Where the administration interferes with a property, whether physically or in law, without carrying out an expropriation or paying its value, a direct right of action arises for the owner. That right is exercised in the form of an action for damages aimed at making good the loss sustained; in the same proceedings the owner may seek the value of the property, the ending of the interference or the making good of the loss that has arisen.
The situations in which this picture is most frequently encountered in practice are well known: a road being run across the property, a park being built on the parcel, a power transmission line being run across the land, or the use of the property being locked for years by way of a zoning plan. Each of these constitutes a violation directed at the right to property and opens the way to the courts for the owner.
In this briefing note we address, with a practical eye, the conditions required for an action for damages brought by reason of de facto expropriation, the claims that may be advanced, the principles on which the damages are calculated and the conduct of the proceedings.
The Concept of De Facto Expropriation
De facto expropriation is an unlawful situation that arises where the administration physically enters a property without the expropriation procedure having been operated at all, or without its value having been paid, or where by means of the administrative decisions it takes it seriously narrows the possibility of benefiting from the property. The administration here restricts the right to property while failing to comply with the procedural safeguards required by expropriation law.
Article 46 of the Constitution makes expropriation conditional upon the advance payment of the true value of the property. Interference with a property without an expropriation being operated is for this reason regarded as a violation of the right to property and affords the owner the possibility of bringing an action for damages by reason of de facto expropriation.
The Two Forms of Interference
De facto expropriation divides, according to the nature of the interference, into physical interference and legal interference. This distinction is not merely conceptual; which court has subject-matter jurisdiction, by what means proof is to be made and how the damages are to be determined all depend directly upon it.
Physical interference is the administration’s physical interference with the property and its beginning to use that property in fact. In this situation the right to property is impaired in a concrete and tangible way. The forms most frequently encountered in practice are the following:
- Power transmission lines: Running an electricity line across the land or erecting a pylon.
- Occupation: Using the property as a construction site, car park or depot without any facility being established.
- Infrastructure works: Running a sewer, water line or road across the parcel.
- Superstructure works: Building a park, police station, hospital or school on the land.
Legal interference, by contrast, is the prevention of the use of the property over a lengthy period, or the impairment of the essence of the right to property, by reason of decisions taken by the administration (most often zoning plans), notwithstanding the absence of any physical contact. Detailed explanations on the subject appear in our note entitled What Is Legal Interference (Zoning Restriction)? The typical examples of this form are:
- Inaction: The administration’s failure to conclude the transactions notwithstanding that a decision to expropriate has been taken, leaving the owner in a state of uncertainty.
- Zoning restrictions: The failure to expropriate the property notwithstanding that it has been set aside in the plan as a park, green area or school area and that five years have passed.
- Economic loss: The property becoming unsaleable, or incapable of being built upon, by reason of legal restrictions, even though it remains in fact usable.
The decisive difference as regards subject-matter jurisdiction: Disputes arising from physical interference are as a rule resolved in the Civil Courts of First Instance, and those arising from legal interference in the Administrative Courts. The explanations below relate predominantly to actions for damages brought by reason of physical interference.
The Elements Required for Interference to Exist
Whether the administration’s interference may be regarded as de facto expropriation depends on certain legal elements being present together. Scholarly writing and judicial decisions accept these elements as the basic criteria in making that determination.
- The interference must pursue a public interest purpose. A taking is most often effected for the purpose of delivering a public service. The opening of a road, the establishment of infrastructure or the allocation of the property to a public service are assessed within this scope.
- The property must be in private ownership. The owner of the place subject to the taking must be a natural person or a legal person of private law; transactions relating to public property fall outside this characterisation.
- The interference must come from a public legal person having the power to expropriate. There must be an act of a municipality, a ministry, a provincial special administration or a similar public administration.
- The administration must act with an intention to appropriate. It is required that the interference be permanent rather than temporary in nature, that the administration have no intention of returning the property, and that the place have in fact been allocated to a public service.
- The owner’s power of disposal must have ceased to exist. As a result of the interference, the owner’s dominion over the property must have come to an end in fact or have been narrowed to a significant extent. The property becoming unusable, or its economic value falling seriously, shows that this condition is satisfied.
Types of Action Available to the Owner
An owner faced with de facto expropriation may bring a single action against the administration’s unlawful interference, or may advance several claims together. Which route is chosen varies according to the nature of the interference, the manner in which the property is actually used and whether the taking is permanent. The three routes most frequently resorted to in practice are addressed below.
Claim for Compensation of the Property’s Value
The most basic route is to seek the true value of the property from the administration. This route is preferred where the property has been permanently set aside for a public service such as infrastructure, a park or a road and its restitution has in fact become impossible.
The court determines, by the examination of a court-appointed expert, the true value borne by the property as at the date of the action, and orders that this amount be paid to the owner.
Claim for Compensation for Unjust Occupation
In respect of the period during which the property has been used without an expropriation being carried out, the owner may seek compensation for the value of that use. In practice this claim is called compensation for unjust occupation.
Compensation for unjust occupation is the counterpart of the income from use that the owner has been unable to obtain during the period in which the property has in fact been used, and in most files it may be advanced together with a claim for the value of the property.
Claim for Prevention of Interference (Removal of the Taking)
If the taking has not yet acquired a permanent character, or if the allocation of the property to a public service is not necessary, the owner may seek the ending of the interference. Where the claim is allowed, the court orders that the unlawfulness be brought to an end and that the place be left once more to the use of the owner.
For this reason the restitution of the property does not most of the time form the subject of a separate action; it comes about as the natural consequence of the order for the prevention of interference.
Calculation of the Damages
The starting point for the calculation of damages in these actions is the true value borne by the property as at the date of the action. The court determines that value not according to a figure assessed by the administration, but according to the result of the technical examination carried out by independent court-appointed experts. The valuation principles of expropriation law are applied in the calculation.
The starting point of the determination is that the loss sustained by the owner be made good in full. For this reason it is not the value in the past period or the investments made by the administration, but the economic and legal position of the property as at the date of the action, that is taken as the basis.
The Basic Criterion: True Value
The damages are calculated on the basis of the true and current value of the property. By this concept is meant the price that the property would reach were it to change hands on the open market.
There are for this reason three elements that are as a rule not taken into account:
- Probable gains expected to be obtained in the future
- The increase in value arising by reason of the investment made by the administration
- The value of the property in the past period
Criteria Observed in the Valuation
In determining the value on the basis of the technical expert report, the court has regard to the following elements:
- Its location and the transport facilities available
- Its type (building plot, land, field and so forth)
- The area it covers
- Its position in the face of the zoning plan
- The purpose for which it is actually used
- The sale prices of similar properties in the vicinity
- The income it provides, particularly as regards agricultural land
- The structures and facilities situated upon it
- Other objective factors capable of affecting the value
The criteria listed rest on the valuation principles in Article 11 of the Expropriation Act No. 2942.
The Difference in Method According to the Distinction Between Building Plots and Land
Whether the property is in the nature of a building plot or of land directly determines the valuation method to be applied.
For properties in the nature of a building plot, the comparable sales method is generally used; the market value is arrived at by examining the sale prices of similar properties in the same district.
For properties in the nature of land, on the other hand, the income method is most often preferred. Here a value is arrived at by taking the annual net income, the production capacity and the level of productivity as the basis.
Interest and the Valuation Date
The damages in these actions do not consist solely of the value of the property; the court also orders that interest run on that value. The settled approach in practice is as follows:
- The value of the property is determined according to its value at the date of the action.
- Interest likewise runs from the date of the action.
The purpose of this arrangement is to make good the economic loss sustained by the owner through being unable to benefit from the property for a lengthy period.
How the Proceedings Work
These actions are in essence actions for damages aimed at establishing the administration’s unlawful interference with the property and the loss arising from it. The court first examines whether a physical taking has occurred and whether the interference is lawful; the value of the property and the amount of the loss are then determined through a court-appointed expert.
These actions are as a rule subject to the written procedure and follow defined procedural steps.
The Courts with Subject-Matter and Territorial Jurisdiction
Subject-matter jurisdiction: In claims for damages arising from de facto expropriation, subject-matter jurisdiction belongs as a rule to the Civil Court of First Instance.
Territorial jurisdiction: The court with territorial jurisdiction is the court of the place where the property is situated.
Statute of Limitations and Time Limits
The assessment of the statute of limitations varies according to the nature of the interference.
Where physical interference is in question, no limitation period runs for so long as the administration’s interference continues. That is because there is here a continuing unlawfulness. For this reason the owner may take the route of an action at any time for so long as the interference continues.
By contrast, as regards monetary claims such as compensation for unjust occupation, the general rules on the statute of limitations may come into play. The examination of time limits must accordingly be carried out separately according to which claim is advanced in the file.
Evidence and Proof
The burden of proof lies with the claimant, who must establish that the administration has interfered with the property and that this interference has impaired the right to property.
The means that come to the fore as regards proof are the following:
- On-site examination and examination by a court-appointed expert
- Title deed records
- Aerial photographs and satellite images
- Zoning plans and municipal correspondence
- Witness statements where necessary
As regards allegations of physical interference, the carrying out of an on-site examination and the technical establishment of the present condition of the parcel become a necessity in most files.
Costs of the Proceedings
As regards the regime of court fees, these actions differ from general actions for damages. However high the amount claimed may be, a fixed fee rather than a proportional fee applies.
No proportional fee tied to the value of the property is therefore required when the action is brought; only the application fee and the judgment fee, both fixed in nature, are collected from the claimant. Where the action succeeds, the costs of the proceedings and the attorney’s fees are as a rule imposed on the respondent administration.
Keeping the fee fixed is an important provision that in practice keeps the possibility of bringing an action alive as regards high-value properties.
Attorney’s Fees
The amount of the attorney’s fees depends on how the proceedings are concluded. Since the dispute is regarded in nature as falling within the scope of damages in tort, a settled special rule is operated in practice:
- If the owner wins the action: Proportional attorney’s fees are ordered on the basis of the amount of damages awarded, and that amount is recovered from the respondent administration.
- If the owner loses the action: With a view to securing the right to property, no high fee is ordered against the claimant; only fixed attorney’s fees are assessed in favour of the administration.
This approach is a settled judicial stance adopted with a view to securing the property owner’s right to property and to preventing the possibility of bringing an action from being extinguished in fact in the case of high-value properties.
Interest and the Date of Valuation
The valuation is as a rule carried out on the basis of the market value of the property at the date of the action. As regards interest, a separate assessment is made according to the type of claim: while interest as a rule runs from the date of the action in claims for compensation of the value of the property, in claims for compensation for unjust occupation a separate calculation may be required for each period. For this reason the valuation date and the starting point of interest do not coincide in every file.
Appellate Remedies
The parties may take the routes of appeal and appeal on points of law against the decision of the first-instance court within the framework of the general provisions.
Awards of damages given in these actions may be enforced before they become final. The taking of an appellate remedy does not of itself stay the implementation of the decision.
The Legal Consequences of the Judgment
If the court reaches the conclusion that the property has been unlawfully taken by the administration, it orders that the loss sustained by the owner be made good. The decision given is not merely an award of damages; it also carries the meaning of a judicial finding that the right to property has been violated. The principal consequences of the decision are addressed below.
Award of the Property’s Value
Where it is established that the property has in fact been taken and that the interference continues, the court awards damages on the basis of the true value of the property at the date of the action. Three consequences follow from this:
- The power of disposal over the property comes to an end.
- The value determined is paid to the owner by the respondent administration.
- Ownership of the property passes as a rule to the administration.
The picture that emerges is the completion, within the legal order, of an expropriation that has in fact taken place without its procedure having been operated.
Making Good Compensation for Unjust Occupation and Other Losses
If it is established that the property has been used without an expropriation being carried out, the court may order, alongside the value of the property, the payment of compensation for unjust occupation in respect of the past period. Within this scope:
- The losses relating to the period during which the property was used are calculated.
- Interest runs on the damages awarded.
- The owner additionally receives compensation for unjust occupation for the period during which he was deprived of the right of use.
Independent Legal’s Assessment
In de facto expropriation files, the first step that determines the outcome is the correct characterisation of the interference as either physical or legal. Where that determination is made wrongly, the file may be dismissed years later for want of subject-matter jurisdiction and returned to the starting point. The second decisive element is the expert report; since the amount of the damages is in fact shaped in that report, scrutinising the comparables and the method used becomes a matter going to the substance of the action.
The fee being fixed, and no limitation period running in cases of physical interference, provide two strong protections in favour of the owner. It should not be overlooked, by contrast, that the same protection does not exist as regards claims for compensation for unjust occupation, and that this head is confined by the general limitation periods. In a particular dispute the following headings should be addressed as a priority:
- Determining whether the interference is physical or legal and identifying the branch of the judiciary with jurisdiction accordingly
- Documenting the permanence of the taking by on-site examination, aerial photographs and satellite images
- Discussing at the outset whether the property is in the nature of a building plot or of land, bearing in mind that this affects the valuation method to be applied
- Separating out whether a claim for the value of the property is to be advanced together with a claim for compensation for unjust occupation, and the starting point of interest for each
- Assessing in advance the limitation defence as regards the head of compensation for unjust occupation
- Objecting in due time to the comparables and the method of calculation in the expert report
Independent Legal provides advisory and litigation services throughout the whole of the process in disputes arising from de facto expropriation, from establishing the interference through to the recovery of the damages.