A judgment in the case regarding the right of joint owners to act with the subject-matter of the joint ownership has been adopted
On 25 October 2011, the Constitutional Court adopted a decision in the case No. 2011-01-01 “On Compliance of Section 1068 (1) of the Civil Law with Article 105 of the Satversme of the Republic of Latvia”.
On the right of persons to act with the subject-matter of the joint ownership
The Contested Norm
Section 1068 (1) of the Civil Law: “The consent of all the joint owners is required in order to act with the subject-matter of the joint ownership, either as a whole or with respect to stated individual shares and if one of them acts separately then such action not only has no effect, but also imposes a duty on the latter to compensate the others for losses caused them thereby.”
The Facts
JSC „Pilsētas zemes dienests” as an owner of several immovable properties, namely, land plots, on which residential houses with privatized apartments have been raised, brought an action before the court against the Council of Riga regarding conclusion of a land lease agreement on use of the land plot owned by the Applicant.
The Applicant asked the court to establish natural and accidental constituent parts of a written lease agreement, by inter alia including into the agreement provisions stating that the tenant shall ensure maintenance of the land property and the adjacent territory and that the tenant shall have the right to transfer the right to use the land plot (factual ownership right) to third persons after having received consent of the lessor. Likewise, the draft agreement suggested by the Applicant contained provision that the lease agreement would establish servitude in accordance with Section 1142 of the Civil Law. Such requirement was also applied to land plots being as subject-matters of the joint ownership, although no consent to conclude a lease agreement was received from other joint owners of the land plot.
Courts of general jurisdiction, by inter alia referring also to the Contested Norm, have rejected the claim of the Applicant regarding conclusion of a lease agreement of land plots under joint ownership.
The Applicant hold that the Contested Norm restricts their property right established in Article 105 of the Satversme because its application has resulted in decrease of economic value of the Land Plots. Namely, the above mentioned norm prohibits a joint owner acting separately to rent his or her undivided share or bring an action regarding conclusion of a lease agreement. Although the Contested Norm has been established by a property adopted law and the legitimate aim of the norm is protection of the rights of other joint owners, consequences caused by it are non-proportional.
Moreover, according to the Applicant, the Contested Norm is out-dated because it was adopted about 150 years ago when joint property and compulsory lease relations did not yet exist.
Findings and Ruling of the Court
On the extent of the claim
Although the application contains a claim to assess compliance of the Contested Norm with the entire Article 105 of the Satversme, the Constitutional Court assessed compliance of the Contested Norm with the first three sentences of Article 105 of the Satversme because the present matter does not deal with compulsory expropriation for public purposes established in the fourth sentence of Article 105 of the Satversme [10].
On restrictions included in the Contested Norm
The Contested Norm establishes a prohibition to a joint owner acting separately to act the entire subject-matter of the joint ownership or a part of it. Consequently, the right of the joint owner acting separately is restricted, whilst a pre-condition for acting with joint property is consent of all joint owners. As a result of such regulatory framework, the right of each of the joint owners acting separately are more restricted that if compared to the right of a single owner to an unshared property [12.1].
The Constitutional Court took into consideration the fact that, in the present case, the decisive role is played by the fact that the Contested Norm is applied in the frameworks of compulsory lease legal relations existing on legal basis. In such cases, the lessor and the tenant form their legal lease relations by means of a stipulated measure rather than voluntarily [12.2].
The Constitutional Court indicated that Article 105 of the Satversme ensures peaceful enjoyment of property right and the right of the State to restrict use of the property in the interests of the society. Namely, the general principle on peaceful enjoyment of property should always be considered in conjunction with the right of the State to restrict the use of the property [13].
On the legitimate aim of the restriction included in the Contested Norm
Having established that the restriction provided in the Contested Norm has been adopted by a property adopted Law, the Constitutional Court concluded that, on the one hand, the Contested Norm restricts the freedom of action of joint owners; however, on the other hand, its regulatory framework is based on the essence of joint ownership, it assures such legal situation when rights of all joint owners are protected and justice in mutual relations of joint owners is observed. The Contested Norm establishes such action model that does not infringe the right of each joint owner to the subject-matter of the joint ownership and also protects the above mentioned right [13.2]. Consequently, the Constitutional Court concluded that the legitimate aim of the restrictions established in the Contested Norm is protection of the rights of other persons.
The Constitutional Court found that the Contested Norm is appropriate for reaching of the legitimate aim because causal relation exists between the Contested Norm and its legitimate aim. Namely, the Contested Norm prohibits each of the joint owners to unilaterally act with the entire subject-matter of the joint ownership. However, such prohibition is in causal relationship with its aim, which is both, not to infringe and to protect the right of each joint owner to the subject-matter of the joint ownership [14.1].
Taking into account the fact that the Constitutional Court is not committed to assess the extent, to which alternative solutions would be regarded as more appropriate solution of the present situation, moreover, the Applicant has failed to indicate any alternative measures that would permit reaching of the aim of the Contested Norm with the same effectiveness, and the fact that the case contained no materials referring to other alternative measures ensuring reaching of the legitimate aim at the same quality, the Court concluded that the Contested Norm is indispensible for reaching of the legitimate aim [14.2]. The Court also indicated that in the survey regarding modernization of the Rights of Thins chapter of the Civil Law, no necessity regarding development of its regulatory framework by expanding the unilateral rights of joint owners in respect to dealing with the subject-matter of the joint ownership was mentioned [14.2].
On negative consequences caused by the restrictions established and the possibilities to eliminate them
Taking into account the argumentation of the Applicant, namely, that the Contested norm is out-dated and is not appropriate for regulation of modern legal relationships, the Constitutional Court concluded that only in case when a contested norm fails to comply with the existent social reality or contradicts the dominating legal relationships established as a result of development of the society, its constitutionality can be reviewed [14.3.1].
The Constitutional Court also indicated that there is no reason to associate creation of the regulatory framework included in the Contested Norm with the mid IX century or beginning of the XX century. In researches devoted to this legal institute, experts of law associate its emergence with roman legal sources [14.3.1].
Having assessed the opinion of the Applicant, namely, that the Contested Norm establishes a non-proportional restriction of the rights of a person since it prohibits bringing an action and receiving lease payment for undivided part of a land plot being a subject-matter of the joint ownership, the Court concluded that, when purchasing undivided parts, the Applicants has become a joint owner of the particular land plots in the result of its voluntary choice. The Applicant had to take into account the fact that the extent of rights and duties of a joint owner in respect to a subject-matter of the joint ownership, as established in the Civil Law, differs from the right of a single owner. Consequently, the right of a joint owner, inter alia protection of the rights according to the procedure established in the Civil Procedure Law, shall be exercised by taking into account the different character of legal relations in respect to a joint ownership [14.3.2].
The Constitutional Court has already concluded that the Contested Norm does not prohibit a joint owner of a land plot to bring an action before a court in the frameworks of legal relationships existing on legal basis in case if no agreement has been reached with other joint owners and thus to request establishment and recovery of lease payment. The Court also took into consideration the fact that joint owners of a land plot and owners or representatives of the residential house are governed by common lease legal relations that apply to the entire land plot. This means that in case if compulsory lease legal relations that follow from law are included in to lease agreements concluded with different joint owners, such contractual provisions should be common [14.3.2].
On proportionality of the restrictions included in the Contested Norm
When assessing proportionality of restrictions included in the Contested Norms and investigating whether the benefit gained by the society from the Contested Norm is greater than the restriction of the fundamental rights established to the Applicant, the Court regarded the restrictions in conjunction with other legal mechanisms that could be applied by the Applicant with the purpose to prevent restriction of its fundamental rights, for instance, termination of legal joint ownership relationship or agreement by the joint owners on actins to be taken with the joint property. The Court indicated that in certain cases preconditions of legal or factual nature for action with the subject-matter of the joint ownership may lead to loss of interest by the joint owners to preserve their legal status [14.3.3].
The Constitutional Court indicated that the Civil Law establishes the right of a joint owner to require separation of the joint property at any time or the possibility of the joint owners to agree on establishment of special use procedure in respect to the joint property. Moreover, by failing to provide an imperative character to the Contested Norm, the legislator has committed the joint owners to decide on the necessity of consent of joint owners to deal with the joint property by concluding respective agreements [14.3.3]. Consequently, the Court concluded that the character of legal relations of joint ownership permits termination of joint ownership and agreement by the joint owners on the action with the joint property [14.3.3].
The Constitutional Court has already concluded that it is not possible to protect interests of the society by other means that would restrict the rights of person at a lesser extent because increase of the rights of one joint owner in the field of dealing with the subject-matter of the joint ownership would reduce the extent of the rights of other joint owners. The institute of joint ownership in conjunction with compulsory lease establishes legal procedure and co-ordinates different interests of different persons. The Contested Norm is necessary to ensure the fairest balance possible between interests of each of the joint owners. The benefit gained by the society from the Contested Norm is greater than the restriction of the rights of a joint owner, and therefore it can be concluded that the legislator has selected an appropriate regulatory framework for regulation of mutual legal relations of joint owners [15].
The Constitutional Court recognized Section 1068 (1) of the Civil Law as compliant with the first three sentences of Article 105 of the Satversme.
The judgment of the Constitutional Court is final and not subject to appeal. The Judgment shall come into force on the date of publishing it in the newspaper “Latvijas Vēstnesis”.
Linked case: 2011-01-01