Decision 64/1993 on a law on the lease and the alienation of living accommodation (flats) and other premises
22 December 1993
Decision number: Decision 64/1993. (XII. 22.)
Subject of the case:
A law on the lease and the alienation of living accommodation (flats) and other premises
The Hungarian legislature in July 1993 passed a law on the lease and the alienation of living accommodation (flats) and other premises. These premises became the property of the local governments by force of law (ex lege) in 1990, in the process of the transformation of the former state property. The most questioned part of the new law was the entire chapter on the option to purchase the flats and other premises by the tenants. Under the law local governments are obliged to sell the flats to the tenants at a reduced price specified by the law.
This option to purchase is valid for five years. The option is obviously a serious restriction on the right to property. The Court declared in several decisions that the right to property is a fundamental right, but it can be restricted for necessary public goals. These restrictions must meet a strict constitutional scrutiny. The five year term open to the tenants for the option to purchase the flats is disproportionately long, creating a deeply uncertain situation for the local governments. The other source of unconstitutionality is the lack of guarantee for maintaining the value of the wealth given to the local governments. If they are obliged to sell the flats and other premises for a special reduced price, the value of their property will be significantly diminished. Local governments should be compensated for the losses suffered because of the option.In the case of other premises that are not used as living accommodation (but as shops, e.g.) there is no social reason to put burdens on the property of the local governments.
Therefore the Court declared the rules related to the option to purchase flats and other premises unconstitutional.