When managing property a municipal authority acts as a private individual
Municipalauthorities, like the state, have real estate which they manage privately in order to meet their cash needs, acting as a private individual, to develop the property and derive financial benefit. In this context, they conclude agreemen
Municipalauthorities, like the state, have real estate which they manage privately in order to meet their cash needs, acting as a private individual, to develop the property and derive financial benefit. In this context, they conclude agreements with private individuals to whom they grant licence to use a property or part of it and charge a fee which is determined as well as the terms of the use.
Upon the expiration of the term of the permit, the private individual no longer has rights over the property. If the municipal authority decides not to renew the permit or limit the extent of the granted property, the private individual does not acquire rights and cannot review the decision of the municipal authority by filing a recourse with the Administrative Court.
The decision of the municipal authority constitutes property management and falls within the sphere of private law. The fact that the decision is taken by the municipal council does not change its character. Also, the fact that the decision affects a certain number of citizens does not serve the public interest and is not considered to originate from a public body in the exercise of its public authority.
Supreme Constitutional Court decision
The Supreme Constitutional Court, in its decision issued in Appeal No.10/20, dated November 18, definitively resolved a dispute between the Municipality of Larnaca and two restaurant owners on the coastal avenue of Finikoudes. Specifically, a shop that operated next to a restaurant changed its use and was converted into a restaurant. It applied to the Municipality of Larnaca and requested the granting of part of the paved area located in front of the restaurant, which was previously occupied by the neighboring restaurant under a licence.
The Municipality of Larnaca, in a letter to the owner of the first restaurant, informed him that it had rejected his request to be granted the same paved area as before and that it had approved the allocation of space in front of his restaurant as specified in the letter, restricting his right to occupy the paved area accordingly. The owner did not accept the decision of the municipal council and filed a recourse to the Administrative Court requesting its annulment.
The Administrative Court examined the issue of jurisdiction and whether the contested act constituted an act of public or private law. It decided that it constituted an act of private law and ruled that the municipality acted within the framework of the management of its property and did not take a decision for purposes of public interest, dismissing the recourse. The Supreme Constitutional Court agreed with the first-instance decision, stating that the licence had expired and that the competent management committee of the municipality examined the issue of granting a licence again to the owner of the first restaurant as well as to the owner of the new restaurant and made the specific decision.
It referred to the authority of Antoniou v Municipality of Larnaca (2009) 3 AAD 130, adopting what was mentioned there on the subject. In that decision, the municipality granted part of the coastal area to the owner of a pub and this was done to serve its financial interests, charging a relevant fee. It was held that the decision of the municipal authority was not intended to promote a public purpose and although it affected a certain part of the public, it did not affect the general public as required by case law.
It was emphasised that a point that indicated that this was a private law act was the fact that if the owner violated the terms of the permit, the municipality would have recourse to regain possession of the site. This was an act of property management and the character of the decision remains unchanged, since its primary purpose is the regulation of private law rights.
The Supreme Constitutional Court concluded that the judgment of the court of first instance was correct. This was a private law relationship that, based on the facts of the case, constituted a licence and not a lease. It adopted relevant case law in which the principle that the right of use based on an existing license terminates upon expiration was reiterated. It added that the court of first instance was right not to examine the grounds for invalidity, which was referred to as an error in the appeal, since it prejudged that it did not have jurisdiction and dismissed the appeal.
George Coucounis is a lawyer specialising in Immovable Property Law, based in Larnaca. E-mail: coucounis.law@cytanet.com.cy, tel: 24818288
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