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The Supreme Court of the Czech Republic has ruled that a person occupying a non-rental property without an agreement with the owner is not obliged to make payments to the owner on the legal ground of unjust enrichment.

According to a general civil-law principle, nobody must enrich themselves groundlessly at the expense of someone else. The concept of unjust enrichment also covers the pecuniary advantage derived by someone who unlawfully uses third-party property – i.e., who uses such property in the absence of a valid contract or other legal title. Whoever enriches themselves in this manner at the expense of the owner must surrender the advantage to the owner. However, no rule is without exception – and the Supreme Court has derived such an exception for the case of unlawful use of a piece of real property owned by a third party.

The amount of the compensatory payment to be made to the owner for the use of their asset without any legal basis is based on the advantage gained by the unlawful user. In the case of real estate, established case law says the ill-gotten advantage can be expressed in money by taking one's cue from the amount of the customary rent in the market at the given place and time for a comparable property, which a tenant would under normal circumstances be compelled to pay. In this sense, the compensation to be paid is being derived from the level of market rent, though attention must always be given to the specific circumstances and conditions of the actual piece of real estate.

In actual practice, it is not always possible to determine what amount of rent is market standard, e.g. because "comparable properties" are in fact not fit to be let and thus not marketable. This concerns in particular neglected properties in a poor structural condition.

In such cases, the Supreme Court has repeatedly ruled that those who used such third-party property without any legal title did not gain any pecuniary advantage to the detriment of the owner, and that they therefore did not have to pay any monetary compensation to the owner.

Clearly, this solution is relevant only in highly specific cases. Even so, one may question the Supreme Court's wisdom, as it is doubtful whether this solution is equitable and fair.

Source:
Judgment 28 Cdo 4184/2018 by the Czech Supreme Court of 27 February 2019

 

 

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