After a long time, the media scene is once again occupied with the problem of apartments seized in the former state. Accepting that there is not much sense in going back to the past, we should focus on what the problem is today and all that has complicated the attempt to rectify this injustice in the new state. The state began selling apartments with tenant rights in 1992, before the Denationalization Act, bringing everything to a fait accompli instead of first carrying out denationalization and then allowing the purchase of apartments. When the Denationalization Act was passed, former owners of sold apartments were given compensation of 10 percent of the amount (!), and only a few actually received the apartments. At the same time, tenant rights were abolished and replaced with the much less valuable status of protected tenants.
>>> Amendments to the Apartment Lease Act Submitted to Parliamentary Procedure
European Court Ruling
The existence of a protected tenant means a reduction in the market value of the apartment by more than 50 percent. If a division solution between the owner and the tenant were to be pursued, each party could enter the division with 50 percent of the market value. The one who achieved a higher amount through bidding would pay it to the other party and become the owner of a habitable apartment.
After that, the state apparently slept for a long twenty years because since 1998 and the Constitutional Court’s request to replace the abolished provisions of the Apartment Lease Act with new ones within six months, nothing has been done. Today, twenty years later, after European courts have somehow ruled that owners whose rights have not been taken away have the right to demand that tenants pay them much more than the symbolic rent, which is now (at most two kunas per square meter). So how to resolve the conflict of interest of protected tenants in apartments that are privately owned (never state or social apartments)? In the well-known ruling of the European Court of Human Rights in Statileo vs. Croatia, a ruling was made against Croatia, ordering it to implement specific legislative measures to ensure a balance between the interests of landlords, including their right to profit from their property, and the general interest of the community, including the availability of adequate housing for protected tenants.
>>> Protected Tenants Threatened with Lawsuit if Amendments to the Law Are Not Withdrawn
The Forgotten Right of First Refusal
The government has finally reacted with a proposal for a new law that prioritizes owners so that the rent gradually increases to market value over five years, while offering protected tenants another apartment for rent during that period. There are exactly 3,734 such apartments. Certainly, if both the owner and the tenant want that specific apartment in ownership and free from rental burdens, a suitable legal framework must be found to clearly resolve this conflict according to acceptable criteria. It should be respected that tenants have been in that apartment for generations, but also that they pay rent for someone else’s apartment that is ten times or more lower than the market rate, and that if they were to pay the market rate, their desire for that apartment under those conditions would likely diminish or disappear. Regarding the usual objection that owners are mostly speculators (and not original owners or heirs), it should be noted that there has always been the right for tenants to purchase the apartment (right of first refusal) if the owner decides to sell it; if someone missed that opportunity, they should not seek bread above the loaf.
>>> Apartment Owners: The Right to a Roof Over One’s Head Yes, But Not at Someone Else’s Expense
A Simple Solution
It is quite strange why no one has thought of a simple solution. If both opposing sides want the same and at the same time have certain property rights (the owner has ownership rights, the tenant has rights that are currently without time limitation and for which the apartment is permanently uninhabitable), it is possible to enact a legal solution (currently this is not possible, but it depends on the legislator) regarding the division of such a community. The existence of a protected tenant in practice means a reduction in the market value of the apartment, even more than 50 percent. Therefore, assuming that both parties enter the division with 50 percent, those parties would bid; the one that achieves a higher amount would pay it to the other party and thus become the owner of a habitable apartment, while the other would receive the bid amount for the cessation of their rights – at least 50 percent of the estimated market value of the apartment (starting bid price) or more.
