Identifier
Created
Classification
Origin
09WARSAW648
2009-06-25 05:31:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Warsaw
Cable title:  

PROPERTY RESTITUTION AND REAL PROPERTY MARKET IN

Tags:  ECON GM ODIP PREL XG XH XT PL 
pdf how-to read a cable
VZCZCXRO8389
PP RUEHKW
DE RUEHWR #0648/01 1760531
ZNR UUUUU ZZH
P 250531Z JUN 09
FM AMEMBASSY WARSAW
TO RUEHC/SECSTATE WASHDC PRIORITY 8491
INFO RUEHRL/AMEMBASSY BERLIN 1006
RUEHBM/AMEMBASSY BUCHAREST 0644
RUEHUP/AMEMBASSY BUDAPEST 0818
RUEHPG/AMEMBASSY PRAGUE 3504
RUEHRA/AMEMBASSY RIGA 1572
RUEHVL/AMEMBASSY VILNIUS 6882
RUEHKW/AMCONSUL KRAKOW 2289
UNCLAS SECTION 01 OF 04 WARSAW 000648 

SENSITIVE
SIPDIS

STATE FOR L/CID SDRAEMEL, EUR/OHI JBECKER & EUR/CE TYEAGER

E.O. 12958: N/A
TAGS: ECON GM ODIP PREL XG XH XT PL
SUBJECT: PROPERTY RESTITUTION AND REAL PROPERTY MARKET IN
POLAND

REF: A. STATE 62772

B. 08 WARSAW 1138

UNCLAS SECTION 01 OF 04 WARSAW 000648

SENSITIVE
SIPDIS

STATE FOR L/CID SDRAEMEL, EUR/OHI JBECKER & EUR/CE TYEAGER

E.O. 12958: N/A
TAGS: ECON GM ODIP PREL XG XH XT PL
SUBJECT: PROPERTY RESTITUTION AND REAL PROPERTY MARKET IN
POLAND

REF: A. STATE 62772

B. 08 WARSAW 1138


1. (U) Summary: "Clouds" on title associated with property
confiscations related to the Holocaust and post-war Communist
upheavals have several effects on the Polish real estate
market. Property may be kept off the market by unclear title
or a pending restitution claim, sometimes driving up the
price of near-by property with a clean title. Where the
Communist government failed to record properly an
expropriation, the "former" owner may scurry to sell the
property before government authorities can correct the error.
Restitution cases usually take years, and the associated
legal costs can be heavy. Title insurance is available, but
only to large developers. The effects on the real estate
market are broadly the same throughout Poland. There is no
formal distinction between the situation of Holocaust victims
and other persons whose property was taken, although some
historical measures -- such as time bars for filing a claim,
or the settlement of claims by an international agreement --
may disproportionately affect heirs of persons who fled
Poland during or after World War II. Restitution legislation
remains stalled. End summary.

--------------
The Land Registry System
--------------


2. (U) In Poland, the most important information regarding
the legal status of real property is contained in the land
and mortgage registers maintained by regional courts ("sady
okregowe"). The registers record the owner, nature of
ownership rights (for example, fee simple or long-term
lease),mortgages and encumbrances (liens, etc.) There is a
legal presumption that entries in the registers are accurate
and reflect true title and actual legal status of real
property.


3. (U) Because mistakes, inaccuracies or gaps in the land
and mortgage registers can invalidate a real property
transaction, such errors can cause real property transactions
to be postponed for months or years. Polish law specifies
the procedure to correct errors in the land and mortgage
registers. Depending on the scope of the inaccuracies, or

what information is missing, the procedure can take from
several months to many years. For example, a request to
delete a mortgage that was paid off long ago may be
dispatched "relatively quickly," i.e., within three to six
months, according to Halina Wieckowska, a Warsaw real estate
lawyer.


4. (U) However, cases seeking restitution of expropriated
property are more complex. (NOTE: Because Poland does not
yet have legislation that provides an administrative
mechanism for private property restitution/compensation, all
such claims have to be handled through the court system.)
Frequently, before a case can be initiated, claimants must
gather evidence from multiple agencies and jurisdictions.
According to three real estate lawyers in the firm Miller
Canfield, in Warsaw the process involves several steps.
First one must obtain a decree from a regional court
recognizing the claimant as the legal heir to the owner
listed in the land and mortgage registers. Then, the
claimant must file a petition with the local government
requesting revocation of the original expropriation decision.
The local government has three months to respond. If it
denies the request, the claimant commences an action in an
administrative court. Appeal from the administrative court
is to the Supreme Court. In Warsaw, these cases take three
to five years minimum, and sometimes as long as 15 years, the
Miller Canfield lawyers said. The associated legal costs
"may be quite high," Wieckowska stated.

--------------
Roots and Scope of the Problem
--------------


5. (U) The Polish government acquired land (including
"abandoned property" that had belonged to Jews before the
Holocaust) via different legal acts. In 1944, the Communist
regime expropriated industrial property and all agricultural
estates and forests exceeding 50 hectares. Land in areas

WARSAW 00000648 002 OF 004


that had been part of Germany came into Polish government
ownership following the Potsdam Conference. As the
Communists consolidated power, they tried to force owners of
smaller agricultural plots to collectivize, but because of
popular resistance were unable to carry this through.
Roughly 80% of agricultural holdings smaller than 50 hectares
remained in private hands throughout the Communist period.
The expropriation acts often contained a clause barring
claims seeking to regain property unless such claims were
raised by a certain date. Many people declined to file such
claims, believing it would be a futile act that would expose
them to Communist authorities' wrath. In other cases, heirs
were living outside of Poland or were unaware of having a
claim on property. Furthermore, in some cases the government
claims to have obtained title through adverse possession.
These maneuvers particularly disadvantage persons who fled
abroad, including Jews who left Poland after anti-Semitic
events in 1968.


6. (U) When the Communists expropriated property, they
often neglected to ensure the changes in ownership were
recorded in the land and mortgage registers. An April 2009
study by Poland's Supreme Chamber of Control (NIK),which has
a similar role to the U.S. Government Accountability Office,
found that ownership rights are not properly documented in
the land and mortgage registers for 60 percent of the
properties belonging to the Polish State Treasury, or for 30
percent of those belonging to local governments. Where the
land and mortgage registers are not in order, government
agencies lose money from unpaid rents or property taxes.


7. (U) Over the last seven years, the number of requests
for corrections to the land and mortgage registers almost
doubled. However, the courts are keeping up with the
increased load; the number of requests resolved each year
also has nearly doubled. According to NIK, at the beginning
of 2008, 577,000 requests were pending. An additional 3.56
million requests were lodged during 2008. However, during
the year, the courts disposed of 3.57 million requests,
leaving 564,000 cases pending at the end of 2008.

--------------
The "Recovered Territories"
--------------


8. (SBU) In 2006, a group representing Germans expelled
from territory that became Polish at the end of World War II
filed petitions with the European Human Rights Court seeking
compensation. The German government and the main expellee
association in Germany declined to support the group's
compensation claims. In 2008, the Court determined it was
not competent to render a judgment in the matter.
Nevertheless, the possibility that German expellees could
claim restitution remains a highly sensitive issue in Polish
politics.

--------------
Effects on the Market
--------------


9. (U) Rapidly increasing property values in Poland over
the past several years have been primarily the result of two
factors: Poland's entrance into the EU and legislation passed
in 2004 allowing landlords to increase rents to near free
market value. In areas like Kazimierz, a Krakow neighborhood
where the majority of property before World War II was
Jewish-owned, cloudy titles have contributed to increasing
property values because relatively few properties come up for
sale on the open market. Those that do are highly prized for
their location. Of those properties that are sold, most are
purchased after laborious work by property developers who
have the means to track down previous owners now living
outside of Poland and then spend months or years working the
purchase through the Polish legal system.


10. (U) Restitution questions do block some real estate
sales. For example, a developer may be interested in buying
Warsaw property putatively owned by the Polish State
Treasury. However, if an heir makes a restitution claim, the
property cannot be sold during the pendency of the claim.


11. (U) Conversely, disorder in the registers may have

WARSAW 00000648 003 OF 004


spurred some sales. The Miller Canfield lawyers stated that
in areas of northeast Poland where land was expropriated, but
the expropriation was not properly recorded, the owners of
record have rushed to sell. In such cases, the purchaser may
be protected against the state later asserting a claim by
showing that he or she relied on the information in the land
and mortgage registers. However, Wieckowska noted that in
some cases expropriated property may be returned to a prior
owner even though the current "owner" relied in good faith on
the registers.


12. (U) U.S. firms introduced title insurance into Poland
about seven or eight years ago, but it is only available to
large developers. Banks require title insurance for loans
for large projects, such as construction of an entire
apartment building. However, banks do not demand title
insurance to issue a mortgage for an individual apartment; in
those cases the bank takes its "comfort" from the legal
presumption that the land and mortgage registers are accurate.


13. (SBU) Przemysl, a town on the Polish-Ukrainian border,
provides one example of the challenges of Holocaust
restitution. Before World War II, Przemysl's 20,000 Jews
made up a third of the population. Deputy Mayor Wieslaw
Jurkiewicz told ConOff that there is a saying in Przemysl
that out of every three buildings one belongs to the city,
one to the church, and one to the Jewish community. Some
communal property, such as the New Synagogue, has been
"returned" to the Foundation for the Preservation of Jewish
Heritage in Poland, but 55 restitution cases remain pending.
"It is not sufficient to say, 'we all know this was the
property of Jewish people.' You need proof," Jurkiewicz
stated. He added that, due to the disputed ownership of many
properties in Przemysl, the current occupants are unwilling
to invest in the buildings, causing the buildings to fall
into disrepair.

--------------
Hitting Close to Home
--------------


14. (SBU) Restitution questions touch the property where
both U.S. Embassy Warsaw and the Consulate General in Krakow
are located. Regarding Krakow, the Jewish heirs to the
Consulate's two buildings, who now live in Brazil, agreed to
sell their rights in the property to another private citizen,
and their title was acknowledged by a Polish court. However,
the city had claimed ownership of the buildings since the
1944 expropriation decrees, and was faced with losing the
lucrative USG rent. The city appealed the transfer of title.
The city lost its appeal on one building, and an initial
appeal on the second, but continues to attempt to block the
sale. The Krakow case illustrates a major obstacle to
passing comprehensive restitution legislation: government
entities' reluctance to lose thousands of income-generating
properties nation-wide.


15. (SBU) In Warsaw, the land on which the Embassy sits was
owned before World War II by members of a well-known family
of Polish nobles. For over a decade, they have been seeking
restitution of the land from the Polish government in various
administrative and court proceedings. A key issue is whether
one of the claimants received compensation from the British
government under a claims settlement agreement, and, if so,
whether this bars further relief from the Polish courts. The
United States and Poland concluded a similar agreement in

1960.

--------------
Status of Draft Restitution Legislation
--------------


16. (SBU) In September 2008, Poland's Treasury Ministry
completed draft legislation that would provide administrative
mechanisms for claimants to receive partial compensation for
WWII and communist-era private property confiscations. Since
that time, the legislation has been bogged down in an
inter-ministerial clearance process, mainly because of
financial objections raised by the Finance and Agriculture
Ministries and regional governments. The draft legislation
(ref B) establishes a PLN 20 billion (approx. USD 6.15
billion) compensation fund from which claims would be paid.

WARSAW 00000648 004 OF 004


The fund would be financed by the sale of government-owned
properties and local tax revenues, and supplemented with
funds from the national budget. Claims would be paid over a
fifteen year period. The Treasury Ministry estimates
claimants would be paid approximately 15 to 20 percent of the
value of their claim, depending on the total number of claims
filed. According to the Treasury Ministry, Jewish-owned
property makes up about 20 percent of all property covered by
the legislation. (Note: The draft legislation does not
cover heirless property.)


17. (SBU) Contacts at the Treasury Ministry concede the
inter-ministerial process has been more complicated and
time-consuming than Prime Minister Tusk and other Polish
officials initially anticipated. Aside from the financial
concerns, which have recently been magnified by the Polish
government,s almost obsessive commitment to avoid deficit
spending in the middle of a global economic crisis,
ministries were instructed to anticipate objections that
might lead to potentially destructive amendments in
parliament and to preempt legal challenges in the
Constitutional Tribunal. While the technical issues have
been largely resolved, ministries remain concerned about the
potential financial implications, especially in the wake of
calls for ministries to reduce spending further. In
particular, local governments have objected to the use of
local tax revenue to finance the compensation fund. More
recently, declining property values have led the Agriculture
Ministry to suggest that government-owned real estate be
leased, rather than sold off altogether. While the Polish
government theoretically could ignore these objections and
move the legislation to the parliament, objectionable
provisions would probably be removed via parliamentary
amendment, leaving the national budget to foot the entire
bill -- a development the Finance Ministry is keen to avoid.


18. (U) This is a joint cable from Embassy Warsaw and
Consulate General Krakow. U.S. Embassy Berlin also
contributed to this cable.
ASHE