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The recent judgment of the Supreme Court in Civil Appeal 193/2016 is an important reminder that, in the sensitive field of compulsory Expropriations, the judicial power to determine "fair and reasonable compensation" is not unlimited. The Court does indeed have the discretion to accept or reject elements from the experts' reports, but it is obliged to exercise that discretion with clear, reasoned and well-substantiated findings.
The case concerned a 987 sq.m. property in Limassol, which was expropriated for the construction of school facilities. The Limassol District Court had determined its value at €328.68 per sq.m., awarding an additional amount of €127,007 to the owner. The Republic challenged the decision, focusing its appeal on the allegedly erroneous use of the comparable sale S3.
The Legislative Framework: Duties and Principles in Determining Compensation
The Compulsory Expropriation Law of 1962 (Law 15/1962) clearly provides:
- that the expropriating authority is obliged to negotiate with the owner within 14 months and, in case no agreement is reached, to offer the compensation it has assessed (Article 8);
- that where no agreement is achieved, the Court determines the compensation payable following an application by the authority or any interested person (Article 9);
- that the value of the property is assessed on the basis of the reasonable price in the open market at the time of publication of the Expropriation notice (Article 10).
In compulsory Expropriation cases, the Court itself is empowered to determine the disputed value of the affected property and the fair and reasonable compensation to be paid, in the light of the totality of the evidence before it, and without being bound by the assessments of any particular expert. (Aglantzia Municipality v. Georgiou (2001); Rashid Ali (1971)). However, the fact that the Court may use the evidence before it to reach its own assessment does not mean that its conclusion may be arbitrary or unreasoned. Any departure from the evidence must be explained. (Papassavvas v. Attorney General (1999); Agia Napa Improvement Board v. Alexia & Polis Estates Ltd (2000)).
The Key Issue: The Comparable Sale S3
The Supreme Court examined whether S3 – a 508 sq.m. property which was in essence treated as a building plot – was truly comparable to the subject field of 987 sq.m. The Republic's own valuer had explained that:
- S3 had much better access;
- it did not require any land to be ceded for a road in the event of development;
- it constituted a building plot with a higher value than a simple field;
- and for that reason she did not use it in her valuation.
Nevertheless, the District Court included S3 in calculating the average value, without explaining its deviation from the valuer's evidence.
The Supreme Court's Finding: Arbitrary and Unsafe Use of S3
The Supreme Court found that:
- S3 was not comparable to the expropriated property;
- the first-instance decision provided no reasoning for accepting it;
- no necessary adjustments were made for the material differences;
- and therefore its use was arbitrary and unsafe.
For these reasons, both grounds of appeal were upheld.
The New Compensation Amount
The Supreme Court held that the only appropriate comparables were S2 and S5, with an average of €260.03 per sq.m.
- Total market value: €256,649.61
- Less the amount already paid: €197,400
- Balance of compensation: €59,249.61
The original compensation of €127,007 was thus drastically reduced.
Significance of the Judgment
Civil Appeal 193/2016 confirms that the Supreme Court remains strict as to the proper application of Law 15/1962 and the case-law principles governing compulsory Expropriations. The judgment reinforces the principle that compensation must reflect the true market value of the property at the relevant time. Properties with materially different characteristics cannot be used as comparables without technical adjustments. Compensation must be calculated on the basis of substantiated data, proper comparables and full reasoning, so that the right to property is effectively protected.
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