Alex Wolf

&

Associates

LLC

Recovery of Nationalized and Expropriated Property in Poland

Contact:  Alex Wolf                e-mail:  awolf@alex-wolf.com                Telephone:  302-351-6200


Poznan buildings by Christofer John SSF (Flickr) click to view license







RECOVERY OF TITLE OR FINANCIAL COMPENSATION?

Q. What are alternative ways to claim asset restitution in Poland?
A. It should be emphasized that, whatever legislation has been enacted in some other countries of Eastern Europe, Poland does not have a general property restitution law. That is, Poland does not have a law that — without the applicants facing contestation — returns to them private property that was nationalized or expropriated (collectively “expropriated”) or that — without contestation — pays  applicants indemnification for expropriated property.

“Private property” refers to property that, before expropriation, was owned by individuals or companies. Poland has a general property restitution law concerning property that was owned by religious communities and certain other non-profit organizations. Such “Communal Property” was already restitute or is now being restituted (without contestation of the correctness of expropriation, as long as pre-war Communal ownership is proven).

A few years ago, restitution via Project HEART was the great hope of heirs of Polish Jews, whose properties were expropriated in Poland. But sometime in 2013, Project HEART stopped accepting claims and in 2016 informed us that it has given up on obtaining restitution for individual claimants.

Today, the only way to obtain restitution for a nationalized expropriated property in Poland is to file an individual legal demand, on the grounds of specific material defects in the expropriation laws or procedures, via which a specific property was taken. The need to file an individual legal demand is a fact of life.

Contrary to popular beliefs originating during the Communist era, which are now myths, today in many cases recovery is possible.

In fact, since the fall of Communism in 1989 tens of thousands of claimants obtained restitution by taking legal steps. This has worked for a great number of claimants, because during the Communist period material defects in expropriation procedures were fairly common. The carelessness of officials of that era had many roots, one of them was the arrogance of those who (then) had absolute power.

Q. Should one aim to recover the property itself or financial compensation for it?
A. It depends, and sometimes making the best choice is not easy.

Due to the devastation caused by WW2 and subsequent developments during the Communist era, in many instances the pre-WW2 building is gone, and the government, or a new private owner, erected new buildings on the lot. Also, the property may have been an empty lot when it was owned by the pre-war owner.

In such situations, the pre-war owner (nowadays, more often the heir), has a claim to the land but not to the building, for the construction of which someone else paid. In such situations one can claim the rights to the land, a so-called “eternal lease” (for 99 years) or one can claim compensation.

In some cases, the owner of the new building wants to buy the land rights from the heirs who recovered them, instead of paying to them rent for the land. He can then redevelop the property, for instance by erecting condo buildings on it.

In such situations, the decision (whether to claim land rights or compensation) will depend on various factors, particularly on what is the best use of the land at issue.

Under Polish law, compensation should be at fair market value. However, the determination of what is fair market value takes time and can be costly, especially when the government is involved. For this reason, when the old building still stands and is still owned by the government, then very often it is more efficient to take title back and monetize the property on the open market.

In fact, it is not uncommon for a municipal government to neglect the management of expropriated properties which it knows it may have to return. For instance, the administrators hired by municipalities allow “social tenants”, and sometimes even companies, to pay negligible rents (insufficient to cover basic renovations) for premises in heritage-designated areas near city centers. Such locations are in high demand by parties who are willing to pay rent at market value (such as high-end stores and professional offices).

In such cases of management neglect, change of management and a few other strategic changes made after the recovery of title can greatly increase a property’s value. Sometimes we get involved in such work.

In a few cases in which we are involved in (one of them concerns properties we recovered in November 2015), the client wishes to develop some of his properties that are large neglected lots near the center of a medium size city.

Q. What types of rights can an heir claim?
A. It depends, but in general an heir can claim the title to the property, plus net profit arrears for the last 10 years, with interest.

In some cases, a claim for net profit arrears is particularly difficult to evaluate. In such cases we use such claim mainly as negotiating leverage.

Q. If the property was taken by the government for public use, how does this affect our approach to monetization?
A. Such situations are not infrequent in parts of Poland; especially in Warsaw and Łódź. In such situations, it is often more expedient to claim financial compensation, in order to avoid further delays in monetization.


warsaw downtown.Warsaw Downtown, (public domain) via Wikimedia Commons this work is in the public domain

Warsaw by night, panorama
 Warsaw by Night, panorama By Michal Osmenda of Brussels, Belgium, via Wikimedia Commonsclick to view license
 
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