Case Study by a Legal Practice in Cluj — Compensation for Expropriation in Fact
Civil courts in Cluj-Napoca municipality have held that transferring a parcel of land free of charge to the municipality, in order to comply with the street grid imposed by the maps of the new PUG, is void (absolutely null), and that the local authority’s conduct amounts to a de facto expropriation that requires compensating the former owners at the market value of the transferred areas.
Relevance of the Case
It should be emphasized that although this case arises from a specific situation of persons who transferred property parcels free of charge to Cluj municipality, the reasoning developed by the courts can be extended in favor of all those who have donated or waived portions of land in favor of Cluj municipality in order to obtain a building permit. Thus, any companies or persons who have been in this situation — assisted by a Cluj attorney specialized in expropriations and urbanism — may obtain a ruling obliging Cluj municipality to grant compensation equivalent to the market value of the parcels transferred.
Presentation of the Case
In fact, the claimants own intravilan parcels in the Municipality of Cluj-Napoca, and in 2016 they began the procedures necessary to obtain the right to build a real estate project on those parcels. From the earliest stage of the authorization process, the Cluj municipality authority informed the claimants that on the maps of the new PUG there was the route of a “public utility servitude” over portions of their land, and that the portion affected must be severed and transferred into public ownership of the municipality per Article 24(4) of the Local Urbanism Regulation. This was presented as a condition for approval of the urbanism documentation required to obtain the building permit.
Article 24(4) of the RLU associated with the new PUG (approved by HCL 493/2014, in the form then in force) provided that portions of land burdened by public-utility servitudes under approved urbanistic documentation shall be transferred into public ownership before issuance of the building permit. (These provisions were later annulled by courts in favor of individuals in a similar case.)
Faced with the local norms and the conditions imposed by Cluj municipality to obtain the required approvals, the claimants subdivided their land into two plots and waived, without compensation, an area of 624 sqm in favor of Cluj municipality, by executing notarized declarations renouncing their ownership rights.
As a result of that free transfer of ownership, the Cluj Local Council approved acceptance of that parcel into public ownership and approved the urbanism documentation for the remainder of land still held by the claimants, necessary to get the building permit.
Urbanism & Real Estate Litigation
Under those circumstances, in mid-2017 the claimants, assisted by a Cluj attorney specializing in urbanism and real estate litigation, filed a civil action in Cluj Tribunal requesting that the tribunal:
- Declare absolute nullity of the notarized renouncement deeds by which they gave up ownership;
- Declare de facto expropriation of the 624 sqm parcel for which they surrendered rights;
- Award compensation equal to the value of the expropriated property.
Court’s Reasoning
The Cluj Tribunal accepted the claimants’ requests and found the following:
- In the unfolding of events it is evident that the claimants were coerced, conditioned, to give those notarized declarations, because otherwise they would not have been able to obtain the building permit. The determining motive was not a gift to the state, but the municipality’s evasion of the expropriation procedure for public utility.
- The court notes that the claimants’ property is burdened by a public utility servitude imposed by the defendant, for which the legal procedure for expropriation ought to have been initiated.
- In this context, the court deems the donation by the claimants an unlawful and immoral act subject to absolute nullity. The institution of that servitude affects the claimants’ property, entitling them to a just compensation. Moreover, Article 44 of the Romanian Constitution provides none can be expropriated except for a reason of public utility established by law, with prior and fair compensation.
Compensation and Court Orders
With respect to the compensation evaluation, a judicial technical expert commission prepared a report concluding that the market value of the disputed 624 sqm is €121,056 (i.e. €194 per sqm).
Accordingly, the Tribunal granted the claimants’ action and ordered:
- The absolute nullity of the notarized declarations renouncing ownership;
- Recognition of de facto expropriation of the 624 sqm parcel;
- Obligation of Cluj municipality to pay the claimants €121,056 as compensation.
The local authority (Cluj municipality and Local Council) appealed. The Cluj Court of Appeal partially allowed the appeal only with respect to the amount awarded, reducing compensation to €117,312, while leaving all other rulings intact. They then appealed further, but that appeal was rejected in filter procedure at the High Court of Cassation and Justice.