Constitutional Court: landlords can sue state over losses caused by rent control

There has been yet another new development in the ongoing battle over rent control in the Czech Republic. Only a month after a law on the phasing out of rent control was finally passed, the Constitutional Court has ruled that the owners of apartment buildings can sue the Czech state over losses they have suffered due to rent regulation.

The Constitutional Court ruled on Tuesday that the Czech Parliament had failed to act on the issue for several years and the state can therefore be held accountable for the fact that the low rents collected by landlords do not even cover maintenance costs.

Even though under a new law controlled rents will rise by an average 14 percent annually between 2007 and 2010, their levels have not changed for four years now and many landlords have taken legal action over lost profit. The President of the Czech Union of Judges, Jaromir Jirsa, says that so far, courts have been reluctant to compensate for the inactivity of Czech legislators and fill holes in the laws with their rulings.

Jaromir Jirsa
"The current situation - which is in violation of the constitution - has been caused by the inactivity of politicians who for fifteen years have not found the courage to deregulate rents. I believe the situation has gone so far that the landlords are so frustrated that they will go to courts en masse not only to determine the level of market rents in their buildings but also to sue the state over damages."

Social Democrat MP and head of a tenants' organisation, Stanislav Krecek, says there have been so many Constitutional Court rulings on rent control that nobody knows anymore which laws are in force and which are not.

"My reading of Tuesday's ruling is that the Constitutional Court has refused the landlords the right to demand rent retroactively from their tenants. So, if the owners believe they have sustained losses they can only address the state but not the tenants."

The head of an organisation of property owners Girolamo Giormani says the Constitutional Court ruling is good news. His organisation has filed over 200 lawsuits with The European Court of Human Rights in Strasbourg and he himself is suing the state over lost profit with Czech courts.

"I am asking for damages caused by this wrong law amounting to some 65 million crowns. As you know I have already some complaints in Strasbourg and I won't take them back until I win my cases here. Yesterday, I heard the head of [the Union of] judges, Mr Jirsa, and he said clearly the courts have to be on our side."

The Ministry for Local Development which drafted the law on rent deregulation says it will respect Tuesday's ruling of the Constitutional Court but argues the new law addresses the situation sufficiently. But Girolamo Giormani says the landlords are not impressed by the law which comes into force next year.

"It is again cheating the landlords because this is absolutely ridiculous. This law is anti-constitutional. If you followed what the Senators said in a discussion about this law, they said clearly, we are sorry but it is not in line with the Constitution but let's do something because we are definitely going to lose in Strasbourg. This has nothing to do with the Constitution."