the right to housing, which is a social right (the fact that it arises under international law does not alter this in any way), and the ownership right it is necessary to apply principles that are also valid in respect of other social rights ... It cannot be neglected that the content of social rights – contrary to the classical fundamental rights – depends on the wealth of society and on economic development, including fluctuations in the economic cycle. This characteristic, i.e. this condition, often leads to the classification of social rights as constitutional soft law (in contrast to classical fundamental rights). In testing the proportionality and fair balance the ‘right’ of an actual tenant, who may resort to ‘feigned’ cohabitation or may move in for a short period of time solely to acquire favourable housing conditions, would not stand in relation to the ownership right. The expedience of the conduct may, for example, be determined from a comparison of the situations in which the person lived prior to his/her move, in relation to which he/she asserts that it was motivated exclusively by the care of a relative. Furthermore, the case-law of the Supreme Court of the Czech Republic satisfies this requirement, when it bases its decision-making on the following opinion: ‘Although for persons specified in Article 706 § 1, first sentence of the Civil Code, the condition of a community of consumption is not required for succession to tenancy of a flat, from the point of view of satisfying the condition of there being a common household, it is necessary for the cohabitation in the flat with the tenant to be characterised by permanency. The cohabitation is considered permanent if there are circumstances that can be objectively ascertained and that show that the flat tenant and the person living with him/her in his/her flat agreed upon the intention to cohabitate permanently.’ (cf. decision of 16 January 2001 no. 26 Cdo 1867/2000, no. 42/2001 in the Collection of Decisions of the Supreme Court). ...

From the point of view of Article 4 § 4 and Article 11 § 1 of the Charter it is not acceptable for Article 706 § 1 of the Civil Code to provide protection to relatives of the deceased tenant specified in this provision who make use of this unique opportunity contrary to its narrow purpose. The Constitution obliges the courts to verify carefully whether the person asserting the satisfaction of conditions for succession to tenancy is not abusing the law to the detriment of the owner. This holds true a fortiori if a short period of only several months has passed from the moment of the beginning of the cohabitation to the death of the original tenant and during this period the original tenant was mainly in hospitals or other health-care facilities. The decisions of the ordinary courts are based on an interpretation of the law that does not observe the constitutional protection of the applicants’ ownership rights and furthermore the ordinary courts reached their conclusions via a course of action in assessing the evidence that is contrary to the rules of a fair trial. ...”

Judgment no. IV. ÚS 113/05 of 7 September 2005

104. In this judgment the Constitutional Court quashed the judgment of the appellate court upholding a first-instance judgment in which an applicant’s action against tenants for the surrender of unjust enrichment had been rejected. The unjust enrichment consisted in the fact that the tenants had used a flat in the applicant’s building without legal entitlement and they had paid her, for the use of the flat, the amount of the “controlled rent” for a second-category flat. The Constitutional Court stated, inter alia, as follows:

“In the case under consideration the applicant requested, before the ordinary courts, the enjoined party to surrender the unjust enrichment which that party had allegedly gained to the detriment of the applicant by refusing to vacate the flat, in relation to which that party’s right of lease had ended upon a notice of termination, despite having been provided with a substitute flat. In the Constitutional Court’s view it is not possible to accept the interpretation according to which until the time of a decision of the court on the enforcement of a decision the relationship between the former landlord and tenant is regulated by Article 712a of the Civil Code, i.e. that until that time the former tenant is obliged to pay to the landlord rent as determined by Decree no. 176/1993, i.e. the ‘controlled rent’. Such a broad interpretation does not even observe the protection of the right to housing, but it protects housing ‘for a price subsidised by the owner’ and that is a consideration that is markedly outside a reasonable interpretation of the right to housing. In the Constitutional Court’s opinion such interpretation does not observe the essence and objective of the protection of ownership rights and consequentially it creates an entirely disproportionate restriction, or even negation of ownership rights, which are already inadmissibly restricted during the tenancy by the mere nature and form of the rent regulation, as the Constitutional Court has repeatedly held in the past (cf. judgments nos. Pl. ÚS 3/2000, Pl. ÚS 8/02 and Pl. ÚS 2/03). ...

In other words, Article 712a of the Civil Code must be interpreted in a way that it affects the relationship between the former landlord and tenant only until the time when the former landlord secures a replacement flat for the tenant. It is then up to the owner of the flat to show, in evidential proceedings before the ordinary courts, on what date he secured the replacement flat. From that moment the former tenant uses the flat without legal entitlement and this relationship is no longer governed by Article 712a of the Civil Code. After this time the right of the owner ... to the surrender of unjust enrichment comes into existence, while the amount of the unjust enrichment should correspond to the amount of usual rent in the given place and time. The interpretation by the ordinary courts, which does not respect the limits stipulated in Article 4 § 4 of the Charter, represents a disproportionate restriction of the ownership rights of the flat owner and is therefore contrary to Article 11 § 1 of the Charter.”

Judgment no. IV. ÚS 611/05 of 8 February 2006

105. As no statute providing for controlled rents had been enacted after Constitutional Court judgment no. 84/2003 and the ordinary courts had failed to provide landlords with any remedy in respect of controlled rents, the Constitutional Court, with reference to the case-law of the Court (Kruslin v. France, 24 April 1990, Series A no. 176‑A) and to the principle of non-interference with property rights other than on a statutory basis, reiterated its intention to apply the principles enshrined in its previous judgments in individual cases until the existing vacuum legis was filled. It held:

“... it is incumbent upon the courts to fill the vacuum legis by their case-law... while taking into consideration the Constitutional Court’s case-law...”

106. The court further found:

“The interpretation [by the ordinary courts] of the Constitutional Court’s case-law ... in such a way as to deny the protection of property rights of landlords cannot be accepted. The objective of this case-law was not to freeze and set in stone the unconstitutional interference with property rights, but to eliminate unconstitutional restrictions on landlords’ property rights. The distortion of the market caused by the long-lasting lack of a solution to the problem of dwellings subject to the rent-control scheme cannot be perpetuated by the courts’ practice. Pending action by the legislature it is incumbent upon the ordinary courts to safeguard the rights ... of individuals. ... The courts cannot refuse to protect individuals’ fundamental rights by referring to the vacuum legis. On the contrary, they are obliged to provide such protection. They are requested to do so in a way that will protect the very substance and objective of ownership within the meaning of Article 4 § 4 of the Charter.”

107. The Constitutional Court then quashed the judgments of the Pardubice District Court of 7 October 2004 and Hradec Králové Regional Court of 16 June 2005 dismissing an action by J.K. seeking an order for his tenant to pay outstanding rent. The appellate court had inter alia held that the tenant was not receiving unjust enrichment because she had a legal title to live in the flat and was paying a rent in the same amount as when that legal title had been established.

Judgment no. Pl. ÚS 20/05 of 28 February 2006 (published in the Official Gazette under the number 252/2006 on 2 June 2006) (see too §§ 157-158 below)

108. A plaintiff was claiming the payment of outstanding rent for July 2003 corresponding to the difference between the regulated rent and usual rent as determined by an expert opinion. After having declared the long-lasting inactivity of the legislator unconstitutional, the Constitutional Court urged the ordinary courts to fulfil their essential role and not to reject the landlords’ actions for rent increase on the ground of absence of legal basis. It held that the ordinary courts had to decide on rent increase notwithstanding the absence of special legislation.

109. It referred to the Supreme Court’s case-law no. 26 Cdo 867/2004 of 31 August 2005, 26 Cdo 80/2005 of 15 September 2005, 26 Cdo 819/2005 of 22 September 2005, 26 Cdo 1647/2005 of 19 October 2005, 26 Cdo 1912/2005 of 26 October 2005, in which the Supreme Court had held that lower courts could not interfere with the contractual relationship, and declared that such approach was contrary to the right to judicial protection.

110. Judge Jan Musil formulated a dissenting opinion in which he esteemed that a judicial solution of the issue, i.e. lower courts deciding on rent increase, in a situation where no objective criteria for determination of the level of rent exist, could lead to arbitrary and random decisions of lower courts. He found it hardly imaginable that lower courts could decide on individual case on a fair and foreseeable basis, especially should actions for rent increase be massively lodged. Some forms of evidence (e.g. expert opinions) were lengthy, procedurally complex and very costly for the parties.

Judgment no. I.ÚS 717/05 of 21 March 2006 (see too §§ 159-161 below)

111. On 6 August 2003, the plaintiff lodged an action to declare null and void regulated tenancies and order the tenant to pay a newly fixed increased rent as of 1 April 2003, which was rejected by ordinary courts. In its judgment the Constitutional Court reiterated the principles articulated in judgment no. Pl. ÚS 20/05 of 28 February 2006 and quashed the lower courts decisions.

112. The Constitutional Court criticised the Supreme Court’s decision in that case which applied judgment no. 26 Cdo 867/2004 of 31 August 2005 referred to in judgment no. Pl. ÚS 20/05 of 28 February 2006. It urged the Supreme Court to lay down the basis for unification of the ordinary courts’ jurisprudence.

113. The Constitutional Court further noted that the issue of declaring null and void the contractual provisions regarding the level of rent was new in jurisprudence which led to a legal uncertainty for the landlord. In consequence, the Supreme Court would have to refrain from rejecting the action on the ground that the landlord failed to comply with formal requirements for formulating such an action but allow the lower courts to give him sufficient possibility to reformulate his action in compliance with the Supreme Court’s perception, if need be.

114. One of the three judges composing the chamber of the Constitutional Court, Vojen Güttler, formulated a partly dissenting opinion where he expressed the view that judicial solution of the regulated rent issue was very risky due to the possibility that ordinary courts would decide randomly and inconsistently. He esteemed that the reasoning should have indicated that the duty of ordinary courts to decide on rent increase would end as of the day of taking of effect of a new legislation regulating rent increases. He also pointed out that the ordinary courts would have to consider whether the increased rent should be granted as of the day of lodging the action for rent increase or of the courts’ decision becoming final.

Judgment no. I. ÚS 489/05 of 6 April 2006

115. On 5 August 2004, the plaintiff introduced an action for payment of outstanding rent for the period between 18 December 2002 and 31 July 2004 representing the difference between the usual and the controlled rent for a flat. His action was rejected by lower courts whose decisions were subsequently quashed by the Constitutional Court.

116. The Constitutional Court stated that it had affirmed the lower courts’ obligation to decide on rent increase notwithstanding the absence of legislation for the first time in its judgment Pl. ÚS 20/05 above.

117. It further held that when deciding on increases in rent, the ordinary courts were empowered to act only pro futuro and that it was not possible to claim payment of the difference between regulated rent and the rent common in the given locality for the past.

118. Given the extraordinary character of this procedure created by the judgment Pl. ÚS 20/05 above the courts must provide the parties with sufficient space to take account of the applicable principles and to use adequate instruments including a possible modification of the formulation of the petition and the possibility of concluding a settlement. The plaintiff must be provided by the courts with sufficient instructions even outside the general obligation to provide advice embodied in Article 5 of the Code of Civil Procedure.

119. The court further held that if the landlord’s founded claims were not fully satisfied, he would have no choice but to sue the State for damages.

Judgment no. IV. ÚS 111/06 of 16 May 2006

120. In this judgment the Constitutional Court quashed lower courts’ decisions having rejected an action for payment of outstanding rent. It reiterated the opinion that if the landlord’s founded claims of rent increase were not fully satisfied, he would have no choice but to sue the State for damages.

Judgment no. II. ÚS 93/05 of 8 June 2006

121. In this judgment, the Constitutional Court quashed the lower courts decisions having rejected the landlord’s action for surrender of unjust enrichment in the amount of the difference between the controlled rent and the rent corresponding to the local conditions. The Constitutional Court esteemed that this action was “the only imaginable for the landlord”; by rejecting it the lower courts deprived him of the right to a fair trial and his right to peaceful enjoyment of property.

Judgment no. I. ÚS 47/05 of 13 July 2006

122. In this judgment the Constitutional Court reiterated the principles articulated in its previous judgments and quashed the lower courts’ decisions by which they rejected a landlord’s action requesting the payment of additional rent, corresponding to the difference between the regulated and market rent, for a past period of time.

123. Subsequently, lower courts rejected again the action referring to judgment no. I. US 489/05. They considered that a rent increase was only possible pro futuro. Their decisions were quashed again by the Constitutional Court on 5 February 2009 (see judgment no. III. US 696/07 (§§ 129-131 below) holding that it was possible to claim rent increase for the past.

Judgment no. I. ÚS 123/06 of 17 April 2007

124. On 12 July 2004, the plaintiff filed an action for payment of usual rent for the period from 21 March 2003 until delivery of the court’s decision, which was rejected by ordinary courts. The Constitutional Court reiterated the opinion that the landlords could only claim rent increase pro futuro. Ordinary courts were obliged to provide the plaintiff with adequate space to be allowed to take account of applicable principles and to use adequate instruments including modification of the formulation of the petition, and with adequate instructions even outside the general obligation to provide advice embodied in Article 5 of the Code of Civil Procedure. If the landlord’s founded claims of rent increase were not fully satisfied, he would have no choice but to sue the State for damages.

Judgment no. IV. ÚS 282/05 of 31 May 2007

125. In this judgment, the Constitutional Court granted a landlady’s constitutional appeal against the judgments of the lower courts which had dismissed her action to pay the difference between the rent paid by the defendants for August 2003 in the amount last determined under the repealed regulations in the domain of rent control and the usual rent, specified in an expert opinion. It found, inter alia, as follows:

“The fact that the applicant’s constitutional appeal was granted does not mean that the ordinary courts would accept the amount of rent requested by her without further examination. The specific amount of rent must result from the process of evidence in particular, during which the ordinary courts must provide sufficient opportunity to the litigants to enable them to present relevant background information that may influence the amount of rent. Given the exceptional nature of this procedure in which the law is developed, the claimant and the defendant must receive appropriate advice from the ordinary court, even outside the general obligation to provide advice embodied in Article 5 of the Code of Civil Procedure.”

Judgment no. II. ÚS 361/06 of 26 July 2007

126. In this judgment the Constitutional Court specified that the ordinary courts could decide on actions for rent increase only until valid legislation regulating rent increase as of 1 January 2007 becomes effective.

Decision no. Pl. ÚS 7/07 of 14 August 2008

127. In this decision the Constitutional Court specified, in an obiter dictum and referring to its decisions Pl. ÚS 20/05, I. ÚS 719/2005, IV. ÚS 611/05, II. ÚS 93/05, the meaning of pro futuro. It can only mean from the date on which the civil action for rent increase was lodged or the date indicated by the claimant, and for the period indicated in the action or until the date on which the court decides on the action.

Judgment no. IV. ÚS 175/08 of 9 September 2008

128. In this judgment the Constitutional Court reiterated the opinion that the landlords could only claim rent increase pro futuro and indicated that the meaning of pro futuro was as of the date of lodging the action. Should the landlord’s founded claims of rent increase not be fully satisfied, he would have no choice but to sue the State for damages

Judgment no. III. ÚS 3158/07 of 4 December 2008 (applied in III. ÚS 905/06 of 27 January 2009, III. ÚS 696/07 of 5 February 2009, III. ÚS 1129/07 of 19 February 2009, III. ÚS 95/08 of 19 February 2009)

129. In these decisions the Constitutional Court observed that all previous cases in which the Constitutional Court had quashed lower courts’ decisions concerned an issue of rent increase for a past period of time (inter alia judgments nos. I. ÚS 489/05, II. ÚS 361/06, IV. ÚS 111/06). It followed that the lower courts’ obligation to decide on rent increase, affirmed in judgment Pl. ÚS 20/05 of 28 February 2006, could not be reduced only to future tenancy relationships; it was possible to apply it also to past relationships and to order the payment of additional rent for a past period of time (surrender of unjust enrichment).

130. The court further held that claims for damages against the State had a subsidiary character with respect to the landlords rent claims against the tenants (rent increase, payment of additional rent).

131. One of the three judges composing the chamber, Jan Musil, expressed the same dissenting opinion in all five cases where he esteemed that the rent increase was only conceivable as of the day of lodging the action for rent increase against the tenant. He noted that the judgment Pl. ÚS 20/05 contained no explicit reference as to the point of time from which it was possible to increase rent. While the judgment no. I. ÚS 489/05 referred to an increase pro futuro, excluding at the same time any increases for the past, judgment no. IV. ÚS 175/08 considered that the increase could be granted as of the day of lodging the action for rent increase pro futuro.

Judgment no. IV. ÚS 2525/07 of 2 March 2009

132. In this judgment the Constitutional Court held that the opinion that the rent increase could not be granted for the past, expressed in judgment no. I. ÚS 489/05, had been overcome and quashed the lower courts’ judgments which had rejected an action for surrender of unjust enrichment lodged by a landlord.

Opinion no. Pl. ÚS 27/09 of 28 April 2009 (published in the Official Gazette under the number 136/2009)

133. The Constitutional Court decided that the ordinary courts could grant rent increases for a period from the date of the lodging of the action until 31 December 2006. The rent could not be increased for the period preceding the lodging of the action. Nor could it be increased for the period after 1 January 2007 since unilateral rent increases were authorized by Act no. 107/2006.

134. For the abovementioned period of time the action for damages against the State on the ground of the long-lasting unconstitutional inactivity of the Parliament regarding the failure to adopt a special regulation on conditions under which the owners were authorized to increase rents, charges, or other conditions of rent agreements unilaterally, had subsidiary character and could only be lodged if the action for rent increase against the tenant failed. As regards the period preceding the date of the lodging of the action, the owner could claim damages directly against the State.

135. In that respect, the Constitutional Court precised that the right to damages from the State could in no way be deduced from its judgment no. Pl. ÚS 20/05 of 28 February 2006 where it had held that the long-lasting inactivity of the legislator had been unconstitutional. Responsibility for legislative competence was primarily political. Although the margin of appreciation of the legislator was limited by the constitutional order, if these boundaries were not respected it was possible either to repeal the relevant act or to declare its unconstitutionality by the Constitutional Court. Such intervention by the Constitutional Court could under some circumstances impact the rights of an individual which had been restricted (e.g. inapplicability of an act in a particular case). Nonetheless, it did not create the individual’s claim for compensation. As regards judgments nos. I. ÚS 489/05 of 6 April 2006 and IV. ÚS 175/08 of 9 September 2008, the subsidiary claim of damages was based on the ordinary courts’ unfounded refusal to grant an action for rent increase, not the legislator’s inactivity.

136. The Constitutional Court further considered that claims for damages filed against the State under the State Liability Act on the ground of the long-lasting unconstitutional inactivity of the Parliament were to be analyzed by lower courts as claims for damages under Article 11 § 4 of the Charter. Since the Charter did not regulate practical details of such law suit such as competent authority, time-bars etc., the court esteemed that it was necessary to apply the State Liability Act per analogiam.

137. The Constitutional Court urged the legislator to deal with the issue of rent control and to take into consideration different measures adopted in Poland as a result of the Court’s judgment in the case of Hutten-Czapska v. Poland (no. 35014/97, ECHR 2006‑VIII).

138. There are dozens of decisions of the Constitutional Court delivered after this plenary opinion in which reference was made to this opinion and the landlords’ constitutional appeals against ordinary courts’ decisions on actions in which these landlords sought compensation for damage that had allegedly been caused by rent control, were granted.

Judgment no. I. ÚS 3241/07 of 16 June 2009

139. The plaintiff sued the state for damages in the amount of the difference between regulated rent and market rent for the period between February 2002 and January 2004. In its judgment the Constitutional Court ruled that the “possibility to pursue an action for rent increase against the tenant was created only by judgment no. Pl. ÚS 20/05”. Thus, the action for damages against the State did not have subsidiary character regarding the period concerned by the action. In other words, the owner was entitled to sue the State for damages directly regarding the period of time prior to that judgment.

The Court further held that the amount of indemnification to be paid by the State was not necessarily identical to the difference between the regulated rent and the rent that was common in the given locality.

Judgment no. I. ÚS 680/08 of 2 July 2009

140. In this case the owner filed an action for damages against the State on 29 August 2006. The action concerned the period from 1 September 2004 until 31 August 2006, i.e. both before judgment no. Pl. ÚS 20/05 but also after it became final, for which the owner was claiming payment of damages in the amount of the difference between regulated and usual rent.

141. The Constitutional Court reiterated that the “possibility to pursue an action for rent increase against the tenant was created only by judgment no. Pl. ÚS 20/05”. Consequently, the action for damages against the State did not have a subsidiary character until the day of publication of that judgment and the owners were entitled to sue the State for damages directly regarding the period of time preceding that date.

142. Nonetheless, the Constitutional Court esteemed that pursuant to the principle vigilantibus iura, the plaintiff should have introduced an action for rent increase for the period after the latter judgment became final. Although this fact did not entirely exclude the possibility of receiving compensation from the State, lower courts were obliged to take into account the amount which the owner could have successfully requested from the tenant.

143. The Court further held that the amount of indemnification to be paid by the State was not necessarily identical to the difference between the regulated rent and the rent that was common in the given locality.

144. The Constitutional Court further clarified that the court of appeal was manifestly mistaken when it considered that it was not possible to sue the State after the adoption of Act no. 107/2006 i.e. 31 March 2006. Restrictions on property rights had been removed first – although only progressively and partly – on 1 January 2007 when it became possible to increase rent unilaterally, not when the act had been adopted, nor when it took effect. This did not however exclude its subsidiary character after the publication of judgment no. Pl. ÚS 20/05.

Judgments nos. IV. ÚS 1431/09 of 26 January 2010, III. ÚS 870/09 of 8 April 2010, I. ÚS 1026/08 of 19 August 2010, and Decision no. IV. ÚS 1343/10 of 3 September 2010

145. In these rulings the Constitutional Court referred to its findings in opinion no. Pl. ÚS 27/09. It held that the ordinary courts could grant rent increases only for a period from the date of lodging of the action until 31 December 2006. For that period the action for damages against the State had subsidiary character and could only be lodged if the action for rent increase against the tenant failed; for the period preceding the date of the lodging of the action, the owner could claim damages directly against the State.

Judgment no. IV. ÚS 156/05 of 28 July 2009

146. In this judgment the Constitutional Court applied its judgment no. Pl. ÚS 27/09 of 28 April 2009 and quashed the Supreme Court’s judgment no. 25 Cdo 1124/2005 of 31 January 2007 (see below).

147. The Court further held that the amount of indemnification to be paid by the State was not necessarily identical to the difference between the regulated rent and the rent that was common in the given locality.

Decisions nos. IV. ÚS 152/06 of 4 August 2009, IV. US 256/06 of 31 August 2009

148. In these decisions the Constitutional Court, referring to its judgments nos. I. ÚS 489/05 and Pl. ÚS 27/09, refused to quash lower courts’ decisions considering that the owner could not request the courts to order a tenant to pay the difference between a regulated rent and a rent that was common in the given locality (or “minimal economic rent”) for a past period of time, whatever the legal ground e.g. surrender of unjust enrichment or compensation for limitation of property rights, but only claim a rent increase pro futuro from the date of lodging of such an action.

Judgment no. I. ÚS 908/09 of 19 August 2009

149. In this case the owners filed an action for damages against the State on 18 July 2007. Their action concerned the period from 1 May 2004 until 31 December 2006, i.e. both before judgment no. Pl. ÚS 20/05 but also after it became final, for which the owners were claiming payment of damages in the amount of the difference between regulated and economic rent.

150. The Constitutional Court ruled that the “possibility to pursue an action for rent increase against the tenant was created only by judgment no. Pl. ÚS 20/05”. Thus, the plaintiffs had the possibility to sue the tenant as of the day of publication of that judgment in the Official gazette. Regarding the period preceding that date, the owners were entitled to sue the State for damages directly.

151. Therefore, the Constitutional Court esteemed that pursuant to the principle vigilantibus iura, they could have introduced an action for rent increase for the period after the latter judgment became final. Although this fact did not exclude the possibility of receiving compensation from the State entirely, lower courts were obliged to take into account the amount which the owner could have successfully requested from the tenant.

152. The court rejected the owners’ argument that due to the entry into force of Act no. 107/2006 it would have been useless to introduce an action for rent increase after 2 June 2006. The court esteemed that the day of taking of effect of that law was not decisive but 1 January 2007 – the first day as of which it was possible to increase rent unilaterally.

153. The Court further held that the amount of indemnification to be paid by the State was not necessarily identical to the difference between the regulated rent and the rent that was common in the given locality.

Decisions nos. I. ÚS 2187/09 of 8 September 2009 and II. ÚS 3134/09 of 18 February 2010

154. These decisions confirmed that the approach developed in decision no. Pl. ÚS 27/09 was only applicable until 31 December 2006. Afterwards, it was necessary to apply Act no. 107/2006 which provides for a unilateral increase of rents.

Judgment no. IV. ÚS 1431/09 of 26 January 2010

155. On 8 December 2006, the owner sued the State for damages in the amount of the difference between regulated and market rent for the period between 22 December 2004 and 21 December 2006. In its judgment the Constitutional Court reiterated that the “possibility to pursue an action for rent increase against the tenant was created only by judgment no. Pl. ÚS 20/05.” Consequently, the Court ruled that the owner could claim rent increase from the tenant only for the period after 2 June 2006, the date on which the Constitutional Court’s judgment no. Pl. ÚS 20/05 was published. Regarding the period preceding that date, actions for damages against the State could be lodged directly.

156. The Court further reiterated that the amount of indemnification to be paid by the State was not necessarily identical to the difference between the regulated rent and the rent that was common in the given locality.

Decision no. IV. ÚS 141/09 of 26 January 2010

157. In this case, the landlord repeatedly requested a tenant to increase rent between 1 November and 31 July 2005. The tenant refused the landlord’s proposals. In consequence, the landlord introduced an action for surrender of unjust enrichment, or alternatively for payment of compensation for limitation of property rights, against the tenant for the abovementioned period. His action was rejected by lower courts with a reference to the Constitutional Court’s judgment no. I. ÚS 489/05. In his constitutional appeal, he complained that the legal opinion applied by lower courts was erroneous since the limitation of rent increase pro futuro made it impossible to obtain redress for the period which was relevant in his case. The Constitutional Court rejected his complaint applying decision no. I. US 489/05 and opinion Pl. ÚS 27/09.

Decision no. IV ÚS 716/07 of 25 October 2010

158. This decision was adopted in the same law suit as judgment no. Pl. ÚS 20/05 of 28 February 2006. After the adoption of the Constitutional Court’s latter judgment, which quashed the lower courts’ decisions by which the landlord’s action for payment of the difference between the regulated rent and the rent common in the given locality for a past period of time had been rejected, the lower courts informed the applicant that in the light of judgment no. Pl. ÚS 20/05 of 28 February 2006 he was entitled to claim a rent increase only pro futuro and gave him the possibility to reformulate his action. The applicant did not comply with that invitation esteeming that he should be given a possibility to obtain redress not only for future but also for the past. Moreover, if he had complied, his reformulated action would either have been rejected on the ground that as of 31 December 2006 the new Act on unilateral rent increase was applicable, or such rent increase would only cover a period of 25 days between 6 December and 31 December 2006.

159. The Constitutional Court applying its judgment no I. ÚS 489/05 and opinion Pl. ÚS-st 27/09 rejected the new constitutional appeal considering that a rent increase could only be granted pro futuro.

Judgment no. II. ÚS 115/08 of 2 March 2011

160. This judgment was adopted in the same case as the judgment no. I. ÚS 717/05 of 21 March 2006 (constitutional appeal lodged on 20 December 2005), where the plaintiff’s action to declare null and void regulated tenancies and order the tenant to pay a newly fixed increased rent as of 1 April 2003, lodged on 6 August 2003, had been rejected by ordinary courts. These decisions were subsequently quashed by the Constitutional Court in the abovementioned judgment and the case was remitted to the lower courts which, yet again, rejected the owner’s request to increase the rent.

161. Applying judgment no. I. ÚS 489/05, they considered that the owner could not claim rent increase for a past period of time, therefore any rent increase could be effective only as of the day of delivery of the court’s decision, in this particular case 27 June 2007. The plaintiff however demanded rent increase from 1 April 2003 until 21 December 2006. Thus, more than five years following the applicant’s initial constitutional appeal and almost 8 years after he lodged his initial action, the Constitutional Court remitted the case, again, before the lower courts.

162. The Constitutional Court approved the approach of the lower courts to the extent that they had rejected the plaintiff’s action for rent increase for the period between 1 April 2003 and 5 August 2003. Nonetheless, the lower courts’ opinion that it was possible to increase rent only as of the date of delivery of their decision was unconstitutional. Regarding the period between 6 August 2003, when the applicant lodged his action, and 21 December 2006, when he transferred the property of the building, the lower courts should have decided on the rent increase.

D. Supreme Court’s judgments in individual cases

Judgment no. 26 Cdo 867/2004 of 31 August 2005; Decisions nos. 26 Cdo 80/2005 of 15 September 2005; Cdo 819/2005 of 22 September 2005; 26 Cdo 1674/2005 of 19 October 2005; 26 Cdo 1912/2005 of 26 October 2005 and 26 Cdo 983/2005 of 27 January 2006

163. In these judgments the Supreme Court held that the Civil Code (and any other statute) did not allow a court to interfere with the contractual tenancy or to modify one of its components, including the rent, and that this entitlement was confined to the legislative and executive powers in which courts could not intervene and for which they could not substitute themselves.

Judgments nos. 26 Cdo 32/2006 of 7 July 2006; 26 Cdo 1013/2005 of 30 August 2006; 26 Cdo 1039/2006 of 31 August 2006; 26 Cdo 1213/2006 of 20 September 2006; 26 Cdo 1924/2006 of 10 October 2006; 26 Cdo 2106/2006 of 24 October 2006

164. In these judgments, the Supreme Court applied the binding opinion of the Constitutional Court expressed in its judgment no. Pl. ÚS 20/2005 and held that if there was no agreement on an amendment to the tenancy agreement and there was no special law allowing the unilateral increase in rent as provided for in Article 696 § 1 of the Civil Code, general courts were empowered to intervene in the rent relationship and to increase (fix) the rent.

Decision no. 26 Cdo 594/2005 of 16 August 2006; Judgments nos. 26 Cdo 1013/2005 of 30 August 2006; 26 Cdo 1039/2006 of 31 August 2006; 26 Cdo 1924/2006 of 10 October 2006; 26 Cdo 3663/2007 of 29 October 2008

165. In these judgments the Supreme Court held, with reference to the Constitutional Court’s judgment no. I. ÚS 489/05, that the rent could be increased only pro futuro, not for the past.

Judgment no. 25 Cdo 1124/2005 of 31 January 2007 (applied inter alia in decisions nos. 25 Cdo 3034/2005 of 26 September 2007, 25 Cdo 2076/2006 of 24 October 2007, 25 Cdo 3113/2005 of 25 October 2007, 25 Cdo 2818/2005 of 29 October 2007, 25 Cdo 811/2006 of 22 November 2007, 25 Cdo 3098/2005 of 27 November 2007, 25 Cdo 4513/2007 of 29 January 2008, 25 Cdo 4531/2007 of 30 January 2008, 25 Cdo 1250/2006 of 28 February 2008, 25 Cdo 2864/2006 of 11 March 2008, 25 Cdo 2742/2007 of 21 April 2009, 25 Cdo 1893/2008 of 21 April 2009)

166. The Supreme Court dealt with an appeal on points of law brought against a decision of the appellate court upholding the first-instance judgment by which the claimant’s action for damages against the State had been dismissed. The court dismissed the appeal on points of law, but noted the following:

“In the case under consideration the appellate court was dealing with a legal issue – whether the Parliament’s activities in voting on an Act constituted an official procedure within the meaning of section 13 of Act no. 82/1998. Since this legal issue has never been dealt with in the case-law of the appellate review court, in this respect the challenged appellate court judgment represents a decision that is of fundamental importance for its precedent value and in this regard the appeal on a point of law is admissible under Article 237 § 1(c) of the Code of Civil Procedure. ...

State liability under Act no. 82/1998 is in principle related to incorrect official procedure of executive and judicial authorities. With regard to the fact that the Parliament, consisting of the Chamber of Deputies and the Senate, is the supreme authority of the legislative power ... which decides, in a representative democracy, by the voting of its members – Deputies and Senators – whether or not to enact legislation, while there is no rule or regulation and there cannot be any rule or regulation on how the individual Deputy, Senator or a group of Deputies or Senators should vote on bills ..., the procedure for the enactment of legislation by voting in the Chamber of Deputies or the Senate cannot be considered an official procedure within the meaning of section 13 of Act no. 82/1998 and – if the rules of procedure of the Chamber of Deputies or the Senate were observed – it would furthermore be impossible to consider a ‘judicial’ review as to whether the outcome of the voting was correct or incorrect. It is part of the constitutional sovereignty of the legislative authority, which is accountable to the people. ...

The result of votes by the Deputies or Senators in their respective legislative body does not constitute an official procedure and therefore liability on the part of the State for damage in relation to individual voters cannot result from it.

The appellate court’s legal reasoning that for State liability for damage to be established, first of all, the requirement of incorrect official procedure of a State authority in applying State power was not met is correct. This reason per se is sufficient to reject an action for damages. With regard to this, the other objections in the appeal on points of law cannot influence the overall conclusion of the appellate court.”

Decisions nos. 25 Cdo 290/2006 of 26 February 2008, 25 Cdo 700/2006 of 25 March 2008, 25 Cdo 1861/2007 of 26 March 2008, 25 Cdo 1309/2006 of 22 April 2008, 25 Cdo 1220/2007 of 4 June 2008, 25 Cdo 3021/2006 of 14 August 2008

167. In these decisions the Supreme Court applying its judgment no. 25 Cdo 1124/2005 of 31 January 2007 refused to admit that the landlord could sue the State for damages on the ground that the Parliament failed to adopt a law. It further held that the Constitutional Court’s judgments nos. Pl. ÚS 20/05 of 6 April 2006 and I. ÚS 489/05 of 6 April 2006 did not have any effect on that conclusion.

Decisions nos. 26 Cdo 800/2006 of 21 December 2006

168. In this decision the Supreme Court held that judicial rent increase could be granted only until the date of taking of effect of a new legislation allowing for unilateral rent increase.

Judgment no. 26 Cdo 3255/2007 of 19 November 2008

169. The plaintiff filed an action for rent increase as of 4 August 2006 which was rejected by ordinary courts. The court of appeal in particular held that the plaintiff could have increased rent pursuant to the Act 107/2006 at the material time.

170. The Supreme Court rejected the appeal on points of law. Referring to judgment no. II. ÚS 361/06 it held that rent increase by ordinary courts had been possible only exceptionally during the period of absence of a legal norm authorizing rent increases. This period however ended on 31 March 2006 when Act no. 107/2006 took effect. Indeed, owners were entitled to increase rents pursuant to this Act from 31 March 2006 until 31 December 2010.

Judgment no. 26 Cdo 3663/2007 of 29 October 2008 and decision no. 26 Cdo 4595/2007 of 20 January 2009

171. In these decisions the Supreme Court held that rent increase by ordinary courts was possible only exceptionally during the period of absence of a legal norm authorizing rent increases. According to the Supreme Court this period however ended on 31 March 2006 when Act no. 107/2006 took effect. Indeed, owners were entitled to increase rents pursuant to this Act from 31 March 2006 until 31 December 2010.

Judgment no. 26 Cdo 2259/2007 of 24 March 2009

172. On 31 July 2006, the plaintiffs filed an action for rent increase as of July 2006 which was rejected by ordinary courts. The court of appeal in particular confirmed the first instance court’s view that it was not possible to grant rent increase after 31 March 2006 when Act no. 107/2006 took effect. Indeed, if the courts granted rent increase, they would decide against valid and applicable legislation.

173. The Supreme Court recalled its jurisprudence according to which it was not possible to grant rent increase after a new legislation on rent increase had taken effect and declared the appeal on points of law inadmissible.

Judgments nos. 25 Cdo 3305/2007 of 29 July 2009, 25 Cdo 3777/2007 of 25 August 2009, 25 Cdo 4508/2008 22 October 2009, 25 Cdo 3792/2009 of 27 January 2010, 25 Cdo 2395/2008 of 11 February 2010, 25 Cdo 2953/2008 of 11 February 2010, 25 Cdo 4078/2008 of 21 December 2010, 25 Cdo 2660/2009 of 22 December 2010, 28 Cdo 196/2009 of 5 April 2011, 28 Cdo 1409/2009 of 20 October 2011

174. In these decisions the Supreme Court applying the Constitutional Court’s judgment no. Pl. ÚS 27/09 of 28 April 2009 quashed the lower courts’ decisions which had rejected the landlords’ actions for damages against the State. It maintained that the State Liability Act was not applicable to the Parliament’s inactivity as legislator. Nonetheless, claims for damages against the State filed under the State Liability Act were to be analyzed as claims for damages for forced restriction of ownership rights within the meaning of Article 11 § 4 of the Charter.

Judgment no. 26 Cdo 2489/2007 of 28 May 2009 and decision no. 26 Cdo 1366/2008 of 8 July 2009

175. In this judgment the Supreme Court recalled both its jurisprudence, according to which judicial rent increase could only be granted until 31 March 2006, and the Constitutional Court’s opinion no. Pl. 27/09 according to which this was possible until 31 December 2006.

Decisions nos. 26 Cdo 5408/2008 of 10 November 2009, 26 Cdo 3265/2009 of 14 July 2010, and judgment no. 26 Cdo 1480/2009 of 25 May 2010

176. In these decisions the Supreme Court applied the Constitutional Court’s judgment no. Pl. 27/09 and held that the ordinary courts were entitled to grant rent increases for a period from the date of lodging of the action for rent increase until 31 December 2006.

Decisions nos. 26 Cdo 392/2009 of 16 March 2010

177. In this decision the Supreme Court recalled both its jurisprudence, according to which judicial rent increase could only be granted until 31 March 2006 and the Constitutional Court’s opinion no. Pl. 27/09 according to which this was possible until 31 December 2006.

178. It declared the appeal on points of law inadmissible confirming the appellate court’s view that “the landlord could not claim rent increase for a period when Act no. 107/2006 had already been effective.”

Decision no. 26 Cdo 1819/2009 of 20 October 2009

179. In this decision the Supreme Court, notwithstanding the fact that it referred to the Constitutional Court’s judgment no. Pl. ÚS 27/09, approved the appellate court’s decision which had dismissed an action for rent increase filed after 31 March 2006, date of taking of effect of Act no. 107/2006.

This decision was confirmed by the Constitutional Court on 26 August 2010 (decision no. I. ÚS 96/10).

Judgment no. 26 Cdo 1480/2009 of 25 May 2010

180. In this judgment the Supreme Court applied the Constitutional Court’s judgment no. Pl.-st 27/09 and held that it was not true that a judicial rent increase could take effect only after the delivery of the court decision on rent increase but that it took effect as of the date of lodging of the action for rent increase.

E. The case-law of the ordinary courts

Prague 1 District Court’s decisions nos. 27 C 46/2002-23 of 19 September 2002; 22 C 77/2004-33 of 29 November 2004; 24 C 189/2004-27 of 9 February 2005; 24 C 3/2005-33 of 12 October 2005; 13 C 338/2006 of 21 June 2007; Prague Municipal Court’s Judgments nos. 16 Co 100/2003-46 of 2 December 2003; 20 Co 67/2005-47 of 28 April 2005; 20 Co 218/2005-47 of 29 August 2005; 20 Co 2/2006-47 of 2 February 2006, 13 Co 300/2005-71 of 28 February 2006, 20 Co 135/2006-71 of 1 June 2006, 20 Co 162/2006-91 of 22 June 2006, 13 Co 184/2006-57 of 25 October 2006, 13 co 194/2006-46 of 25 October 2006, 20 Co 270/2006-65 of 26 October 2006, 13 Co 302/2006-75 of 13 December 2006, 13 Co 376/2006-56 of 24 January 2007, 35 Co 239/2007-45 of 13 September 2007, 54 Co 244/2007-47, 19 September 2007, 22 Co 395/2007-58 of 22 November 2007, 13 Co 461/2005-68 of 19 December 2007, 22 Co 255/2008-60 of 2 October 2008

181. In these decisions the Prague 1 District Court and the Prague Municipal Court refused to admit that the Parliament’s legislative inactivity could be regarded as a cause of the State’s liability under the State Liability Act.

Prague 1 District Court’s Judgment no. 27 C 46/2002-23 of 19 September 2002

182. In this judgment the District Court held inter alia that adoption of a generally binding legal act cannot constitute an incorrect official procedure for which damages could be requested pursuant to the State Liability Act.

Tábor District Court’s decision no. 3 C 18/2005 of 21 April 2005 and České Budějovice Regional Court’s decision no. 15 Co 456/2005 of 8 August 2005

183. On 28 January 2005, the landlord introduced an action for rent increase pro futuro as of the day on which the court’s decision becomes final. On 21 April 2005, the District Court partly granted the action (it increased the rent but fixed it at a lower level than the one requested by the landlord) in application of the Constitutional Court’s judgment no. 2/03 of 19 March 2003. This decision was confirmed by the court of appeal and by the Supreme Court in its judgment no. 26 Cdo 32/2006 of 7 July 2006 which however referred to the Constitutional Court’s judgment no. Pl. ÚS 20/2005 (see § 163 above).

Prague Municipal Court’s Judgments nos. 20 Co 67/2005-47 of 28 April 2005

184. In this judgment the Prague Municipal Court held inter alia that regarding the period before 20 March 2003, i.e. the date as of which the last regulation fixing rent ceilings was repealed, the action for damages against the State could not be granted due to the fact that rights and obligations created before repeal of a legal act remain unaffected.

A similar approach was adopted by the Prague 1 District Court in its decisions nos. 20 Co 218/2005 of 29 August 2005, 24 C 3/2005 of 12 October 2005, 24 C 189/2004 of 9 February 2005, 24 C 171/2005 of 20 December 2006, and the Prague Municipal Court in judgments nos. 20 Co 2/2006 of 2 February 2006, 20 Co 270/2006 of 26 October 2006, 13 Co 218/2006-49 of 29 November 2006, 13 Co 178/2007 of 20 June 2007.

Nymburk District Court’s decision no. 6 C 626/2004 of 9 September 2005 and Prague Regional Court’s decision no. 24 Co 197/2006 of 25 May 2006

185. The landlord introduced an action for surrender of unjust enrichment for the period between 1 November 2003 and 28 February 2004 in the amount of the difference between the rent paid by the tenant and usual rent. The district court rejected this action on 17 September 2004 but its decision was quashed by the Prague Regional Court on 3 March 2005. Subsequently, the district court partly granted the action (in a lower amount) and its decision was confirmed by the Prague Regional Court.

Plzeň-South District Court’s decision no. 7C 92/2005-56 of 21 March 2006; Plzeň Regional Court’s Decision no. 61 Co 288/2006 of 28 February 2007

186. The District Court rejected a landlord’s action for rent increase considering that it was not empowered to interfere with the contractual relationship. Referring to the Supreme Court’s decision 26 Cdo 32/2006 and to the evolution in Constitutional Court’s and Supreme Court’s case-law, the Regional Court quashed that decision considering that the District Court’s approach was not admissible any more. Subsequently, the parties concluded a settlement agreement.

Prague Municipal Court’s Decision no. 14 co 102/2006-56 of 14 April 2006

187. In this decision the Prague Municipal Court quashed the first instance court’s judgment and ruled that in the light of the evolving Constitutional Court’s case-law (inter alia decisions nos. I. ÚS 489/05 and I. ÚS 717/05) the Parliament’s legislative inactivity was to be regarded as a cause of the State’s liability under the State Liability Act.

Pardubice District Court’s Decision no. 10 C 178/2004 of 9 May 2006

188. This decision was adopted in the same case as the Constitutional Court’s judgment no. IV. ÚS 611/05 of 8 February 2006. After the case was remitted by the Constitutional Court to the District Court, the plaintiff extended his action and claimed rent increase from 10 March 2003 until 10 March 2006. The defendant accepted to conclude settlement agreement with the plaintiff whereby she accepted to pay the whole sum requested by the landlord. In its decision the District Court approved the settlement.

Prague Regional Court’s Decision no. 8C 1005/05 of 25 May 2006; Nymburk District Court’s Decision no. 8 C 1005/2005 of 15 September 2006; Prague Regional Court’s Decision no. 8C 1005/05 of 26 April 2007

189. The plaintiff introduced an action for surrender of unjust enrichment in the amount of the rent paid and the market rent. On 1 November 2005, the action was rejected by the District Court which considered that in the absence of special legislation allowing for rent increase it was not possible to increase rent unilaterally. On 25 May 2006, the Prague Regional Court applied the Constitutional Court’s judgment no. Pl. ÚS 20/05 and quashed the District Court’s decision. Both courts considered however that the landlord did not have a claim regarding unjust enrichment but payment of rent. On 15 September 2006, the District Court accepted that view and granted the action. On 26 April 2007, the Regional Court confirmed this decision.

Brno Municipal Court’s Decision no. 31 C 262/2004 of 10 October 2006

190. Referring to the Supreme Court’s decision 26 Cdo 32/2006, the Municipal Court ordered the tenant to sign an amendment to the lease agreement whereby she agrees to a rent increase.

Prague 4 District Court’s Decision no. 28 C 389/2003 of 31 January 2007

191. In this decision the District Court partly granted an action for rent increase pro futuro. It rejected the action for the period preceding the date of lodging of the action.

Prague Municipal Court’s Decision no. 14 Co 244/2007-88 of 17 August 2007

192. In this decision, the Prague Municipal Court intervened again in the same case as in decision no. 14 Co 102/2006-56 of 14 April 2006 referenced above. Since the first instance court had not applied its opinion expressed in the latter decision, the Prague Municipal Court quashed the first instance court’s second decision. It explained that although the Supreme Court had been refusing to admit the State’s liability for the Parliament’s inactivity under the State Liability Act, this approach had to change in the light of the Constitutional Court’s case-law (inter alia decisions nos. I. ÚS 489/05, IV. ÚS 111/06, I. ÚS 123/06).

Prague Municipal Court’s Decision no. 22 Co 56/2009-91 of 28 May 2009

193. In this decision, the Prague Municipal Court applied the Constitutional Court’s judgment no. Pl. ÚS-st. 27/09 of 28 April 2009 and quashed the first instance court’s decision rejecting the action for damages against the State.

Pardubice District Court’s Decision no. 8 C 153/2006-48 of 29 June 2009

194. On 31 March 2006, the landlord lodged a rent increase action for the period from 1 January 2002 onwards. The District Court applied plenary opinion no. Pl. ÚS-st 20/05 of 28 April 2009 and granted the action only for the period between 1 April 2006 (day of lodging) and 31 December 2006. It rejected it for the period between the day of lodging and after 31 December 2006.

[1] The detailed overview of the Czech legislation and practice in the matter is described in the Annex.

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