Damages from the Republic of Croatia - the problem of protected rent

The legal relationship between apartment owners and protected tenants in the Republic of Croatia is regulated by the Apartment Rental Act (Official Gazette 91/96, 48/98, 66/98, 22/06, 68/18, 105/20). The status of a protected tenant was acquired by the entry into force of the said law by individuals who, in the previous socialist social order, had the legal status of occupancy right holders.

Protected tenants continued to use apartments that were never their property, while the owners were still left without the possibility of exercising authority over their property, in most cases obliged to suffer the imposed legal restrictions.

Such apartments are often occupied by socially disadvantaged members of society who do not own any other real estate, while the protected rent is considerably lower than the market rental price. The described situation of apartment owners is not favourable, as the current legal regulation does not allow them complete freedom over their property rights, which are a fundamental human right guaranteed by Article 1 of Protocol No. 1 to the European Convention on Human Rights.

Excessive interference by public authorities and unjustified restriction of private property cause significant material damage to citizens. Had the state not imposed on the owners this obligation to take care of certain groups of citizens, the owners could have used these apartments for their own needs or rented them out on terms set at their own discretion.

The case law in this area of law has already laid its foundations, including the Supreme Court of Croatia in the case no. Rev-2364/16, which, deciding on a claim for damages brought by the owner of an apartment occupied by a protected tenant, concluded that “the Republic of Croatia, due to the violation of the Constitution and the Convention on the guaranteed property right, must compensate the damage to the owners of apartments in which the protected tenants live". This decision greatly opens the door for other owners to initiate proceedings for damages and, thus, puts pressure on the Republic of Croatia to adequately regulate their relation with protected tenants, respecting their seemingly conflicting interests.

Finally, with the recent decision of the Constitutional Court no. UI/3242/2018 of 14 September 2020, a number of provisions of the Apartment Rental Act were repealed, including a provision that provided for the termination of the right to protected rent on September 1st 2023. Therefore, the future of the relation between apartment owners and protected tenants is currently uncertain, so the owners are left with no choice but to seek compensation in the form of material damage from the Republic of Croatia, which, 25 years after the latest apartment rental law came into force, has not enabled a fair distribution of the burden of care for the protected tenants.