CEDH · CASELAW;JUDGMENTS;CHAMBER;ENG — 10 juillet 2014

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margin-left:21.25pt; margin-bottom:6pt; text-indent:7.1pt; page-break-inside:avoid; page-break-after:avoid; font-size:10pt } .s583D00FA { margin-top:0pt; margin-left:17pt; margin-bottom:0pt; text-indent:-17pt } .s26FF04E7 { margin-top:0pt; margin-left:17.3pt; margin-bottom:0pt } .s64E792FA { margin-top:0pt; margin-left:39.7pt; margin-bottom:0pt } .s4B243ECC { margin-top:12pt; margin-bottom:0pt; text-indent:14.2pt; page-break-inside:avoid; page-break-after:avoid } .sF7A4323 { margin-top:36pt; margin-bottom:0pt; text-align:left } .s4DFDBCC7 { width:188.96pt; display:inline-block } .sA2E62387 { width:204.97pt; display:inline-block }       FIRST SECTION               CASE OF STATILEO v. CROATIA   (Application no. 12027/10)                     JUDGMENT     STRASBOURG   10 July 2014     FINAL   10/10/2014   This judgment has become final under Article 44 § 2 of the Convention. It may be subject to editorial revision.   In the case of Statileo v. Croatia, The European Court of Human Rights (First Section), sitting as a Chamber composed of:   Khanlar Hajiyev, President,   Isabelle Berro-Lefèvre,   Mirjana Lazarova Trajkovska,   Paulo Pinto de Albuquerque,   Linos-Alexandre Sicilianos,   Erik Møse,   Dmitry Dedov, judges, and André Wampach, Deputy Section Registrar, Having deliberated in private on 17 June 2014, Delivers the following judgment, which was adopted on that date: PROCEDURE 1.     The case originated in an application (no. 12027/10) against the Republic of Croatia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Croatian national, Mr Sergej Statileo (“the applicant”), on 27 January 2010. 2.     The applicant was represented by Mr T. Vukičević, an advocate practising in Split. The Croatian Government (“the Government”) were represented by their Agent, Mrs Š. Stažnik. 3.     The applicant alleged, in particular, that his inability to charge adequate rent for the lease of his flat had been in violation of his property rights. 4.     On 28 June 2011 the application was communicated to the Government. 5.     By a letter of 6 December 2011 the applicant’s representative informed the Court that the applicant had died on 6 February 2011 and that his statutory heir Mr Boris Filičić wished to pursue the application (see paragraphs 88-89 below). 6.     Ksenija Turković, the judge elected in respect of Croatia, withdrew from sitting in the case (Rule 28 of the Rules of Court). The Government accordingly appointed Isabelle Berro-Lefèvre, the judge elected in respect of Monaco, to sit in her place (Article 26 § 4 of the Convention and Rule   29). THE FACTS I.     THE CIRCUMSTANCES OF THE CASE 7.     The applicant was born in 1952 and lived in Split. 8.     He was the owner of a flat in Split with a surface area of 66.76 square metres. 9.     On 17 October 1955 a certain Ms P.A. was, on the basis of the Decree on Administration of Residential Buildings of 1953 (see paragraph 24 below), awarded the right to live in the flat and moved in together with her mother and her cousin I.T. (born in 1948) whom her parents had entrusted to P.A.’s care in 1951. This right was by the entry into force of the Housing Act of 1959 transformed into the specially protected tenancy ( stanarsko pravo , see paragraphs 24-30 below about the specially protected tenancy in the former Yugoslavia). 10.     P.A. and I.T. lived together in the applicant’s flat until P.A. moved out in 1973. I.T. continued to live there with her husband and her son, Ig.T. (born in 1972). I.T.’s husband died in 1998. 11.     On 5 November 1996 the Lease of Flats Act entered into force. It abolished the legal concept of the specially protected tenancy and provided that the holders of such tenancies in respect of, inter alia , privately owned flats were to become “protected lessees” ( zaštićeni najmoprimci , see paragraphs 31 and 40 below). Under the Act such lessees are subject to a number of protective measures, such as the duty of landlords to contract a lease of indefinite duration, payment of protected rent ( zaštićena najamnina ), the amount of which is set by the Government and significantly lower than the market rent; and better protection against termination of the lease. A.     Civil proceedings 12.     The applicant refused to conclude a lease contract with I.T. stipulating the protected rent pursuant to section 31(1) of the Lease of Flats Act (see 40 below). On 16 May 1997 I.T. brought a civil action against him in the Split Municipal Court ( Općinski sud u Splitu ), relying on section 33(3) of the same Act (see paragraph 43 below), with a view to obtaining a judgment in lieu of such a contract. 13.     Shortly afterwards in 1997 the applicant brought a civil action in the same court seeking to obtain a judgment ordering I.T. and her son to vacate the flat in question. He argued that she had not been “a child without parents” and thus could not have been considered a member of P.A.’s household within the meaning of section 9(4) of the 1974 Housing Act or section 12(1) of the 1985 Housing Act (see respectively paragraphs 28 and 29 below). Consequently, she could not have taken over the specially protected tenancy after P.A. had moved out of the flat in 1973, and thus had not had any title to use it. 14.     The two proceedings were subsequently joined. 15.     By a judgment of 2 September 2002 the Split Municipal Court found in favour of I.T. and her son in part. It ordered the applicant to conclude with I.T. a lease contract stipulating protected rent in the amount of 102.14   Croatian kunas   (HRK) – approximately 14 euros (EUR) at the time – per month within fifteen days; otherwise the judgment would substitute such a contract. Since the existence of a specially protected tenancy was a necessary precondition for acquiring the status of a protected lessee under the Lease of Flats Act (see paragraph 11 above) the court had first to determine, as a preliminary issue, whether I.T. had become the holder of the specially protected tenancy after P.A. had moved out of the flat in 1973. The court held that, unlike the subsequent legislation relied on by the applicant, the legislation in force at the material time, namely the Housing Act of 1962, had not defined who could have been considered a member of the household of a holder of a specially protected tenancy (see paragraph 27 below). Thus, given that I.T. had been in foster care by P.A. and lived with her in the flat in question, she could have been considered as a member of her household and therefore could, after P.A. had moved out of the flat in 1973, taken over the specially protected tenancy from her and become the holder thereof. Consequently, when in November 1996 the Lease of Flats Act entered into force, I.T. had, as the holder of the specially protected tenancy, become a protected lessee by the operation of law and was entitled to conclude a lease contract stipulating protected rent with the applicant (see paragraphs 39-40 below). While the court ruled that I.T.’s son could be listed in the lease contract as a member of her household, it also held that her daughter-in-law and her grandson could not because they had not moved into the flat until after the entry into force of the Lease of Flats Act, when specially protected tenancies could no longer be obtained. 16.     On 28 June 2006 the Požega County Court ( Županijski sud u Požegi ) dismissed an appeal by the applicant and upheld the first-instance judgment, which thereby became final. 17.     The applicant then lodged a complaint with the Constitutional Court ( Ustavni sud Republike Hrvatske ) alleging violations of his right to equality before the law, his right to a fair hearing and his right of ownership under the Constitution (see paragraph 23 below). 18.     On 17 September 2009 the Constitutional Court dismissed the applicant’s constitutional complaint and served its decision on his representative on 2 November 2009. B.     The protected rent 19.     According to the information submitted by the parties, the monthly protected rent for the applicant’s flat changed as follows, in line with the increase in the construction price index (see paragraphs 52 and 85 below):   Period The amount of the protected rent   HRK EUR (average exchange rate in the relevant period) 1 December 1997 – 31 October 2005 102.14 13.36 1 November 2005 – 8 May 2008 157.62 21.48 9 May 2008 – 4 September 2012 174.48 23.66 5 September 2012 – onwards 180.25 23.76   20.     It appears from the documents submitted by the Government that the applicant refused to receive the protected rent for the flat and that   I.T. therefore had to deposit it with a court. 21.     According to the parties the condominium fee paid into the common reserve fund (see paragraph 67 below) by the owner of the flat – the applicant and later his heir – for maintenance etc., was set at HRK 102.81 on 1   January 1998 and has not been changed since. 22.     The Government also submitted information from the tax authorities according to which the applicant had never declared any income from renting out the flat. On the other hand, the applicant’s heir did so in his tax returns for 2011 and 2012 where he also asked for a tax deduction on account of costs corresponding to the amount of the condominium fee paid (see paragraphs 67-70 below). The Government did not specify what tax rate was applied. II.     RELEVANT DOMESTIC LAW AND PRACTICE A.     The Constitution 23.     The relevant provisions of the Constitution of the Republic of Croatia ( Ustav Republike Hrvatske , Official Gazette no. 56/90 with subsequent amendments) read as follows: Article 14(2) “Everyone shall be equal before the law.” Article 29(1) “In the determination of his rights and obligations or of any criminal charge against him or her, everyone is entitled to a fair hearing within a reasonable time by an independent and impartial court established by law.” Article 48 “The right of ownership shall be guaranteed.   Ownership entails obligations. Owners and users of property shall contribute to the general welfare.” B.     Legislation governing specially protected tenancy 24.     The “right to a flat”, entitling its holder to permanent and unrestricted use of a flat for living purposes, was introduced into the legal system of the former Yugoslavia in 1953 by the Decree on Administration of Residential Buildings ( Uredba o upravljanju stambenim zgradama ) of 1953. The Housing Act ( Zakon o stambenim odnosima ) of 1959 was the first legislative act that introduced the legal concept of the “specially protected tenancy” ( stanarsko pravo ). Once awarded, it entitled its holder and the members of his or her household to permanent (lifelong) and unrestricted use of a particular flat for living purposes against the payment of a nominal fee covering only maintenance costs and depreciation. The holder of a specially protected tenancy could also sub-let a part of the flat to someone else, participate in the administration of the building in which the flat was located, exchange it for another flat (in agreement with the provider of the flat) and, exceptionally, use part of it for business purposes. In legal theory and judicial practice the specially protected tenancy was described as a right sui generis . Such tenancy could be terminated only in judicial proceedings and on limited grounds, the most important one being failure by the holder to use the flat for living for a continuous period of at least six months without justified reason. 25.     Until the entry into force of the Housing Act of 1974, specially protected tenancies could be awarded in respect of both socially and privately owned flats. However, in the large majority of cases they were awarded in respect of flats in “social ownership” ( društveno vlasništvo ) – a type of ownership which did not exist in other socialist countries but was particularly highly developed in the former Yugoslavia. According to the official doctrine, property in social ownership had no owner, the role of public authorities in respect of such property being confined to management. With the Housing Act of 1974 it was no longer possible to award specially protected tenancies in respect of flats in private ownership. However, the pre-existing specially protected tenancies in respect of such flats were preserved. 26.     The legal relationship between the providers of flats (public authorities which nominally controlled and were allocating socially-owned flats, or owners of privately-owned flats) and holders of specially protected tenancies were regulated by successive Housing Acts of 1959, 1962, 1974 and 1985. Those acts provided, inter alia , that when a holder of a specially protected tenancy died or moved out of the flat the tenancy was transferred by the operation of law ( ipso jure ) to the members of his or her household, even though in such cases the housing administration could seek eviction of those using the flat if it considered that none of them satisfied the conditions for obtaining that tenancy. Thus, specially protected tenancies could be passed on, as of right, from generation to generation. 27.     The Housing Act of 1962 did not define who could be considered a member of the household of a holder of a specially protected tenancy. It did, however, define, in section 12(1), who could be considered the occupant of a flat: “(1) The occupants of a flat within the meaning of this Act are: the holder of the specially protected tenancy, members of his or her household who live together with him or her, and persons who are no longer members of his or her household but still live in the same flat.” 28.     The Housing Act of 1974 in its section 9(4) defined household members of a holder of a specially protected tenancy as:   “... persons who live together with him or her and form an economic unit, [including] spouses, blood relatives in the direct line and their spouses, stepchildren and adoptees, children without parents taken into foster care, stepfather and stepmother, adoptive parents, brothers and sisters and dependants, a cohabitee ...” 29.     The Housing Act of 1985 in its section 12(1) defined household members of a holder of a specially protected tenancy in the following terms: “Under this Act members of the household of a holder of a specially protected tenancy are his or her spouse and persons who have lived with him or her in the past two years, including: blood relatives in the direct line and their spouses, brothers and sisters, stepchildren and adoptees, children without parents taken into foster care, stepfather and stepmother, adoptive parents and dependants, a cohabitee ...” 30.     The Specially Protected Tenancies (Sale to Occupier) Act of 1991 entitled holders of specially protected tenancies and, with their permission, the members of their household, to purchase the flats in respect of which they held such tenancy under favourable conditions. In that way a large majority of specially protected tenancies were transformed into the right of ownership of former tenants. However, holders of specially protected tenancies in respect of privately-owned flats or socially-owned flats which flats had passed into social ownership by means of confiscation (rather than nationalisation) had no right to purchase the flats in respect of which they held such tenancy. They, together with those holders of specially protected tenancies who had, but did not avail themselves of, the right to purchase the flats, became the so-called protected lessees with the entry into force of the Lease of Flats Act on 6 November 1996 (see paragraph 11 above and paragraphs 39-40 below). C.     The Lease of Flats Act 1.     Relevant provisions 31.     The Lease of Flats Act ( Zakon o najmu stanova , Official Gazette no.   91/1996 of 28 October 1996), which entered into force on 5 November 1996, regulates the legal relationship between landlord and lessee with regard to the lease of flats. (a)     Provisions relating to ordinary lease 32.     Section 5 provides that a contract for lease of a flat should specify, inter alia , the types of charges payable in connection with living in the flat and the way they should be paid, and contain clauses on the maintenance of the flat. 33.     According to section 6 the rent paid for the use of a flat may be either the protected rent or freely negotiated rent (that is, the market rent). 34.     Section 7, which provides for the protected rent as one of the most important elements of the status of a protected lessee, reads as follows: Section 7 “(1)     Protected rent is set on the basis of the standards and criteria set forth by the Government of the Republic of Croatia [that is, by the Decree on the standards and criteria for the determination of protected rent]. (2)     The standards and criteria referred to in paragraph 1 of this section shall be set depending on the conveniences and living (usable) space of a flat, the maintenance costs of the communal areas and installations of the building [where the flat is located], as well as on the purchasing power [i.e. income] of the lessee’s household. (3) Protected rent cannot be lower than the amount necessary to cover the costs of regular maintenance of the residential building [in which the flat is located], which is determined by special legislation.” 35.     Section 13 states that the landlord has to maintain the flat he or she rents out in a habitable condition, in accordance with the lease contract. 36.     Section 14(3) provides that the lessee has to notify the landlord of any required repairs in the flat and the communal premises of the building in which it is located, the costs of which must be borne by the landlord. 37.     Pursuant to section 19 a landlord may terminate a lease in the following cases: -   if the lessee does not pay the rent or charges; -   if the lessee sublets the flat or part of it without permission from the landlord; -   if the lessee or other tenants in the flat disturb other tenants in the building; -   if another person, not named in the lease contract, lives in the flat for longer than thirty days without permission from the landlord, except where that person is the spouse, child or parent of the lessee or of the other legal tenants in the flat, or a dependant of the lessee or a person in respect of whom the lessee is a dependant; -   if the lessee or other legal tenants use the flat for purposes other than as living accommodation. 38.     Section 21 reads as follows: “Apart from the grounds stipulated in section 19 of this Act, the landlord may terminate a lease of indefinite duration if he or she intends to move into the flat or install his or her children, parents or dependants in it.” (b)     Provisions relating to protected lease 39.     Transitional provisions (sections 30-49) of the Lease of Flats Act establish a special category of lessees (“protected lessees” – zaštićeni najmoprimci ), namely, those who were previously holders of specially protected tenancies in respect of privately owned flats or those who did not purchase their flats under the Specially Protected Tenancies (Sale to Occupier) Act. Such lessees are subject to a number of protective measures, such as the obligation of landlords to contract a lease of indefinite duration; payment of protected rent ( zaštićena najamnina ), the amount of which is set by the Government; and a limited list of grounds for termination of the lease. The provisions of the Lease of Flats Act relating to ordinary lease apply to protected lease unless the provisions relating to protected lease provide otherwise. 40.     By section 30 of the Act the still existing specially protected tenancies (see paragraph 30 above) were abolished and holders of such tenancies became protected lessees as of its coming into force. 41.     Section 31(1) provides that the owner of the flat and the former holder of a specially protected tenancy in respect of the same flat shall enter into a lease contract of indefinite duration where the lessee shall have the right to protected rent. Section 31(2) states that the protected lessee does not have the right to protected rent if he or she runs a business in a part of the flat or owns a habitable house or flat. 42.     According to section 33(2) the lessee has to submit a request for the conclusion of a lease contract stipulating protected rent to the landlord within six months from the Act’s entry into force or from the day on which the decision determining the right of that person to use the flat becomes final. 43.     Section 33(3) states that if the landlord does not enter or refuses to enter into a lease contract stipulating protected rent within three months of the receipt of the lessee’s request, the lessee can bring an action in the competent court with a view to obtaining a judgment in lieu of the lease contract. 44.     It follows from section 35 that the protected lessee must pay the landlord, in addition to the protected rent, the utilities fees and other charges levied in connection with living in the flat (running costs), if they have so agreed. 45.     Section 36 reads as follows: “If, owing to amendments to the legislation referred to in section 7 of this Act, the level of the protected rent changes, the lessee is bound to pay that [revised] rent on the basis of the calculation provided by the landlord without any modification of the [lease] contract.” 46.     Section 37(1) provides that persons who, at the time of the Act’s entry into force, had the legal status of a member of the holder of the protected tenant’s household, acquired under the provisions of the 1985 Housing Act (see paragraph 29 above), must be entered into the lease contract. 47.     Section 38 states as follows: “(1)     In the event of the death of a protected lessee or when the protected lessee abandons the flat, the rights and duties of the protected lessee stipulated in the lease contract shall pass to [one of] the person[s] indicated in the lease contract, subject to their agreement. (2)     In the event of a dispute, the landlord shall designate the lessee. (3)     The person referred to in paragraph 1 of this section shall [make a] request [to] the landlord to conclude a lease contract [stipulating protected rent] within sixty days from the change of circumstances [referred to in paragraph 1 of this section]. (4)     The landlord shall conclude with the person referred to in paragraph 1 of this section a contract for lease of the flat of indefinite duration, stipulating the rights and duties of a protected lessee.” 48.     The grounds for termination by a landlord of the lease of a flat to a protected lessee are set out in section 40 of the Lease of Flats Act, which reads as follows: “(1)     Apart from the grounds stipulated in section 19 of this Act, a landlord may terminate the lease of a flat to a protected lessee, on the grounds: -     provided for in section 21(1) of this Act, -     if he or she does not have other accommodation for himself or herself and for his or her family, and is [either] entitled to permanent social assistance on the basis of the special legislation or is over sixty years of age. (2)     [ Invalidated by the Constitutional Court as unconstitutional by a decision of 31   March 1998. ] (3)     In the case referred to in paragraph 1, second sub-paragraph, of this section the local government ... shall provide the protected lessee with another suitable flat [in the use of which he or she shall retain] the rights and obligations of a protected lessee. (4)     The landlord or the local government in the cases referred to in paragraphs 2 and 3 of this section are not bound to provide the protected lessee with another suitable flat if he or she owns a suitable habitable flat in the territory of the township or municipality where the flat in which he or she lives is located. (5)     ...” 49.     By a decision of 31 March 1998 the Constitutional Court invalidated as unconstitutional (see paragraph 57 below), inter alia , paragraph 2 of section 40 which provided that in the case referred to in paragraph 1, first sub-paragraph, of that section the landlord could terminate the protected lease only if he or she had provided the protected lessee with another habitable flat under housing conditions that were not less favourable for the lessee. After that decision by the Constitutional Court, the Supreme Court, in decision Rev-486/02-2, Gzz-74/02 of 21   February 2007, specified that a landlord who intends to move into his or her own flat or install his or her children, parents or dependants therein is entitled to terminate the lease contract of a flat to a protected lessee (or to refuse to enter into a lease contract) only if (a) the landlord does not have other accommodation for himself or herself and for his or her family, and is either entitled to permanent social assistance or is over sixty years of age; or (b)   the lessee owns a suitable habitable flat in the same municipality or township where the flat in which he or she lives is located. 50.     Section 41 defines the notion of a “suitable flat”, referred to in paragraphs 3 and 4 of section 40, as a flat located in the same township or municipality, which complies in terms of its size with the “one person one room” principle and which does not have a greater number of rooms than the flat the protected lessee has to move out of. 2.     Related subordinate legislation (a)     The Decree on the standards and criteria for the determination of protected rent 51.     The Decree on the standards and criteria for the determination of protected rent ( Uredba o uvjetima i mjerilima za utvrđivanje zaštićene najamnine , Official Gazette nos. 40/97 and 117/05), which entered into force on 16 April 1997, is the subordinate legislation referred to in section   7(1) of the Lease of Flats Act (see paragraph 34 above). 52.     Section 3 contains the mathematical formula for calculating protected rent. The formula takes into account: (a) the usable floor area of the flat; (b) the construction price index (as of 1 November 2005 when the Amendments to the Decree entered into force); (c) the number of points given to the flat in its valuation record (which depend on the building materials, the state of the carpentry and plumbing, the state of the water, gas, heating and electric installations and telecommunication outlets, the finishing of the floors and walls, the floor on which the flat is located, the existence of an elevator, etc.); (d)   the location coefficient (which depends on the location of the flat and demographic trends); and (e) the usability coefficient (which depends of the usable floor area of the flat and the number of tenants living in it). 53.     Section 9 provides for the possibility of reducing the amount of the protected rent calculated in accordance with the formula contained in section 3 in cases where the average monthly income per member of the household in the previous year was less than half the average monthly income in the Republic of Croatia for the same year. 54.     Section 10 states that the amount of the protected rent reduced in accordance with section 9 cannot be lower than a certain minimum amount calculated using the formula provided in that section. 55.     According to section 11(1) the monthly amount of the protected rent in respect of a specific flat shall be calculated by the landlord once a year. Section 11(2) provides that the landlord may ask the relevant department of the local authority charged with housing affairs to calculate the amount of the protected rent for the flat he or she is renting out. (b)     The Decision on the determination of the level of freely negotiated rent 56.     The Government of Croatia’s Decision on the determination of the level of freely negotiated rent ( Odluka o utvrđivanju slobodno ugovorene najamnine , Official Gazette no. 120/00) of 15 November 2000, sets the level of rent for flats owned by the State. It is to be noted that this rent is not protected rent but “freely negotiated rent” within the meaning of section 6 of the Lease of Flats Act (see paragraph 33 above). Nevertheless, because such flats are generally awarded to socially vulnerable tenants, it is a non-profit or low-profit rent and is thus considerably lower than the market rent. In particular, the Decision provides that the amount of freely negotiated rent to be paid by lessees in State-owned flats shall correspond to two times the amount of the monthly condominium fee paid into the common reserve fund of the building where the flat is located (see paragraph 67 below). It also provides that the amount of freely negotiated rent paid by protected lessees not entitled to protected rent for the reasons set out in section   31(2) of the Lease of Flats Act (see paragraph 41 above) shall be set at HRK   15 per square metre. 3.     The Constitutional Court’s case-law 57.     Following numerous petitions for (abstract) constitutional review ( prijedlog za ocjenu ustavnosti ), by decision no. U-I-762/1996 of 31 March 1998 (Official Gazette 48/98 of 6 April 1998) the Constitutional Court invalidated four provisions of the Lease of Flats Act, including section   40(2), as unconstitutional (see paragraph 49 above). In its decision it also rejected a number of those petitions and thereby refused to review the constitutionality of another thirteen provisions of the same Act, including section 7 (see paragraph 34 above), as well as of the entire Act itself. 58.     By decision no. U-I-533/2000 of 24 May 2000 (Official Gazette   56/00 of 6 June 2000) the Constitutional Court rejected a petition for (abstract) constitutional review and thus refused to review the constitutionality of eight provisions of the Lease of Flats Act, including section 7 (see paragraph 34 above), as well as of the entire Act itself. 59.     By decision no. U-II-1218/2000 of 22 November 2000 the Constitutional Court rejected a petition for (abstract) constitutional review and thus refused to review the constitutionality of the Decree on the standards and criteria for the determination of protected rent (see paragraphs   51-55 above). D.     The Obligations Act 60.     Several provisions of the Obligations Act ( Zakon o obveznim odnosima , Official Gazette, nos. 35/2005 and 41/2008), which entered into force on 1 January 2006, govern lease contracts. 61.     Section 551 states that the provisions of the Obligations Act on lease contracts apply, as subsidiary rules, to leases governed by special legislation. 62.     Section 553(1) provides that the lessor has to make the property available to the lessee and maintain it in a condition suitable for the agreed use. 63.     Section 554 reads as follows: Maintenance of the property and public levies Section 554 “(1)     In order to maintain the property in a condition suitable for the agreed use, the lessor is bound to carry out the required repairs in due time and at his own expense, and the lessee is bound to allow the lessor to do so. (2)     The lessor is bound to reimburse any costs the lessee has incurred by carrying out repairs, either because they were urgent or because the lessor, having been informed thereof, did not carry them out in due time. (3)     The costs of minor repairs and the costs of regular use of the property [i.e. running costs] shall be borne by the lessee. (4)     The lessee is bound to notify the lessor of the required repairs without delay; otherwise he or she shall be liable for the resultant damage. (5)     All taxes and public levies in connection with the leased property shall be borne by the lessor.” E.     The Property Act 64.     Sections 66-99 of the Ownership and Other Rights In Rem Act ( Zakon o vlasništvu i drugim stvarnim pravima , Official Gazette no. 91/96 with subsequent amendments), which entered into force on 1 January 1997 (“the Property Act”), regulates condominium ( vlasništvo posebnih dijelova nekretnine , etažno vlasništvo ). This is a form of (co-)ownership of a multi-unit building where there is separate and distinct ownership of individual units (such as flats or business premises) and co-ownership of communal areas of the building (such as entrances, staircases, hallways, the roof, heating system, elevators, etc.) and of the land under it. 65.     Section 84(1) provides that a co-owner in a condominium is bound to maintain, at his or her own expense, the individual unit (for example, a flat) he or she owns individually and has to bear all public levies in connection with that unit. 66.     Section 84(3) states that if a lessee of an individual unit (for example, a tenant) is bound to pay for the utilities linked with its use, the owner of that unit shall guarantee to the utility provider that they will be paid. 67.     According to section 89(1) and (2) the costs of maintenance of and improvements to a condominium are incumbent upon all co-owners in proportion to their share in the condominium. Co-owners must set up a common reserve fund ( zajednička pričuva ) into which they have to pay a condominium fee ( doprinos za zajedničku pričuvu ). F.     Legislation on personal income tax 68.     The 2004 Personal Income Tax Act ( Zakon o porezu na dohodak , Official Gazette no. 177/04 with subsequent amendments) entered into force on 1 January 2005. Section 8 sets the personal income tax rates at 12%, 25% or 40%, depending on the level of taxable income. 69.     Section 27(1) and (2) provide that taxable income from property and pecuniary rights includes, inter alia , the difference between receipts (takings) on account of rent and leases and the costs incurred by the taxpayer in connection with those receipts, where only costs up to 30% of the amount received can be deducted. 70.     Similar provisions were contained in section 23(1) and (2) of the 2000 Personal Income Tax Act (Official Gazette no. 127/00 with subsequent amendments), which was in force between 1 January 2001 and 31   December 2003, and sections 30(1) and 32(1) of the 1993 Personal Income Tax Act (Official Gazette no. 109/93 with subsequent amendments), which was in force between 1   January 1994 and 31 December 2000. Tax rates, depending on taxable income, were 20% and 35% under the 1993 Personal Income Tax Act, and 15%, 25% and 35% and, as of 1 January 2003, also 45% under the 2000 Personal Income Tax Act. III.     OTHER RELEVANT DOCUMENTS A.     Bills to amend the Lease of Flats Act 1.     Draft Amendments of 12 December 2002 to the Lease of Flats Act 71.     On 12 December 2002 the Government of Croatia adopted draft amendments to the Lease of Flats Act and presented them to Parliament for first reading. Parliament deliberated on the draft amendments on 29   January 2003 and agreed to them. The bill contained a proposal to amend, inter alia , section 7 of the Lease of Flats Act, that is, the provision on protected rent (see paragraph 34 above). 72.     The general part of the explanatory report to those Draft Amendments reads as follows: “The current level of protected rent is, in principle, not sufficient to cover even the costs of maintenance of the communal areas and installations of a building, which costs are incumbent upon flat owners. Therefore, it is evident that, in principle, the [condominium fee] is higher than the protected rent. It follows that owners even have to pay the difference between the rent obtained and [the condominium fee]. In addition, under the applicable legislation flat owners [who are] natural persons are also liable to pay income tax on the [income derived from] the lease of [their] flats. Therefore, the lowest [level of] protected rent should be regulated so that ... [it is] linked with the regular maintenance costs of the building. The criterion of purchasing power [i.e. income] should be separated from the level of the rent and linked instead with the social welfare system, which provides for a ‘housing allowance’ ... In particular, in developed rental housing systems one of the basic principles applied, even under the system of non-profit or low-profit rents, and [those involving] privileged and protected groups of tenants including socially vulnerable persons, is that the rent must cover the minimum costs of maintenance of the immovable property (of [both] the building and the flat) and that so-called vulnerable groups ... are provided for by the social welfare system.” 73.     The special part of the explanatory report to section 1 of the Draft Amendments, which amends section 7 of the Lease of Flats Act, reads: “... Today’s level of protected rent is generally between the lowest monthly amount of 1.53 and around 2 [Croatian] kunas per square metre of flat. It is estimated that the rent is usually set at the lowest amount. It is also proposed that the protected rent [in any one case] should not be lower than the amount paid by the owner of the flat [i.e. the condominium fee] into the common reserve fund for the maintenance of the communal premises and installations of the building [where the flat is located], increased by   20%. That increase is [proposed] because the owner of a flat [i.e. a landlord] [who is a natural person] is bound by the applicable legislation to declare the contract of lease of the flat, [more specifically], the income from that lease, to the tax authorities. [The proposed increase] would therefore cover the costs incurred by the owner as a result of his obligation to maintain the building (but not the flat) and the tax [levied] on ... [the income from] that lease.” 2.     The Final Draft Amendments of 3 July 2003 to the Lease of Flats Act 74.     On 3 July 2003 the Government of Croatia adopted the final version of the abovementioned draft amendments and presented them to the Croatian Parliament for second reading. The final version also contained a proposal to amend section 7 of the Lease of Flats Act and estimated that at that time around 7,000 privately-owned flats in Croatia were subject to the protected lease scheme. This final version of the draft amendments was placed on Parliament’s agenda for the session held between 24 September and 17   October 2003. However, Parliament did not have the opportunity to deliberate or vote on that draft before its dissolution on account of the forthcoming scheduled parliamentary elections. 75.     The general part of the explanatory report to the Final Draft Amendments reads as follows: “The current level of protected rent is, in principle, not sufficient to cover even the costs of maintenance of a building, which costs are incumbent upon flat owners. The lowest level of protected rent is currently set at 1.53 [Croatian] kunas per square metre of a flat. However, over a period of five years of charging that rent it has been established that the costs related to the maintenance of communal areas and installations in buildings considerably [exceed it]. Consequently, flat owners have to ... pay ... the difference [between the rent obtained and] the amount required for the maintenance of the communal areas and installations of the building [i.e. the condominium fee]. In addition, under the applicable tax legislation ... flat owners with protected lessees living in their flats are also liable to pay income tax on the ... [income derived from] that lease, from which they in fact do not make [any] net profit but only incur additional costs. It is therefore necessary to regulate the criteria for setting the level of protected rent [so that it covers] the costs of maintenance of the immovable property in question. Since the level of protected rent is very low (for a flat of some 60 square metres the average protected rent is around 100 [Croatian] kunas per month) it is proposed to secure [its payment in cases where] the [impecunious] tenant is unable to pay it through the social welfare system, which, within the current legislative framework, provides for a ‘housing allowance’ ....” 76.     The special part of the explanatory report to the Final Draft Amendments relating to section 1 of the Draft, amending section 7 of the Lease of Flats Act, reads as follows: “... Today’s level of protected rent is generally between the lowest monthly amount of 1.53 and around 2 [Croatian] kunas per square metre of a flat. It is estimated that rent is usually set at the lowest amount, which in principle does not even cover the costs of the maintenance of the communal areas of the building [in which the flat is located]. Paragraph 3 ... currently provides that protected rent cannot be lower than the amount necessary to cover the costs of regular maintenance of the residential building [i.e. the condominium fee], determined by special legislation. However, since that amount is not [actually] specified by any special legislation, it is proposed that it be specified in the Decree on the standards and criteria for the determination of protected rent.” 3.     Draft Amendments of November 2013 to the Lease of Flats Act 77.     In November 2013 the relevant Ministry prepared draft amendments to the Lease of Flats Act and on 6   December 2013 opened a public debate on the draft, which lasted until 6   February 2014. This draft also proposes that section 7 of the Lease of Flats Act be amended but estimates that currently no more than 2,600 privately-owned flats in Croatia are subject to the protected lease scheme. 78.     Those Draft Amendments contain a proposal to amend section 40 of the Lease of Flats Act (see paragraph 48 above) so that a landlord who intends to move into his or her own flat or install his or her children, parents or dependants therein would be entitled to terminate the lease contract of a flat to a protected lessee without any conditions. In that situation the local government would have to provide the protected lessee with another suitable flat for the use of which he or she would be paying protected rent. As regards protected rent, the Draft Amendments contain a proposal to the effect that its level should be such to cover the costs of maintenance of the building in which the flat is located (see paragraph 67 above) and enable the landlords to derive at least some profit from renting out their flats. The Draft Amendments also envisage gradual increase in the level of protected rent so that it would in ten years of their entry into force reach the level of freely negotiated rent. Lastly, the Draft Amendments provide for State and local government subsidies that would enable protected lessees to buy (another) flat under favourable conditions and thereby meet their housing needs. 79.     The general part of the explanatory report to the Draft Amendments, reads as follows: “The current level of protected rent is, in principle, not sufficient to cover even the costs of maintenance of a building, which are incumbent upon flat owners. The lowest level of protected rent is currently set at 2.7 [Croatian] kunas per square metre of a flat. However, over many years of charging that rent it has been established that the costs related to the maintenance of communal areas and installations in buildings considerably [exceed it]. Consequently, flat owners have to ... pay ... the difference [between the rent obtained