Waiver of compensation for the acquisition of property rights and extinguishment of the mortgage in connection with Permission for the Implementation of a Road Project (PIRP) procedure

Lawyers of the Law Firm represented the Client, i.e. a limited liability company operating in the commercial real estate industry, in a lawsuit concerning the reimbursement of an amount exceeding PLN 700 thousand, corresponding to the value of compensation paid by the municipality in connection with the assumption of the ownership of real estate and termination of mortgages encumbering real estate in accordance with the procedure of the Permission for the Implementation of a Road Project (PIRP).

In connection with the investment, the Client has entered into an agreement with the mayor of the city – as the manager of public roads and as the executive body of the municipality, specifying rules for the implementation of the construction and reconstruction of public roads in connection with the non-road investment. The agreement was concluded in accordance with Article 16 sections 1 and 2 of the Act on Public Roads of March 21, 1985. Due to complicated ownership situation of the area and the partially unregulated legal status of the real estate on which the roads were to be realized, it was assumed in the contract that the procedure stipulated in the road special act would be used. In the contract, in addition to regulating issues related to establishment of rules for the implementation of the construction and reconstruction of public roads, the Client undertook to make a donation to the municipality of its property rights in rem to the real estate on which the public roads would be built, with the donation agreement to be concluded before the PIRP decision would be issued.

In the case, the donation was never made, so the procedure provided for in the Road Special Act was applied. In the first instance, a decision was issued authorizing the realization of a road project, by virtue of which the properties indicated therein became the property of the municipality by operation of law, and by a subsequent decision the mayor determined compensation to the Client for the municipality’s assumption of ownership of the property and compensation to the bank for termination of mortgages encumbering the ownership.

The municipality paid the compensation awarded to the bank for termination of the mortgages encumbering the ownership of the property, and then demanded that the Client repay the amount corresponding to the amount of this compensation. The Client refused to pay, and the dispute which arose between the parties was taken to court.
In the course of the litigation, the Lawyers of the Law Firm argued, among other things, that the contractual provisions invoked by the municipality concerning the waiver of compensation or the obligation to return it remained invalid, as contrary to generally applicable laws, including the provisions of the Constitution, which stipulate that expropriation is permitted only with just compensation. Lawyers of the Law Firm also argued that the Client had not received any compensation from the municipality, as the compensation paid by the municipality to the bank was compensation for termination of the mortgage encumbering the ownership of the expropriated plots of land, not compensation for the municipality’s assumption of the right of property ownership.

Thanks to the assistance of the Law Firm, the case was fully successful – the municipality’s claim was dismissed in its entirety, and the motives of the decisions made in the case gave legal justification for another dispute over the payment of compensation to the Client.