EHRM, 02-07-2013, nr. 27126/11

The first applicant owns, amongst other residences, a semi-basement flat at the Weesperzijde in Amsterdam. On 1 April 1984 he rented out this flat to X, for the equivalent of 354.67 euros (EUR) per month. In 2009 X was paying a monthly rent of EUR 564.75. Per 23 April 2009 the first applicant wanted to raise X's rent to EUR 835.24.

On 8 December 2009 the Rent Board (Huurcommissie) decided that the law only allowed for the rent increase of 2.5% which the first applicant had already implemented, corresponding to a monthly rent of EUR 564.75.

The first applicant appealed the decision. The Amsterdam Regional Court (rechtbank) rejected the appeal, stating that the first applicant had made a reasonable return and profit over the years so that there was no reason not to abide by the legally allowed maximum rent increase.

Pursuant to the Valuation of Immovable Property Act (Wet waardering onroerende zaken — ‘WOZ’), the so-called WOZ value of the flat was set at EUR 340,000 in 2010. Property tax in Amsterdam for that year was set at 0.05287% of the WOZ value, corresponding to EUR 179.76.

The first applicant submitted that he made EUR 626 profit per year on the flat.

The second applicant owns a building divided up into five flats at the Hemonystraat in Amsterdam. One of the flats was already rented out to Y when the second applicant bought the building on 1 January 1997. At that time Y was paying the equivalent of EUR 167.90 per month for rent and water. On 1 July 2010 Y was paying EUR 153.99 per month for rent only. Per that date the second applicant wanted to raise the rent to EUR 914.10 per month.

On 30 November 2010 the Rent Board decided that the law only allowed for a rent increase of 1.2% to EUR 155.84 per month. It held that, even if that meant that the second applicant would suffer a loss, he had known when he bought the building that one of the flats was rented out and at what price, so that it had been his responsibility to take that into account before deciding to go ahead with the purchase.

The second applicant appealed the decision. The Regional Court rejected the appeal stating the same grounds as the Rent Board.

The WOZ value of the flat was set at EUR 265,500 in 2011. Property tax in Amsterdam for that year was set at 0.05589% of the WOZ value, corresponding to EUR 148.39.

According to the second applicant, he incurred an annual loss of EUR 3,473.84 on the flat.

The third applicant owns a building divided up into several flats at the Borgerstraat in Amsterdam. On 1 August 2006 he rented out one of the flats to Z for EUR 500.92 per month. On 1 December 2010 he rented out another flat, to Q for EUR 524.04 per month.

On 30 July 2010 Z requested the Rent Board to lower the rent and in January 2011 Q did the same.

On 25 July 2011 the Rent Board decided that the standard of the flat rented out to Z should be assessed at 107 points (see below) and lowered the rent to EUR 485.18 per month.

On 25 August 2011 the Rent Board decided that the standard of the flat rented out to Q should be assessed at 92 points and lowered the rent to EUR 412.30.

The third applicant appealed both decisions. In Z's case he claimed primarily that the rent should be determined at EUR 975 and in the alternative that the Rent Board had wrongly assessed the standard of the flat at 107 points. In Q's case he claimed primarily that the rent should be determined at EUR 850 and in the alternative that the Rent Board should have assessed the standard of the flat at 111 points.

On 11 July 2012 the Regional Court decided on both cases in two separate judgments. It declared the primary ground of appeal in both cases inadmissible because the third applicant had not advanced it in the proceedings before the Rent Board as required by law and held that, in any event, he had failed to substantiate that the rent paid by Z and Q left him with such a small return that the Rent Board's decision impaired the very essence of his right of property. As to the alternative grounds of appeal the Regional Court held in both judgments that the Rent Board had assessed the standard of the flats correctly.

The WOZ value of the flat rented out to Z was set at EUR 195,000 in 2010. Property tax for that year corresponded to EUR 103.10.

The WOZ value of the flat rented out to Q was set at EUR 170,000 in 2010. Property tax for that year corresponded to EUR 89.88.

The third applicant submitted that he only received 2.9% of the WOZ value in annual rent for both flats.

As the Court has stated on multiple occasions, Article 1 of Protocol No. 1 comprises three distinct rules: the first rule, set out in the first sentence of the first paragraph, is of a general nature and enunciates the principle of the peaceful enjoyment of property; the second rule, contained in the second sentence of the first paragraph, covers deprivation of possessions and subjects it to certain conditions; the third rule, stated in the second paragraph, recognises that the Contracting States are entitled, inter alia, to control the use of property in accordance with the general interest. The three rules are not, however, distinct in the sense of being unconnected. The second and third rules are concerned with particular instances of interference with the right to the peaceful enjoyment of property and should therefore be construed in the light of the general principle enunciated in the first rule (see, among other authorities, James and Others v. the United Kingdom, 21 February 1986, § 37, Series A no. 98; Beyeler v. Italy [GC], no. 33202/96, § 98, ECHR 2000-I; and Saliba v. Malta, no. 4251/02, § 31, 8 November 2005).

Turning to the facts of the present cases the Court observes that the rules at issue restrict the applicants' right freely to negotiate a level of rent for their properties and it accepts therefore that there has been an interference with their rights under Article 1 of Protocol No. 1. However, it notes that the applicants remain the owners of the properties, that they are free to dispose of those properties and that they continue to receive rent from the tenants. For this reason the Court considers that the interference at issue constitutes a means of State control of the use of property. It follows that the case should be examined under the second paragraph of Article 1 of Protocol No. 1 (see Hutten-Czapska v. Poland [GC], no. 35014/97, §§ 160-61, ECHR 2006-VIII).

The Court will therefore next examine whether the Dutch authorities observed the principle of lawfulness, whether the interference at issue pursued a legitimate aim in the general interest and whether a fair balance was struck (see Amato Gauci v. Malta, no. 47045/06, § 52, 15 September 2009).

The first requirement of Article 1 of Protocol No. 1 is that any interference by a public authority with the peaceful enjoyment of possessions be lawful. In particular, the second paragraph of Article 1, while recognising that States have the right to control the use of property, subjects that right to the condition that it be exercised by enforcing ‘laws’. Moreover, the principle of lawfulness presupposes that the applicable provisions of domestic law are sufficiently accessible, precise and foreseeable in their application (see, mutatis mutandis, Broniowski v. Poland [GC], no. 31443/96, § 147, ECHR 2004-V, and Saliba, cited above, § 37).

Furthermore, a measure aimed at controlling the use of property can only be justified if it is shown, inter alia, to be ‘in accordance with the general interest’. Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is in the ‘general’ or ‘public’ interest. The notion of ‘public’ or ‘general’ interest is necessarily extensive. In particular, spheres such as housing of the population, which modern societies consider a prime social need and which plays a central role in the welfare and economic policies of Contracting States, may often call for some form of regulation by the State. In that sphere decisions as to whether, and if so when, it may fully be left to the play of free market forces or whether it should be subject to State control, as well as the choice of measures for securing the housing needs of the community and of the timing for their implementation, necessarily involve consideration of complex social, economic and political issues. Finding it appropriate that the margin of appreciation available to the legislature in implementing social and economic policies should be a wide one, the Court has on many occasions declared that it will respect the legislature's judgment as to what is in the ‘public’ or ‘general’ interest unless that judgment is manifestly without reasonable foundation (see Hutten-Czapska, cited above, §§ 165–166).

That the interference at issue in the present cases was lawful is a matter not disputed by the applicants. The Court finds that the restrictions were imposed by the Implementation Act, the Rent Decree and the Housing Rents Implementation Ordinance, and were therefore ‘lawful’ within the meaning of Article 1 of Protocol No. 1. The Court further considers that the legislation at issue in the present case pursued a legitimate social policy aim, namely the social protection of tenants.

Any interference with property must also satisfy the requirement of proportionality. As the Court has repeatedly stated, a fair balance must be struck between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights, the search for such a fair balance being inherent in the whole of the Convention. The requisite balance will not be struck where the person concerned bears an individual and excessive burden (see Sporrong and Lönnroth v. Sweden, 23 September 1982, §§ 69–74 Series A no. 52, and Brumărescu v. Romania [GC], no. 28342/95, § 78, ECHR 1999-VII).

The concern to achieve this balance is reflected in the structure of Article 1 of Protocol No. 1 as a whole. In each case involving an alleged violation of that Article the Court must therefore ascertain whether by reason of the State's interference the person concerned had to bear a disproportionate and excessive burden (see James and Others, cited above; Mellacher and Others v. Austria, 19 December 1989, § 48, Series A no. 169; and Spadea and Scalabrino v. Italy, judgment of 28 September 1995, § 33, Series A no. 315-B).

In the cases at hand, the Court observes that it has not been shown that the first and third applicants — who rely only on general data to substantiate their claims — do not receive a decent profit from their rental income. What is clear is that these applicants receive levels of rent well above the level of property tax chargeable on the flats, contrary to the situation in Lindheim and Others v. Norway (nos. 13221/08 and 2139/10, § 129, 12 June 2012). Also, there is no indication that the rental income does not cover the necessary maintenance costs and taxes as in Hutten-Czapska (cited above). There are also no other indications that the first and third applicants have had to bear a disproportionate and excessive burden.

As to the second applicant it is noted that, even assuming that the rent paid by Y does not cover all costs associated with the flat, it cannot be said that the decision of the Regional Court was disproportional. The applicant willingly bought the building, aware of the amount of rent being paid by Y. In addition, it can be assumed that a person buying a building in order to rent it out is aware of the restrictions imposed by domestic law as to the maximum amount of rent chargeable for a certain standard and the maximum allowed yearly rent increases. The Court agrees with the domestic authorities that it was the second applicant's responsibility to incorporate this knowledge in the price negotiations when he bought the building.

In these circumstances, the Court finds that, bearing in mind the wide margin of appreciation afforded to Contracting States in regulating housing problems, the control of the use of property in the present cases can be considered to be justified within the meaning of the second paragraph of Article 1 of Protocol No. 1 to the Convention. It follows that this part of the applications of the first and the second applicant and the application of the third applicant are manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 (a) and 4 of the Convention.