Last Updated on March 15, 2022 by LawEuro
Information Note on the Court’s case-law 260
March 2022
Nikitina v. Russia – 8051/20
Judgment 15.3.2022 [Section III]
Article 1 of Protocol No. 1
Article 1 para. 1 of Protocol No. 1
Deprivation of property
Return to the State of an unclaimed apartment without any award of compensation to the bona fide purchaser in good faith, who could not make use of a new compensatory remedy: violation
Article 35
Article 35-1
Exhaustion of domestic remedies
Effective domestic remedy
New effective compensatory remedy to be used as of 1 January 2020 by bona fide purchasers in good faith of dwellings returned to the State without any award of compensation, including prior to that date
[This summary also covers the decision Olkhovik and Others v. Russia, no. 11279/17, 15 March 2022]
Facts – In the cases of Nikitina and Olkhovik and Others, the applicants bought apartments from private individuals.
In Nikitina, the applicant bought the apartment, without realising it, from an individual claiming to be the owner. The registration authority refused registration on the ground that the original owner had died. The city authorities brought proceedings against the applicant for recovery of the apartment as unclaimed property. The court ordered the annulment of the applicant’s title to the property without awarding compensation. The applicant appealed unsuccessfully.
In Olkhovik and Others, the applicants’ ownership rights were duly registered by the relevant authority. However, the original owners of the apartments had died without leaving any heirs. The municipal authorities, as successors in title to the deceased owners, instituted or were joined to proceedings against the applicants and the vendors for recovery of the properties. The courts classified the apartments as unclaimed properties, returned them to municipal ownership and annulled the applicants’ title without awarding them compensation.
Law – Article 35 § 1:
The legislation in force at the relevant time had made it possible, subject to certain conditions, to obtain compensation in a maximum amount of RUB 1,000,000 for the loss of a dwelling. According to the case-law of the Constitutional Court, which was followed by some of the lower courts, this remedy was intended to afford only partial compensation for the damage suffered by the bona fide purchasers.
With effect from 1 January 2020 the legislation was amended to provide greater protection to the purchasers of dwellings. The concept of “bona fide purchaser” was simplified, such that purchasers were deemed to have acted in good faith once they had checked the data concerning the dwelling they proposed to purchase and the vendor in the unified register of real property. The public authorities were also given less time to bring proceedings for recovery of dwellings, and a clear distinction was introduced between liability for negligence on the part of the registration authority and other authorities and the strict liability of the State. Most importantly, the rules governing the compensatory remedy against the State were amended with retrospective effect in a manner favourable to purchasers. The remedy was available in principle to all bona fide purchasers (provided that they were private individuals), including those whose dwellings had had to be returned before 1 January 2020.
The conditions governing the use of this remedy were the following: (i) the individual whose dwelling had been returned had to be a “bona fide purchaser”; (ii) he or she had to have obtained a court decision awarding compensation for the damage sustained as a result of the return of the dwelling; (iii) that decision had to have remained unenforced for at least six months for reasons beyond the control of the dispossessed purchaser; and (iv) the purchaser had to apply to the courts seeking compensation from the State. The compensation was intended to cover the full amount of the pecuniary damage resulting from the return of the property. The success of the court action was not dependent on a finding of fault on the part of the authorities; in such cases other provisions, concerning liability for negligence, came into play and further sums could be recovered.
In the case of Nikitina, the new compensatory remedy therefore comprised several stages, the first of which consisted in obtaining a judgment awarding compensation for the damage caused by the return of the apartment. The applicant had been unable to obtain such a judgment: she could not sue anyone for damages since, in the absence of a criminal investigation, the identity of the person claiming to be the deceased owner of the apartment had not been established. It was true that, in theory, the applicant could have brought an action against the individual who had claimed to be an estate agent. However, that course of action appeared too uncertain, as not only did the applicant state that she did not know the address or status of the individual in question, but it had also not been alleged that he was responsible for the situation adversely affecting the applicant. Lastly, the Government had not identified any other persons against whom the applicant could bring proceedings in order to obtain compensation.
Thus, without in any sense prejudging the effectiveness in principle of this new compensatory remedy, the Court found that it was not accessible to the applicant in the circumstances of the present case.
Conclusion: preliminary objection dismissed (exhaustion of domestic remedies).
In the case of Olkhovik and Others the new compensatory remedy, although it comprised several stages, was a priori accessible to the applicants, who in principle had until 31 December 2022 to claim compensation from the State.
Furthermore, this compensatory remedy was, on the face of it, appropriate in the present case. The applicants complained of the deprivation of their property without compensation, and the remedy in question afforded them the specific possibility of obtaining full compensation for the pecuniary damage caused by such deprivation. Moreover, it was not contingent on furnishing proof of any fault on the part of the authorities. Accordingly, the remedy in question was capable of affording direct redress for the situation complained of.
It appeared from recent practice that compensation claims by bona fide purchasers were being allowed by the courts.
Although the remedy was a priori accessible and appropriate, the applicants had not demonstrated that they did not satisfy the criteria for obtaining compensation from the federal budget. Likewise, they did not argue that the use of the remedy imposed an excessive burden on claimants, in terms of either the procedure or the costs.
Thus, the Court had no cause to cast doubt, at this stage, on the effectiveness of the new compensatory remedy with regard to Article 1 of Protocol No. 1 as a means of affording redress for the harm caused to bona fide purchasers by the return of their dwelling to the authorities.
However, it did not rule out the possibility of reviewing its position on the actual effectiveness of this new remedy if it emerged from the domestic courts’ practice that actions for compensation against the State were ineffective, for instance because the proceedings were conducted at great length or with excessive formalism or because the amounts awarded by way of compensation were insufficient.
Thus, the applicants had not exhausted domestic remedies.
Conclusion: inadmissible (exhaustion of domestic remedies).
Article 1 of Protocol No. 1 (Nikitina):
The Court considered it unnecessary to determine whether the interference had been lawful, since the measure had in any case been disproportionate.
The applicant had been deprived of her property without any compensation. Such serious interference called for strict scrutiny by the Court. The reasons given by the courts for annulling the applicant’s title to the property were as follows: (i) the local and federal authorities had not contributed negligently to the loss of possession of the apartment; (ii) the city authorities had been dispossessed of their property against their will but had acted in a timely manner; and (iii) whether or not the applicant had acted in good faith was irrelevant.
The sale of the apartment to the applicant had resulted from inadequate and delayed coordination between the various local and federal authorities. While the owner’s death had been known to the authorities by December 2016 at the latest, the registration authority had not learnt of it until June 2017, and the city authorities had not acted until October of that year.
The present case in all likelihood involved offences of fraud, forgery and use of forged documents. Despite this, the registration authority, which was meant to carry out an “expert examination” of the documents submitted, had not detected any forgery. It was true that the Court had previously ruled that the registration authority or other authorities might conceivably fail to detect the falsification of documents. Nevertheless, in the present case the authorities had not taken any steps or initiatives, including of a criminal-law nature, to identify the persons responsible for that situation. Hence, the authorities could not be said to have acted in a timely manner and with the requisite diligence.
With so many authorities responsible for matters relating to residential properties and ownership thereof, it was not for the purchaser to assume unconditionally the risk of the property being returned. The applicant could legitimately and reasonably rely on the checks carried out by the competent authorities.
It had not been alleged at any point in the domestic proceedings that the applicant had acted in bad faith or been negligent when purchasing the apartment. Furthermore, there was no evidence capable of calling into question the presumption of good faith which applied in this regard. As to the Government’s argument that the applicant had purchased the apartment at a price below its cadastral value, the Court took note of the applicant’s submissions regarding the poor state of repair of the apartment and the readiness to sell on the part of the person claiming to be the owner. In any event, the domestic courts had not referred to this aspect in their decisions.
It followed from the above that the applicant had had to bear the consequences of acts that were solely imputable to third parties and to the federal and municipal authorities, without being compensated. As a result, the fair balance to be struck between the demands of the general interest and the need to protect the applicant’s property rights had been upset.
Conclusion: violation (unanimously).
Article 41: restoration of the applicant’s title to the apartment by way of restitutio in integrum, or provision of an equivalent apartment if the authorities were no longer in possession; EUR 5,000 for non-pecuniary damage.
(See also S.C. Service Benz Com S.R.L. v. Romania, 58045/11, 4 July 2017, Legal summary)
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