Byer in good faith, bought a public real estate from non-owners. The return of their property to the state without compensation violated their right to property

JUDGMENT

Olkhovik and others v. Russia (app. no.  11279/17) and Lidiya Nikitina v. Russia 15.03.2022 (app. no. 8051/20)

SUMMARY

Both cases concerned the annulment, without compensation, of the applicants’ title to apartments
which they had purchased, and the return of the apartments to municipal ownership as unclaimed
properties.

In the case of Olkhovik the Court noted that the new compensatory remedy introduced by section
68.1 of the new federal law with effect from 1 January 2020 was a priori accessible to the applicants,
who in principle had until 31 December 2022 to claim compensation from the State for the return of
their apartments to the municipal authorities. The remedy in question made it possible to obtain full
compensation in respect of pecuniary damage, without the need to prove any fault on the part of
the authorities. As the applicants had not availed themselves of that possibility, the Court found that
they had not exhausted domestic remedies.

In Lidiya Nikitina, the Court considered that the new compensatory remedy was not accessible to
the applicant. On the merits, it found that the applicant could legitimately and reasonably rely on
the checks carried out by the competent authorities but had had to bear the consequences, without
being compensated, of acts that were solely imputable to third parties and to the federal and
municipal authorities responsible for conducting checks. The fair balance to be struck between the
demands of the general interest and the need to protect the applicant’s property rights had not
been achieved.

PROVISIONS

Article 1 of the First Additional Protocol

PRINCIPAL FACTS

Olkhovik and Others

The applicants, Olga Vasilyevna Olkhovik, Galina Viktorovna Kirillova and Lena Radionovna Reykhert,
are Russian nationals who were born in 1962, 1958 and 1969 respectively and live in Moscow and
Sertolovo (Russia).

Ms Olkhovik, Ms Kirillova and Ms Reykhert all bought apartments from private individuals. It
subsequently transpired that the original owners had died without leaving heirs. The relevant
municipal authorities brought proceedings against the applicants and the vendors for recovery of
the properties, and the domestic courts found in their favour. The courts returned the apartments to
municipal ownership and annulled the applicants’ title without awarding them compensation.

Ms Olkhovik subsequently brought a successful action for damages against the vendor in her case.

Lidiya Nikitina v. Russia

The applicant, Lidiya Aleksandrovna Nikitina, is a Russian national who was born in 1954 and lives in
St Petersburg.

In March 2017 Ms Nikitina bought an apartment from L. and registered her title to the property. A
few months later she signed an agreement for the resale of the apartment. The authority
responsible for recording the sale informed Ms Nikitina and the purchaser that registration had been
refused on the grounds that L. had actually died in October 2016 without leaving any heirs. The
St Petersburg city authorities brought proceedings against Ms Nikitina and the purchaser for
recovery of the apartment as an unclaimed property. The domestic courts allowed the city
authorities’ claim and ordered the annulment of the applicant’s title to the property.

THE DECISION OF THE COURT…

Article 1 of Protocol No. 1

Olkhovik and Others

The Court observed that section 31.1 of the former Federal Law on the registration of real-property
rights as applicable at the relevant time made it possible, subject to certain conditions, to obtain
compensation in a maximum amount of 1,000,000 roubles (RUB) for the loss of a dwelling.

As of 1 January 2020 the legislation had been amended in order to provide enhanced protection to
purchasers of dwellings. The rules governing the compensatory remedy against the State were
amended by section 68.1 of the new Federal Law on the registration of real property (Федеральный
закон от 13 июля 2015 N 218-ФЗ “О государственной регистрации недвижимости”) which had
retrospective effect in a manner favourable to purchasers. The remedy was available in principle to
all bona fide purchasers (provided that they were private individuals), including those whose
dwellings had had to be returned before 1 January 2020. The conditions governing the use of this
remedy were the following: (i) the person whose dwelling had been returned had to be a “bona fide
purchaser”; (ii) he or she had to have obtained a court decision awarding compensation for the
damage sustained as a result of the return of the dwelling; (iii) that decision had to have remained unenforced for at least six months for reasons beyond the control of the dispossessed purchaser; and (iv) the purchaser had to apply to the courts seeking compensation from the State. The compensation was intended to cover the full amount of the pecuniary damage resulting from the
return of the property. The success of the court action was not dependent on a finding of fault on
the part of the authorities.

In the Court’s view, this new compensatory remedy was a priori accessible to the applicants, who in
principle had until 31 December 2022 to claim compensation from the State. Furthermore, this
compensatory remedy was, on the face of it, appropriate in the present case. The applicants
complained of the deprivation of their property without compensation, and the remedy in question
afforded them the specific possibility of obtaining full compensation for the pecuniary damage
caused by such deprivation. It was not dependent on proof of any fault on the part of the
authorities.

In sum, the Court considered that there was no cause for it to cast doubt, at this stage, on the
effectiveness of the new compensatory remedy with regard to Article 1 of Protocol No. 1 as a means
of affording redress for the harm caused to bona fide purchasers by the return of their dwelling to
the authorities.

However, the Court did not rule out the possibility of reviewing its position on the actual
effectiveness of this new remedy if it emerged from the domestic courts’ practice that actions for
compensation against the State were ineffective, for instance because the proceedings were
conducted at great length or with excessive formalism or because the amounts awarded by way of
compensation were insufficient. If necessary, the applicants could reapply to the Court if their
actions against the State were dismissed.

The Court held that the applicants had not made use of this new remedy and that, accordingly, their
complaints under Article 1 of Protocol No. 1 should be rejected under Article 35 §§ 1 and 4 of the Convention for failure to exhaust domestic remedies.

Lidiya Nikitina v. Russia

The Court observed at the outset that the new compensatory remedy was not accessible to the
applicant. She was unable to sue anyone for damages and therefore could not complete the first
stage of the remedy, consisting in obtaining a judicial decision awarding compensation for the
damage caused by the return of the apartment. Accordingly, the Court dismissed the Government’s
objection of failure to exhaust domestic remedies and declared the application admissible.

The Court noted that the sale of the apartment to the applicant had resulted from inadequate and
delayed coordination between the various local and federal authorities. While L.’s death had been
known to the authorities by December 2016 at the latest, the registration authority had not learnt of
it until June 2017, and the city authorities had not acted until October of that year. The Court also
noted that the present case in all likelihood involved offences of fraud, forgery and use of forged
documents.

The Court had previously ruled that the registration authority or other authorities might conceivably
fail to detect the falsification of documents. Nevertheless, in the present case the Court noted that
the authorities had not taken any steps or initiatives to identify the persons responsible for that
situation. It therefore held that the authorities had not acted in a timely manner and with the
requisite diligence.

In the Court’s view, given the existence of authorities responsible for matters relating to residential
properties and ownership thereof, it was not for the purchaser to assume unconditionally the risk of
the property being returned. Hence, the applicant could legitimately and reasonably rely on the
checks carried out by the competent authorities. It had not been alleged at any point in the domestic
proceedings that she had acted in bad faith or been negligent when purchasing the apartment.

In sum, the Court held that the applicant had had to bear the consequences of acts that were solely
imputable to third parties and to the federal and municipal authorities, without being compensated.
The fair balance to be struck between the demands of the general interest and the need to protect
the applicant’s property rights had not been achieved. There had therefore been a violation of
Article 1 of Protocol No. 1 to the Convention.

By way of just satisfaction, the Court held that Russia was to pay the applicant 5,000 euros (EUR) in
respect of non-pecuniary damage.