Human rights court: State can curb ‘harmful property speculation’

Expropriations that pursue a public interest to provide housing and curb ‘harmful property speculation’

The European Court of Human Rights has found that the Maltese government’s actions in expropriating private property that was used for residential housing, is a legitimate public interest when coupled with a bid to curb harmful property speculation.

The decision found that expropriation of agricultural land at Tal-Andar in Ħal-Qormi in 1985, pursued a public interest to provide residential homes and curb speculation.

The Strasbourg court’s decision also declared that any such compensation for the land is not linked to the State’s intended purpose for the use of the land – housing – but of the State of the land at the time of expropriation.

In this case, applicant Maria Azzopardi complained her €4,000 compensation, based on the value of agricultural land at the time of expropriation, was too low. Both the Maltese and European courts however found no violation of her right to private property.

The decision opens up a legal avenue for environmentalists and advocates of redrawing Maltese development boundaries, who argue that the State’s power to limit development by pulling back development zones does not require any compensation to ‘potential’ property speculators.

Indeed, the decision supports both ‘public purpose’ expropriations, even when no direct use of the land is made; as well as fair compensations that reflect the state of the land at the time it is expropriated, not for their intended purpose.

In the Azzzopardi case, the ECHR said she had no guarantee at the time that she would have been able to sell the same land at prices of developable land. “The applicant had no concrete legitimate expectation to obtain compensation on the basis of the land being valued as developable. It follows that the legislature’s as well as the domestic courts’ decisions to consider such land as being agricultural for the purposes of compensation, were not without reasonable foundation.”

Azzopardi however argued that the “new owners” who purchased a plot on the government-expropriated land went on to make profit on the appreciated value of their homes. To this, the ECHR said the owners who purchased the land from the State “proceeded to construct it and maintain it”.

“The Court cannot ignore that such argumentation is being put forward with the benefit of hindsight,” it said, saying Azzopardi or her ancestors could not have foreseen back in the 1970s or 1980s the extent of property price inflation in the decades that followed.

The Court did however say that the Maltese State should have applied a means-test on prospective buyers, or restrictive conditions for resale to ensure that third-party purchasers did not benefit from windfall profits in the stead of the original owners.

Public interest expropriation

The Court said property can only be expropriated by the State when it is “in the public interest”, as well as 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 requirement of protecting the individual’s fundamental rights, the search for such 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.”

Expropriations by the State can be in the public interest when they have legitimate social, economic reasons, even if no direct use of the land is being made. In such cases, fair compensation might not even be owed when these measures are “designed to achieve greater social justice”, or else warrant reimbursement of less than the full market value .

To determine compensation, the Court said this must be calculated based on the value of the 1985 expropriation. “Any other approach could open the door to a degree of uncertainty or even arbitrariness,” the Court said.

In this case, the applicant complained that her compensation was calculated on the basis of the agricultural designation of the land, and therefore at a lower value than were it designated as residential.

The 1985 expropriation was made at a time when there had been a demand for housing in general and where no proper planning legislation had been in place.

Azzopardi in her application to the ECHR did not claim there had been no public interest behind the measure as such, but solely that it had not pursued a social purpose, in so far as it had not been aimed at providing housing for persons in the lower economic strata of society.

However, the Court considers that the notion of public interest is not limited to securing housing for individuals in need of social welfare.

Court saga Malta-Strasbourg

The Qormi property measured just over 3,100 square metres, and was expropriated under the Building Development Areas Act, which declared the land a Building Development Area (BDA). Consequently, the owners lost possession of the property to the State, which sold off the plots to third parties. Some 25 privately-owned residential homes still stand on the land today.

In 1992, Azzopardi’s father filed for compensation before the Land Arbitration Board, and obtained his €4,000 compensation in 2013.

In 2016, Azzopardi filed a claim for breach of her property rights, claiming her €4,000 compensation was inadequate since the land was designted as a BDA. She insisted her land was worth €163,000 in 1985 as a “building site” and €2.2 million in 2014 valuations.

In 2018, the Civil Court found no violation of her rights, saying the land was acquired in good faith and that compensation for the agricultural land as at the time of expropriation was fair value.

Her appeal was rejected by the Constitutional Court, which said there was “a clear line between what was developable land or agricultural land... the applicant could have applied to the minister to obtain building permission prior to the BDAA [but] she had had no guarantee that she would have obtained such permit. Thus, its only potential arose consequent to the expropriation.”

“The fact that the land at issue had gained value over the years in favour of third parties did not in itself breach the applicant’s property rights, once she had obtained fair compensation. Further, in the Constitutional Court’s view, no third party would have purchased that land at a higher price without a guarantee that they could have developed it.”