CEDH · CASELAW;DECISIONS;ADMISSIBILITY;ENG — 8 mars 2011

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Poland (no. 35014/97), Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant, Having deliberated, decides as follows: PROCEDURE 1.     The applicant, Mr Przemysław Piotrowski, is a Polish national who was born in 1976 and lives in Gniezno. He was represented before the Court by Mr A. Śpiewakowski, a lawyer practising in Poznań. The Polish Government (“the Government”) were represented by their Agent, Mr   J.   Wołąsiewicz, of the Ministry of Foreign Affairs. A.     The circumstances of the case 2.     The facts of the case, as submitted by the parties, may be summarised as follows. 3.     On 27 February 1998 the Gniezno District Court ( Sąd Rejonowy ) gave a   decision declaring that the applicant had acquired 3/16 of his late father’s estate, which, among other things, included a tenement house with an   annex in Gniezno. The total usable area of the building was 1,012.28 square metres (“sq. m.”). It comprised commercial premises and several flats whose usable area was some 475 sq. m. That house, which had previously belonged to the applicant’s and his father’s predecessors in title, had been taken under the so-called “state management of housing matters” introduced in 1946 and, subsequently, was made subject to the “special lease scheme” introduced in 1974 and the system of   “controlled rent”, which replaced the latter in 1994 and continued to   apply until 10 July 2001 (see also Hutten-Czapska v   Poland (merits) , no.   35014/97, [GC], §§ 12-14 and 67-84, ECHR 2006-VIII). 4.     Since then, i.e. the entry into force of the Act of 21 June 2001 on the protection of the rights of tenants, housing resources of municipalities and on amendments to the Civil Code ( Ustawa o ochronie praw lokatorów, mieszkaniowym zasobie gminy i o zmianie Kodeksu cywilnego ) (“the 2001 Act”) the lease of flats in the applicant’s house has been governed by the provisions of that law, in particular in respect of rent increases, termination of leases, maintenance and repairs and succession to leases (see   Hutten ‑ Czapska (merits) , cited above, §§ 85-106 and 113-146 and Hutten-Czapska v   Poland (friendly settlement ), no.   35014/97, [GC], §§   12 ‑ 13 and 15-19). 5.     On 30 May 2005 the applicant gave notice to a certain K.Z., a tenant living in the house, informing her of a rent increase which was to take effect on 1 September 2005. The rent currently paid was 4.95 Polish zlotys (PLN) per sq. m. The applicant further informed K.Z. that, according to an expert report obtained by him, the rent covering the costs of the proper maintenance of the dwelling, calculated with reference to the Constitutional Court’s judgment partly repealing certain defective provisions on rent increases (see Hutten-Czapska (merits) , cited above, §§ 126, 132 and 136 ‑ 141) should amount to PLN 13.00 per sq. m. In this regard, he relied on   section 8a of the 2001 Act (see Hutten-Czapska (merits) cited above, §   125). Having regard to the particular circumstances of the tenants in his house, the applicant raised the rent to PLN 10.00 per sq. m. In K.Z.’s case the new rent was to be PLN 329.90, plus the charges for the use of   the dwelling in the amount of PLN 69.00. 6.     On 14 September 2005 K.Z. lodged a civil action with the Gniezno District Court, challenging the rent increase as unjustified. She submitted that she had lived in the building since 1945 and that the standard of the flat, which had only electricity and water supply installations but no gas supply, did not justify the doubling of the rent. The rent had already been raised gradually since 2000. Despite the increase of the rent up to PLN 10.00 per sq. m. no renovations had so far been carried out by the owners. Lastly, the applicant stressed her old age (she was 82 at that time) and the fact that she was a handicapped person, whose only income was an old-age pension of   PLN 1.170. 7.     On 24 May 2006 the court dismissed her claim, finding that the rent increase was economically and otherwise justified. K.Z. appealed, relying on the factual arguments concerning her personal circumstances and the standard of the flat. In addition, the key legal argument advanced by her in the appeal was that she was protected against rent increases by virtue of section 8a (4) and (5), which had been in force at   the relevant time (see Hutten-Czapska (merits), cited above, § 125). 8.     On 29 December 2006 the Poznań Regional Court ( Sąd Okręgowy ) amended the first-instance judgment, declared that the rent increase in   respect of the flat occupied by K.Z. was unjustified and awarded her the costs of the proceedings against the applicant. The Regional Court held that the lower court had rightly applied the   above-mentioned section 8a and, in this regard, referred to   the   Constitutional Court’s two rulings concerning this provision, i.e.   the   judgment of 19   April 2005 and the Recommendations of 29 June 2005 (see Hutten-Czapska (merits), cited above §§ 133-142). It reiterated that the   Constitutional Court had many times held that rent paid by a tenant should be economically justified, that is to say not excessive, dictated by   a   landlord’s legitimate economic interests. At the same time, it should include the costs of running repairs, renovations, maintenance costs, the building’s depreciation in value and the landlord’s decent profit. The decent profit derived from property was indispensable to secure the genuine protection of property rights. Without profit, there would be no new investment or even improvement, which were also in the interests of   tenants. The Regional Court noted that section 8a had been declared unconstitutional by virtue of the subsequent judgment of the Constitutional Court, given on 17 May 2006 (see Hutten-Czapska (friendly settlement), cited above, § 12) but only in so far as it had not included statutory criteria for “justified cases” where landlords could raise rent above the statutory ceiling. However, in its view, the lack of criteria for the judicial control of   rent increases was not relevant since section 8a remained unchanged in   the part stipulating that the burden of proof in respect of the justification for a rent increase rested with a landlord. It was true that the applicant’s house was in a bad technical state but this by itself did not justify the rent increase. The applicant had not produced any evidence showing the costs that he had borne in connection with the necessary repairs or renovations, in particular an inventory of his income from rent from flats and commercial premises and expenditure on   maintenance of the property. He had supplied only an expert report stating the costs of a major overhaul of the building. In consequence, it   could not be said that the applicant had justified the rent increase in   respect of the flat let by K.Z. 9.     In support of his application to the Court, the applicant submitted the above-mentioned expert report, which had been drawn up by a certain A.K. According to the expert, the necessary costs of such a major overhaul amounted to PLN 1,188,678.80. The applicant also supplied a calculation of the difference between the   rent received from K.Z. under the provisions of the 2001 Act and the market-related rent for flats let outside the rules of that Act, estimated at   PLN 10.00 per sq. m. From 1 March to 31 December 2005 the amounts of rent were, respectively PLN 1.829.02 and PLN 3,695.00, with the difference amounting to PLN 1.865. 98. 10.     On 27 December 2007 the manager of the applicant’s property, acting on the applicant’s instructions, gave notice to a certain H.W., a tenant living in the house, informing her of a rent increase which was to take effect on 1 January 2008. The rent currently paid was 4.95 Polish zlotys (PLN) per sq. m and the applicant raised the rent to PLN 10.00 per sq. m. 11.     On 22 April 2008 H.W. lodged a civil action with the Gniezno District Court, challenging the rent increase as unjustified. On 22 December 2008 the Gniezno District Court declared that the increase in rent was unjustified. The reasons given for that ruling were similar to those relied on in the above-mentioned Regional Court’s judgment. In particular the Court found that the increase of rent by more than 100% was excessive. It was true that the building required extensive reparations but no renovation had so far been made so as to warrant the increase in rent in order to obtain a return of a capital investment, as   stipulated in section 8a(4) of the 2001 Act (see paragraph 19 below). Furthermore, the poor standard of the flat occupied by H.W. did not justify the elevated rent level. Lastly, the court noted that the applicant had not respected the statutory 3-month term for giving notice to a tenant. 12.     On an unspecified date the applicant appealed, challenging, among other things, the finding that the time-limit for the notice had not been complied with. 13.     On 2 June 2009 the Poznań Regional Court amended the first ‑ instance judgment and declared that the increase in rent was justified up to the amount of PLN 6.67 per sq. m. The court held that the increase made by the applicant fell outside the list of “justified cases” referred to   in   section 8a (4) (a)-(b) of the 2001 Act. However, the applicant was entitled to raise rent within the limits applicable under section 8a(4)(d) of   that Act, that is to say up to 3% of the reconstruction value of the dwelling within 1 year, which corresponded to the said PLN 6.67 per sq. m. B.     Relevant domestic law and practice 1.     General background and laws as applicable before the 2001 Act 14.     A detailed description of the historical, social and economic background to the case and of laws restricting landlords’ rights until the entry into force of the 2001 Act can be found in paragraphs 12-19 and 67-84 of the Hutten ‑ Czapska pilot judgment on the merits (cited above). 2.     The 2001 Act 15.     The relevant provisions of the 2001 Act (as amended on several occasions and as applicable until the adoption of the Hutten-Czapska merits judgment), together with the summary of the related Constitutional Court’s rulings, are set out in paragraphs 85- 106, 113 and 124-146 of that judgment. 3.     The December 2006 Amendment 16.     The Act of 15 December 2006 on amendments to the 2001 Act on   the protection of the rights of tenants, housing resources of   municipalities and on amendments to the Civil Code (“the December 2006 Amendment”) ( ustawa o zmianie ustawy o ochronie praw lokatorów, mieszkaniowym zasobie gminy i o zmianie Kodeksu cywilnego ) entered into force on   1   January 2007. It modified a number of legal provisions governing leases, their termination and levels of rent with a view to implementing the Constitutional Court’s judgment of 19 April 2005 and its resultant recommendations for Parliament of 29 June 2005 (see Hutten-Czapska (merits) , cited above, §§ 133-142), as well as the subsequent Constitutional Court’s judgments of 17 May 2006 and of 11 September 2006. Those judgments are rendered in paragraphs 12-13 of the Hutten-Czapska friendly ‑ settlement judgment. (a)     New statutory definition of expenses involved in maintenance of a rented dwelling 17.     The December 2006 Amendment added a new subsection 8a to   section 2(1) of the 2001 Act. Section 2(1) 8a reads: “If this law refers to expenses connected with maintenance of a dwelling, [this expression] should be understood as expenses incumbent on the landlord and calculated proportionally to the usable surface of the dwelling in relation to the total usable surface of all dwellings in the building, including a fee for perpetual use of the land, property tax and the [following] costs: (a)     maintenance and keeping property in a proper technical condition, as well as   renovations; (b)     administration of property; (c)     upkeep of shared premises, lifts, collective aerial installations, intercoms and greenery; (d)     property insurance; (e)     other [items], if they are stipulated in a [lease] agreement.” (b)     New provisions on rent increases 18.     Following the December 2006 Amendment section 8a (4) of the 2001 Act [1] is worded as follows: “An increase whereby rent or other charges for the use of the dwelling would exceed 3% of the reconstruction value of the dwelling within 1 year, may take place only in   justified cases referred to in subsections 4(a) and 4(e). At the tenant’s written request, the landlord shall, within 14 days from receipt of the request, give reasons for the increase and its calculation in writing, failing which the increase shall be null and void.” 19.     Amended rules for rent increases are set out in the above-mentioned new subsections 4(a)-4(e) which were inserted into section 8a. They read, in   so   far as relevant, as follows: “4(a)     If the landlord does not receive income from rent or other charges for the use of a dwelling at a level covering the costs of maintenance of the dwelling, as well as   securing to him a return on capital investment and profit ... an increase enabling him to reach that level shall be considered justified if it remains within the limits set out in subsection 4(b). 4(b)     In an increase of rent or other charges for the use of a dwelling, the landlord may include: (1)     a return on capital investment at the maximum level per year:   (a)     1.5% of the investments made by the landlord for the construction or purchase of a dwelling; or   (b)     10% of the investments made by the landlord for the permanent improvement of the dwelling, increasing its usable value until the full return [of such investments]; (2)     decent profit. ...   4(e)     An increase in rent or other charges for the use of a dwelling which does not exceed the average general yearly retail price index in the previous calendar year shall be considered justified. The average general yearly retail price index for the previous calendar year shall be published, in the form of a communiqué, by the President of the Central Statistical Office, in the Official Gazette of the Polish Republic ‘ Monitor Polski’ .” While section 11 of the 2001 Act maintains the general conditions for the termination of leases as applicable on the date of the adoption of the pilot judgment (see Hutten-Czapska (merits) cited above, §§ 127-129), pursuant to section 8a (2) and (5)(1-2), a tenant’s refusal to accept the rent increase deemed to be justified under the above-cited provisions is tantamount to   a   termination of the contract by the end of the term of notice (3 months). Otherwise, it is still open to a tenant to lodge a civil action to have the increase declared unjustified or justified but in a different amount (ibid.   §   125). (c)     New rule governing the civil liability of municipalities for failure to supply social accommodation to a protected tenant 20.     Section 18(3) of the 2001 Act still maintains favourable provisions on the amount of rent to be paid during the period between the issue of   an   eviction order and the vacation of the flat by protected tenants who, on   account of   their low income, are entitled to social accommodation from a   municipality (see the Constitutional Court’s judgment of   11   September   2006 rendered in paragraph 13 of the Hutten-Czapska (friendly settlement) judgment; as regards the situation concerning the provision of social accommodation to tenants under the rent ‑ control scheme as applicable until the adoption of the Hutten-Czapska (merits) judgment, see its paragraphs 79 and 89). 21.     However, in connection with the implementation of the Constitutional Court’s judgment of 11 September 2006, the December 2006 Amendment added a new provision (subsection (5)) to section 18, which makes the municipality liable, under the rules of tort, for any damage sustained by the landlord on account of its failure to provide the tenant with social accommodation. This provision reads as follows: “(5)     If the municipality has not provided social accommodation to a person who is entitled to it by virtue of a judgment, the landlord shall have a claim for damages against the municipality, on the basis of Article 417 of the Civil Code.” Consequently, the municipality’s failure is statutorily deemed to   be   an   “unlawful omission” within the meaning of Article 417 of the Civil Code. 4.     Article 417 of the Civil Code 22.     Article 417 of the Civil Code reads, in so far as relevant, as follows: “1.     The State Treasury, municipality or another legal person wielding public power by virtue of the law shall be liable for damage caused by an unlawful act or omission in the exercise of that power.” 23.     The Supreme Court, in its ruling of 25 June 2008 (no. CZP 46/2008), concerning a claim for damages under section 18(5) of the 2001 Act read in   conjunction with Article 417 of the Civil Code, confirmed that a landlord was entitled to full compensation for any damage sustained on account of   a   municipality’s failure to provide social accommodation to a tenant. 5.     The December 2009 Amendment 24.     The Act of 17 December 2009 on amendments to the 2001 Act on   the protection of the rights of tenants, housing resources of   municipalities and on amendments to the Civil Code and amendments to   certain other statutes ( ustawa o zmianie ustawy o ochronie praw lokatorów, mieszkaniowym zasobie gminy i o zmianie Kodeksu cywilnego oraz o zmianie niektórych innych ustaw ) (“the December 2009 Amendment”) entered into force on 28 January 2010. It introduced a new chapter 12a into the 2001 Act, which deals with the so-called “occasional lease” (“ najem okazjonalny” ). The “occasional lease” is essentially removed from the operation of most provisions of the 2001 Act, in   particular concerning rent increases, protection of tenants, termination of   contracts and restrictions on eviction. It is designed for physical persons – owners of flats, who wish to rent them out for a free, contractual rent for a   period not exceeding 10   years. A landlord who conducts business activity involving lease of flats cannot take advantage of this form of lease. The rent and the conditions for its increase are freely determined in a lease agreement and are not subject to any limitations foreseen in the 2001 Act (see   paragraphs 10-11 above). The procedure for eviction is simplified. Upon the conclusion of a lease agreement, a tenant is obliged to make a   notarised declaration on a voluntary vacation of the rented flat after the termination of the lease and must indicate a flat to which he is to be evicted in the event that an eviction order is issued against him. Pursuant to section 3 of the December 2009 Amendment, income received from occasional lease is subject to a reduced tax of 8.5% per annum. 6.     Other related laws (a)     The 2006 Act 25.     The Act of 8 December 2006 on financial assistance for social accommodation, protected accommodation, night shelters and houses for the homeless (as amended) ( ustawa o finansowym wsparciu tworzenia lokali socjalnych, mieszkań chronionych, noclegowni i domów dla bezdomnych ) (“the 2006 Act”) sets out conditions for obtaining financial assistance from the State for the construction of buildings or dwellings designated for social accommodation (as defined by the 2001 Act) and for the purpose of   securing other forms of   accommodation for the less well-off. Such assistance can be obtained by municipalities, unions of   municipalities and public benefit organisations ( organizacje pożytku publicznego ) in connection with the construction, renovation, conversion, alteration of use or purchase of social-accommodation buildings. Depending on the nature of the development, the subsidies available vary from 30% to   50% of the costs of the investment (section 13 as amended on   12   February 2009). The payments are secured by the State Economy Bank ( Bank   Gospodarstwa Krajowego ) from money allocated to the Subsidies Fund ( Fundusz Dopłat ). (b)     The August 2007 Amendment 26.     The Act of 24 August 2007 on amendments to the 1997 Land Administration Act and certain other statutes (“the August 2007 Amendment”) ( ustawa o zmianie ustawy o gospodarce nieruchomościami oraz o zmianie niektórych innych ustaw ) introduced an information system for monitoring the levels of rent within Poland. That system is referred to   as   a “rent mirror” ( lustro czynszowe ). It stores information on the average rent levels in a given region, thus creating an additional tool for civil courts adjudicating on disputes arising from rent increases by landlords (see   Hutten-Czapska (merits) , cited above, § 138). 27.     Under section 186a of the 1997 Land Administration Act, a new provision introduced by the August 2007 Amendment, a manager administering property including flats for rent is obliged to supply information to the relevant local government concerning the level of rent for rented flats in relation to the building’s location, its age and technical condition, the usable area of the flat and its characteristics, resulting from tenancy agreements concluded in respect of dwellings in buildings administered by him. Pursuant to section 6 of the August 2007 Amendment, the municipality is   required to publish in the regional official gazette ( wojewódzki dziennik urzędowy ) an inventory of data concerning levels of rent for privately ‑ owned residential dwellings situated within its administrative borders. 7.     The 2008 Act (a)     Relevant provisions 28.     The Law of 21 November 2008 on Supporting Thermo ‑ Modernisation and Renovations ( ustawa o wspieraniu termomodernizacji i remontów ) (“the 2008 Act”) was adopted by   Parliament on 21 November 2008 and entered into force on 19 March 2009. The Act is part of the Government’s housing programme, aimed at   improving the existing housing resources. In particular, it concerns tenement houses – both State and privately-owned – that, as stated in   an   explanatory report , have been neglected and fallen into disrepair as   a   result of the operation of the rent-control scheme, which made it   impossible for landlords to receive rent that would secure investment in   proper maintenance and renovations. The explanatory report states that because of the past neglect, within the next 8 years it will become necessary to demolish 40,000   tenement houses with 200,000 flats belonging to private individuals, municipalities or   housing communes. 29.     Under sections 3-7 of the Act, an investor who has carried out renovation or thermo-modernisation work is entitled to the so-called “renovation refund” ( premia remontowa ) or “thermo-modernisation refund” ( premia termomodernizacyjna ). The granting of those refunds is subject to the statutory condition that a   given renovation or thermo-modernisation project would result in energy savings, in particular as regards heating and hot water supply systems in   a   building. The refunds are available only in respect of larger-scale, costly renovations. 30.     A renovation refund means in practice a partial refund of a loan taken out for the purposes of renovating a building, including the replacement of   windows, renovations of balconies, fitting of the necessary installations or equipment or alteration of the building resulting in its improvement. Under section 9, a renovation refund constitutes 20% of a loan spent by   an investor but not more than 15% of the costs of the entire renovation project. Thermo-modernisation refunds are subject to ceilings of 20% and 16% respectively. The refund payments are to be secured by the State Economy Bank from money allocated to the Thermo-Modernisation and Renovations Fund ( Fundusz Termomodernizacji i Remontów ). 31.     The Act introduced a system of compensatory refunds ( premie kompensacyjne ) available to owners whose property was subject to the rent ‑ control scheme between 12 November 1994 and 25 April 2005 [2] (see   also Hutten-Czapska (merits) , cited above, §§ 71-72, 136-141 and 194). Section 2(13) of the 2008 Act reads: “     A dwelling subject to the rent-control scheme ( lokal kwaterunkowy ) is a dwelling within the meaning of   [the 2001 Act] in respect of which the lease originated in an   administrative decision on allocation to a dwelling or had another legal basis dating back to the time before State management of housing matters or the special lease scheme were introduced in   the relevant town, and in respect of which rent was: (a)     controlled; (b)     statutorily limited to 3% of the reconstruction value of the dwelling within 1   year; (c)     statutorily limited in its ... increase to 10% within 1 year during any period between 12 November 1994 and 25 April 2005.” Section 10 read: “1.     An investor – a physical person who on 25 April 2005 was an owner or heir of   an owner of a building in which there was at least one dwelling subject to the rent ‑ control scheme – shall be entitled to a refund hereinafter referred to   as   a   ’compensatory refund’. 2.     A compensatory refund in relation to one building shall be granted only once. 3.     A compensatory refund shall be set aside for paying off a loan granted for carrying out: (1)     a renovation project; or (2)     the renovation of a one-family house if [such a project] concerns the building referred to in subsection 1. 4.     Except for the renovation referred to in subsection 3(2), a compensatory refund shall be granted together with a renovation refund.” 32.     Section 11 read, in so far as relevant, as follows: “1.     ... a compensatory refund shall be equal to the product of the indicator of the costs of the investment and a sum amounting to 2.1% of the conversion index for each square metre of the usable surface of the dwelling subject to the rent-control scheme and for each year in which the limitations referred to in section 2(13) applied in the period from 12 November 1994 to 25 April 2005 or, if the building was not acquired through succession, from the date of acquisition to 25 April 2005. 2.     If an indicator of the costs of the investment is lower than 0.5, for the purposes of   the calculation of the compensatory refund it shall be assumed that that indicator is   equal to 0.5. 3.     If an indicator of the costs of the investment is higher than 0.7, for the purposes of the calculation of the compensatory refund it shall be assumed that that indicator is   equal to 0.7. 4.     The formula for the calculation of a compensatory refund is set out in the annex to this law.” 33.     The annex sets out the following formula: The components of the formula are listed as follows: “ P – the amount of the compensatory refund k =   a)   0.5 if an indicator of the costs of the investment is lower than 0.5;     b)   indicator of the costs of the investment, if that indicator is not lower than 0.5 and not higher than 0.7;     c)     0.7, if an indicator of the costs of the investment is higher than 0.7. [An indicator of the costs of the investment is defined in section 2(12) as a ratio of   the costs of the thermo-modernisation or renovation investment, which fulfils the criteria set out in section 10(1), calculated in relation to 1 square metre of the residential building’s usable area, the price for 1 square metre of the residential building’s usable area as established for the purposes of the calculation of   a   “guarantee refund” ( premia gwarancyjna ) – a kind of a loan refund granted by   the State to persons who before the transformation to the market economy had savings plans for acquiring a flat from a housing cooperative.] w – the value of the indicator of the costs of the investment in the municipality on   whose territory the building is located as of the date on which an application for a   loan has been made; n – number of rented flats in the building; pu i – usable area of an i-th rented flat; m i – the period, expressed in months, during which an i-th rented flat was subject to   restrictions referred to in section 2(12), from 12 November 1994 to 25 April 2005, and if the building has not been acquired through succession after 12 November 1994, from the date of acquisition to 25 April 2005.” 34.     Under section 19, the State Economy Bank shall transfer refunds to   the lending bank if the project has been carried out within the time-limit set in   the loan agreement. Section 19 reads: “   The State Economy Bank shall transfer a compensatory refund [to the lending bank] after the amount of the loan spent [has reached the level of] the renovation refund granted.” Section 20 provides that the State Economy Bank is to keep an electronic database register of buildings in respect of which refunds have been granted. (b)     Operation in practice in 2008-2009 35.     According to reports published in the Polish press in September 2009, no landlord had by that time taken advantage of the compensatory scheme under the 2008 Act. There were only 5 banks cooperating with the State Economy Bank and involved in the scheme. In contrast, 15 banks offered loans that include thermo-modernisation or renovation refunds. As   the Ministry for Infrastructure stated, most banks were not interested in   giving loans that included a compensatory refund. The Ministry intended to propose amendments to   the 2008 Act whereby landlords who had made investments would be able to profit from the scheme, regardless of whether or not they had taken out a   loan for this purpose. (c)     The March 2010 Amendment 36.     On 5 March 2010 Parliament adopted the Act of 5 March 2010 on   amendments to the Law on Supporting Thermo-Modernisation and Renovations ( ustawa o zmianie ustawy o wspieraniu termomodernixacji i   remontów) (“the March 2010 Amendment”). It entered into force on   7   June 2010. 37.     Section 10 (as amended) at present reads, in so far as relevant, as   follows: “     “1.     An investor, a physical person who is an owner of a residential building in   which there is at least one dwelling subject to the rent-control scheme or an owner of part of a residential building and who, on 25 April 2005, was the owner of this residential building or this part of the residential building or heir of   a person who was the owner on this day – shall be entitled to a compensatory refund. ... 3.     A compensatory refund in respect of a residential building or part of a residential building shall be granted only once. 4.     A compensatory refund shall be designated for the reimbursement of entire or   partial costs of: 1)     a renovation project; or (2)     the renovation of a one-family house.” 38.     New subsections 4 and 5 were added to section 12, enabling a   landlord to obtain a compensatory refund without the need to take out a   bank loan for the investment. The amended section 12 at present reads, in   so far as relevant, as follows: “4.     If [an investor] intends to carry out a renovation project or renovation referred to in section 10(4) entirely out of other financial resources than a bank loan in   connection with which a thermo-modernisation or renovation refund has been granted, he shall make an application for a compensatory refund directly to the [State Economy Bank]. 5.     In cases referred to in subsection 4, requirements laid down in section 7(1)1), (2) and (3) 1 shall not apply [the relevant requirements comprise particular conditions that must be fulfilled by other persons wishing to take advantage of the refunds scheme under the 2008 Act, such as the reduction in or savings of energy consumption that must result from a given renovation].” 39.     In order to obtain a compensatory refund, a landlord should attach to   his application certified copies of documents confirming that his property was subject to the rent-control scheme and indicating the relevant period or   periods during which restrictions applied. Also, he should submit documents showing the extent of works and estimated costs of the investment. 40.     According to the amended section 19(4), the State Economy Bank shall transfer a compensatory refund to an investor after he has incurred expenses involved in a renovation project, in accordance with the indicated extent of works. The compensatory refund may not exceed the costs of the investment. 41.     In consequence of the above amendments, a landlord can choose between an ordinary or simplified procedure for granting a compensatory refund. In the ordinary procedure, it is necessary to take out a loan for the planned investment and fulfil the requirements laid down in section 7 of the 2008 Act in respect of the reduction in energy consumption that must result from a given renovation project. A detailed building plan and construction or energy audit are also required. The minimum costs of the investment must reach the statutory threshold, which is determined by reference to the so called “indicator of the costs of the investment” (see the components of   the mathematical formula for the calculation of the compensatory refund in paragraph 32 above). This indicator may not be lower than 0.05 and higher than 0.70, which in practice means that the refund is available only in   respect of substantial investments. A landlord may take advantage of   compensatory and renovation refunds or compensatory and thermo ‑ modernisation refunds at the same time. After the termination of the project, the State Economy Bank transfers the money to the lending bank, which deducts the relevant amount from the loan. In the simplified procedure, a landlord may invest own money or find other sources of financing his project rather than a bank loan. An   application should be supported by documents indicating the extent and costs of planned works but no building plan, construction or energy audit are required. There is no specific requirement regarding the level of costs of   the planned investment but they must be at least equal to or higher than the compensatory refund available to the person concerned. In respect of the granting and payment of the refund, the landlord deals directly with the State Economy Bank. A landlord who has chosen the simplified procedure may, having fulfilled the relevant requirements, take advantage of a renovation or   thermo-modernisation refund in the future. 42.     The authorities disseminated detailed information concerning the conditions for granting compensatory refunds to persons affected by the operation of the rent-control scheme and a comprehensive explanation of   the mathematical formula and its respective components. They also made available to potential applicants an information technology system on the website of the State Economy Bank (http://www.bgk.com), which enables them to calculate or make a simulation of their refund with the help of   a   special calculator. All the necessary data (applicable conversion indexes, relevant indicators of the reconstruction value of 1 square metre of   the usable area of residential buildings in all regions of Poland, prices for 1 square metre of a building at a given time and all other relevant statistical information) are also available on the website. Applicants also have at their disposal PDF texts of the 2008 Act, the March 2010 Amendment, the Rules for Investors ( Regulamin dla Inwestorów ), and two standard application forms for granting a compensatory refund – one for the purposes of the ordinary procedure and one for the simplified procedure. 43.     The explanation of the mathematical formula describes, in simple terms, the steps that are to be followed by an applicant in order to calculate the amount of the refund. To this end, an applicant indicates the costs of the planned investment, the total usable area of the building in question, the surface area of the flats that were subject to the rent-control scheme and the period during which restrictions applied. After uploading the relevant statistical information giving the price of 1 square metre of the building at   the time of lodging an application and an indicator of the reconstruction value of 1   square metre of the building in the region of its location, he   obtains the amount of the compensatory refund available to him. Making a simulation of the approximate costs of a renovation project, an   applicant may determine the amount of the available compensatory refund in such a way that it would cover all the costs involved in the investment. (d)     Calculations of hypothetical compensatory refunds supplied by the Government 44.     The Government, at the Court’s request, supplied several calculations of hypothetical compensatory refunds in respect of various notional properties situated in various regions in Poland which, for the purposes of the simulation, were considered to have been subject to the rent-control scheme for the entire period referred to in the 2008 Act. The amount varied depending on the specific features of the property and level of the expenses to be incurred. For instance, as of the end of   January   2010 an owner of a tenement house in Łódź, with a total surface area of 780 m 2 and comprising 12 flats which were all subject to the rent ‑ control scheme for the entire statutory period (12 November 1994 – 25   April 2005) who were to incur expenses of 150,000 Polish zlotys (PLN) (approx. 36,800 euros (EUR)) for a renovation project, would be entitled to   a compensatory refund amounting to PLN 366,912 (approx.   EUR   90,000). This refund, if recalculated with the help of the calculator accessible via the State Economy Bank’s website, would amount to PLN 393,530 (approx. EUR 96,500) in December 2010; however, since the maximum refund available cannot be higher than the costs of the investment, the landlord would receive PLN 150,000. If only 6 flats with a total surface area of 490 m 2 were subject to the rent ‑ control scheme over the relevant period, the compensatory refund would decrease to PLN 230,496 (approx. EUR 56,500) which, given the statutory ceiling, would not change the amount of the reimbursement. 45.     The Government were also asked to supply the figures for the refund in a situation where the statutory cut-off date would not be 25 April 2005 but 1   January 2007, the date of entry into force of the December 2006 Amendment (see paragraph 8 et seq. above). As of the end of January 2010, such hypothetical refund would amount to PLN 425,152 (approx.   EUR   104,000). The comparison with the refund as determined under the 2008 Act (PLN 366,912) shows a difference of some 15-16%. (e)     Operation of the March 2010 Amendment in practice 46.     According to the Government, as from 7 June 2010, the date of the March 2010 Amendment’s entry into force, to the end of October 2010, forty-one applications for a compensatory refund had been lodged with the State Economy Bank, of which 12 were granted and the remainder required supplementary information. No application has been rejected and the total amount of refunds granted was PLN 750,000 (approx. EUR 184,000). In   contrast, in 2009 only one application was made – and granted. COMPLAINT 47.     The applicant submitted that the various continuing restrictions on   his   property rights, including the control of rent increases, limitations on   the lease termination and vacation of flats, as well as defective rules for the recovery of property maintenance costs, imposed on him by the Polish law, in particular the 2001 Act, amounted to a breach of Article 1 of   Protocol No.   1 to the Convention. THE LAW A.     Scope of the case before the Court 1.     Questions put to the parties by the Court 48.     When giving notice of the application to the respondent Government under Rule 54 § 2 (b) of the Rules of Court, the Court referred, in particular, to two points. First, it made reference to the laws adopted after the delivery of the merits and friendly-settlement judgments in the Hutten-Czapska v.   Poland case, in particular the December 2006 Amendment, the 2006 Act, the August 2007 Amendment and the 2008 Act. Furthermore, the Court, referred to the compensatory scheme under the 2008 Act, providing redress for the Convention violation to landlords affected by the operation of the laws found to be incompatible with Article 1 of Protocol No. 1 in the Hutten–Czapska pilot judgment. In this connection, it invited the parties to state whether, having regard to   the above-mentioned laws, the applicants’ and other similarly situated Polish landlords’ Convention claims under Article 1 of Protocol No. 1 have been satisfied at domestic level and, in consequence, “the matter ha[d] been resolved” within the meaning of Article 37 § 1 (b) of the Convention and whether, having regard to the features of the compensatory scheme under the 2008 Act, the redress offered by the State for the systemic violation of   Article 1 of Protocol No. 1 was satisfactory. 49.     Accordingly, the Court’s examination of the case is limited at this stage to the issue of whether or not it is justified to apply Article 37 § 1 of   the Convention. 2.     Individual and general dimension of the case 50.     The present case, as well as the related case of The Association of   Real Property Owners in Łódź v. Poland lodged by a group of Polish landlords and the remaining 24 similar adjourned cases currently on the Court’s docket originated in the same structural shortcoming that was found by the Court in the Hutten–Czapska case to be at the root of its finding of   the violation of Article 1 of Protocol No. 1. That shortcoming was defined as “a systemic problem connected with the malfunctioning of   domestic legislation in that: (a) it [had] imposed, and continue[d] to   impose, restrictions on landlords’ rights, including defective provisions on the determination of rent; [and] (b) it [had] not and still [did] not provide for any procedure or mechanism enabling landlords to recover losses incurred in connection with property maintenance” (see Hutten-Czapska (merits), cited above, the fourth operative provision of the judgment). The Court perceived the problem as “a combination of restrictions on   landlords’ rights, including defective provisions on the determination of   rent, which [had been] and still [wa]s exacerbated by the lack of any legal ways and means enabling them at least to recover losses incurred in   connection with property maintenance, rather than as an issue solely related to the State’s failure to secure to landlords a level of rent reasonably commensurate with the costs of property maintenance” (ibid. § 239). In that connection, it directed that “in order to put an end to the systemic violation identified in the present case, the respondent State must, through appropriate legal and/or other measures, secure in its domestic legal order a   mechanism maintaining a fair balance between the interests of landlords and the general interest of the community, in accordance with the standards of protection of property rights under the Convention” (ibid. the fourth operative provision of the judgment). In consequence, the Court, applying the pilot-judgment procedure in   the   individual applicant’s case, not only recognised the Convention violation in respect of all actual and potential applicants who found themselves in a similar situation but also made clear that general measures at national level were called for in execution of the judgment and that those measures should take into account the other persons affected and remedy the systemic defect underlying the Court’s finding of a violation. B.     Applicati