Compensation for more nationalised real estate in Warsaw

The Polish Constitutional Tribunal has significantly expanded the set of former owners of properties in Warsaw who are entitled to compensation for seizure of their real estate by communist authorities following World War II. Compensation will now be payable not just to owners of single-family houses or plots zoned for single-family housing, but also to former owners of other types of real estate that was seized.

The Constitutional Tribunal ruled on a constitutional petition concerning application of regulations concerning compensation for real estate taken over by the state under the Decree on Ownership and Usufruct of Land in Warsaw dated 26 October 1945 (also known as the “Warsaw Decree” or the “Bierut Decree”).

Under the 1945 decree, an owner of nationalised land who was not allowed to retain a right of perpetual tenancy or the right to build on the land (or who failed to apply for such rights) was entitled to compensation for the expropriated real estate and any buildings on the land that were capable of use or repair, which passed to the ownership of the local commune. Compensation was to be paid on the basis of a separate regulation, but the regulation was never issued.

Subsequent regulations (set forth in the Act on Rules and Procedures for Expropriation of Real Estate dated 12 March 1958, the Act on Administration of Land and Expropriation of Real Estate dated 29 April 1985 and the Act on Administration of Real Estate dated 21 August 1997) were supposed to fill this gap, but they covered only owners of single-family houses and plots zoned for single-family housing taken after 5 April 1958. The parliament awarded these owners the right to compensation under the procedure provided for in these acts, not on the basis of the Warsaw Decree. Meanwhile, the right to compensation for other land and buildings taken under the Warsaw Decree was extinguished.

This resulted in a category of persons (former owners of real estate other than single-family houses or plots zoned for single-family housing taken after 5 April 1958) who were stripped or any right to compensation for expropriation.

On 13 June 2011, the Constitutional Tribunal ruled that insofar as Art. 215(2) of the Act on Administration of Real Estate differentiates in the legal position of former owners based on the type of real estate that was taken from them, it is inconsistent with Art. 64(2) of the Polish Constitution, which guarantees equal protection of ownership and other property rights.

The judgment from the tribunal puts the City of Warsaw in a tough position, as it is the city that must pay out compensation under Art. 215 of the Act on Administration of Real Estate. So far the city has awarded compensation under this procedure only for single-family houses and plots zoned for single-family housing, interpreting Art. 215 of the act narrowly as the basis for payment of compensation for small houses and land zoned for that use under the General Plan for Construction of Warsaw dated 11 August 1931, to mean free-standing structures of up to two floors. In the case of larger or taller residential buildings, the city took the position that they were not single-family housing but multi-family housing, and plots of land zoned for dense, high-rise construction were not considered to be zoned for single-family housing. Although in numerous cases the administrative courts overturned decisions refusing to award compensation to former owners of such Warsaw properties, the consistent practice of the Mayor of Warsaw was to deny compensation once again.

Now it will be difficult for the administration to deny compensation to former owners of real estate developed with multi-family housing or land zoned for high-rise construction. This affects primarily properties located in central Warsaw (Śródmieście district) and old inner suburbs (the neighbourhoods of Stary Mokotów, Stara Ochota, Stara Wola and Saska Kępa). Although the amount of compensation should reflect the actual state of the property as of 1945, the city should nonetheless expect to pay compensation to the tune of millions of zloty per property. According to estimates, the total value of compensation claims in the territory of Warsaw is PLN 40 billion. Plots developed with single-family houses represent just 20% of all properties that were expropriated under the Warsaw Decree.

Moreover, as a result of the judgment by the Constitutional Tribunal, owners of Warsaw properties zoned in the 1931 plan for other uses, such as industry, education, recreation and so on, will also be able to seek compensation. As correctly pointed out by the tribunal, at present they are deprived of the right to any compensation. However, such persons will have to wait until the Parliament amends Art. 215 of the Act on Administration of Real Estate as directed by the tribunal.

Krzysztof Wiktor, Reprivatisation practice, Wardyński & Partners

Przemysław Szymczyk, Real Estate & Construction practice, Wardyński & Partners