What if the State Treasury refuses to turn over real estate?
Entry in the land and mortgage register of the heirs of the former owner of nationalised or expropriated real estate does not always end the battle to regain the property.
Regaining real estate unlawfully taken by the Polish State Treasury is a long and arduous process. When the process is completed, the entities obligated to return the property usually turn over possession to the rightful owners voluntarily.
But in complicated cases, it sometimes happens that the State Treasury refuses to deliver possession, due to the condition of the property, the type of development on the land, or the nature of the activity conducted on the site—notwithstanding the many years of effort invested by the legal successors of the former owners to rectify the legal status of the property and regain the property through administrative proceedings, and even though they hold legal title to the property.
In such cases, after the State Treasury refuses to deliver possession of the property voluntarily, pursuant to a protocol of delivery, the heirs will be forced to seek a court order for delivery of possession.
The possibility of asserting a claim for possession is provided for in Art. 222 §1 of the Civil Code, under which the owner of property may demand delivery of the property by a person exercising de facto control over the property, unless the defendant has an effective right, as against the owner, to control the property. The basis for this claim is the right of ownership, and thus the heirs must demonstrate that they own the real estate. Proof of ownership is provided by entry in the land and mortgage register, which enjoys a presumption that it reflects the true legal status of the property (Art. 3(1) of the Act on Land and Mortgage Registers and Mortgages). The State Treasury, in turn, will be required to demonstrate that it has an effective entitlement to control the property.
During such a proceeding, it may happen that the State Treasury, as the defendant, asserts a defence of attachment pursuant to Civil Code Art. 461 §1. The purpose of the right of attachment is to secure the defendant’s claims for investments it has made in the property which it would be required to deliver. But this defence will be effective only if such a claim exists. The defendant will have to prove that it made investments in the property—the nature of the investments, who made them, when they were made, and the amount involved. If the existence of the claim for investments is proven, the court will make the duty to deliver possession of the property conditional on the heirs’ payment of a monetary equivalent of the investments by the defendant.
It should also be pointed out that a claim for delivery of possession, as an exercise of the owner’s rights, is also subject to review in light of consistency with public policy—principles of social coexistence and the socio-economic purpose of the law. On this basis, the State Treasury, as the defendant, may allege violation of Civil Code Art. 5, on the grounds that the disputed property is being used for a socially beneficial purpose (such as operation of a school or hospital), and thus it would violate public policy to restore the property to the rightful owners.
However, under the established precedent of the Supreme Court of Poland, a petition seeking delivery of possession of real estate may be denied on the basis of Civil Code Art. 5 only under exceptional circumstances. In the court’s view, assertion of principles of social coexistence as a defence by a person occupying real estate without a legal basis may not result in permanently depriving the owner of the right to exclusive use of the real estate. Similarly, the mere fact that the property is being used for a socially beneficial purpose may not be grounds for denying a petition seeking possession of the property as a violation of Civil Code Art. 5 (Supreme Court judgment of 3 October 2000, Case No. I CKN 287/00).
For example, in the judgment of 22 March 2000 (Case No. I CKN 440/98), the Supreme Court held that under the constitutional principle of protection of ownership, it is impermissible to apply too broadly the general clause set forth in Civil Code Art. 5: “Principles of social coexistence, which protect against abuse of the right of ownership, cannot entirely destroy this right. Therefore, in an action seeking possession, such principles may be applied only to postpone delivery of the real estate, not entirely deprive the owner of its subjective rights.”
It also cannot be ruled out that to prevent loss of the property, the State Treasury may commence its own action, at the same time as the action seeking possession is pending, seeking a declaratory judgment that it has obtained title to the property through prescription (adverse possession). Prescription is a way for a long-term holder of real estate to obtain title to the property as a result of the owner’s failure to protect its title to the land, e.g. by seeking possession through the courts. The condition for acquisition by prescription is uninterrupted, autonomous possession of the property for at least 20 years (in good faith) or 30 years (in bad faith) from the time the State Treasury took possession of the disputed property. In considering the possibility of acquisition by prescription by the State Treasury of land nationalised after the Second World War, great importance is placed on the manner in which the State Treasury came into possession of the property (as a result of an act of public law or civil law). Also relevant are issues connected with the running of the prescription period (suspension and interruption). It should be pointed out here that due to the specific nature and lengthiness of the reprivatisation process, it is worthwhile for the claimant to seek delivery of possession of the property while the reprivatisation process is still underway, because assertion of such a claim interrupts the running of the prescription period.
If the heirs obtain a legally final judgment ordering the State Treasury to deliver possession of the property, but the State Treasury refuses to comply with the order, execution proceedings may be commenced against the State Treasury. It should be pointed out, however, that there are special features to execution proceedings against the State Treasury. In particular, execution against real estate held by the State Treasury is conducted in two stages. First, relying on the executable writ, the creditor summons the state organisational unit whose activity is connected with the relief requested to deliver possession of the property within 2 weeks after service of the summons. If the property is not delivered within that time, the creditor may apply to the court to set a further deadline for the head of the state organisational unit to provide the relief set forth in the executable writ, i.e. delivery of possession of the property. If that deadline is not met, the creditor may apply to the court to impose a fine on the head of the organisational unit of up to PLN 1,000, and if possession is still not delivered the fine may then be replaced by arrest of the person. This portion of the execution proceedings is conducted without the involvement of the bailiff. The return of real estate in execution proceedings against the State Treasury typically runs quite smoothly, without major disruptions.
Barbara Majewska, Reprivatisation Practice, Wardyński & Partners