Compensation criteria for expropriation on the grounds of public utility – structurally key forestry areas and land that is fit for construction
Municipal master plan
Structurally key forestry area
Land fit for construction
Expropriation on grounds of public utility
RULING Nº 37/2011
25 of January of 2011
The legal provision under which the compensation payable for the expropriation of a plot of land can result more favourable than that which would result from the plot’s classification as “land fit for other purposes”, but less favourable than that attributable under the general rules derived from recognition of the plot’s fitness for construction, does fulfil criteria of reasonableness. However, to interpret that provision in a way which completely fails to consider the circumstance that the municipal master plan classifies the plot of land for expropriation as part of a “structurally key forestry area”, and instead limits itself to verifying the existence of the elements which, according to the Expropriation Code, typify a plot as land that is fit for construction under the same terms as would be applicable to a plot which, while it possessed the same potential for construction, was not subject to the same kind of binding normative limitation, is to grant an excessive advantage to the expropriated party. It gives the latter the perception that, as a result of the expropriation, it is obtaining an amount whose value is manifestly greater than the price that would be available to it outside the expropriation relationship, and thus violates the principle of equality and the criterion of fair compensation, both of which are enshrined in the Constitution.
The appellant – the company Estradas de Portugal (a state-owned company with responsibility for many of the country’s roads) – questioned the constitutionality of the Expropriation Code norm which says that land that is fit for construction is that which has road access and a water, electricity and sanitation network, with characteristics that are appropriate to servicing the buildings which either already exist or are going to be erected on the land in question, when the norm is interpreted in such a way as to allow a plot that is included in a municipal master plan as “structurally key forestry area” to be qualified as land that is fit for construction for the purposes of calculating the compensation due for its expropriation. The appellant argued that inasmuch as the amount of compensation is calculated in accordance with the way in which land is classified, a classification that is based solely on the autonomous consideration of whether the requisites provided for in the norm are fulfilled, without taking account of the legal instruments that implement and permit the ius aedificandi, is in breach of the principle of equality, to the extent that it generates inequality between persons whose land has been expropriated and others who have not been the object of expropriation when it comes to determining the value of their respective properties, and makes land classification criteria that do not apply outside the expropriation relationship autonomous.
At issue was the expropriation of a plot of land belonging to the respondent, a real estate company, for the purpose of building a communication road. The municipal master plan classified the plot as structurally key forestry area – i.e. an area that was predominantly intended for forestry operations, and one in which practices that entail the total destruction of the vegetation cover were not permitted. Having said this, the plot in question did fulfil the criteria for classification as land that was fit for construction.
The Constitutional Court was of the view that, bearing in mind the relative flexibility of the criteria for calculating compensation, the definitive calculation by the respective decision-maker cannot limit itself to gauging whether the requisites laid down in any of the subparagraphs of the article governing the classification of land are fulfilled or not. If a piece of land is objectively fit for construction, under the overall system of compensatory standards it is also necessary to then weigh up the existence or otherwise of factors which, in the concrete situation in question, are significant enough to constitute market value in the case of the expropriated land.
One of these factors is whether there are regulations which require that the land be used for something other than housing – an allocation of usage that would impose a specific compensation regime. It is thus necessary to assess whether or not it is indispensable to take this circumstance into account in order for the constitutional requirement for fair compensation to be fulfilled.
The Constitutional Court’s jurisprudence on expropriations is vast, and a significant part of it addresses normative interpretations regarding the classification of plots of land which, while they possess objective capacity to be built on, because they possess all the elements provided for in the applicable Expropriation Code norm, are also subjected by a territorial management instrument to a purpose other than construction.
These Rulings have basically addressed the question of whether there is an imperative requirement for plots of land that are included in the National Agricultural Reserve or the National Ecological Reserve, among others, to be valued as “land fit for other purposes”. This jurisprudence is not uniform, and it is possible to identify two diverging tendencies.
One camp has argued that the interpretation that the classification “land fit for construction” covers a plot which is included in the National Agricultural Reserve and is expropriated in order to build communication roads, which must thus be the object of the compensation applicable to this classification, is unconstitutional, even when the land in question is fit for construction purposes according to the criteria defined in the applicable article of the Expropriation Code.
The other view is that the classification of a piece of land that is included in the National Agricultural Reserve as “land fit for construction” for the purposes of calculating the compensation due for its expropriation should not be deemed unconstitutional.
However, there is a significant difference between the questions of constitutionality that have been the object of earlier constitutional jurisprudence, with regard to the specific issue that came before the Court in the present case. In the past, the Court has discussed whether it is admissible to include a given plot in the “land fit for construction” category, in order to permit the application of the specific compensation regime to that plot. In the present situation, what was at stake was whether it is in conformity with the Constitution to classify the expropriated plot as “land fit for construction” solely on the basis of the elements defined in the legal precept, without considering the fact that it has already been administratively allocated to another purpose (and thus without applying the specific criterion for determining the amount of the compensation which would result from the latter situation).
The Court recalled that inasmuch as the principle of fair compensation is indissolubly linked to the principle of equality, the latter must obligatorily be taken into account in this situation. The compensation criteria must ensure equal treatment in terms of the costs to the public purse, both on the level of the internal expropriation relationship, in which one compares the situations of the various expropriated parties with one another, and on the level of the external relationship, where the basis for comparison is the situation of the parties that have not been the object of expropriation.
Fulfilment of these requirements works both ways, in that it precludes solutions in which the expropriated party’s sacrifice is not properly compensated, just as much as it does those which put that party in a disproportionately advantageous position and provide it with an unjustified benefit.
On the level of the external relationship (comparison with the situation of the parties that are not subject to expropriation), and to the extent that one must also take account of factors that shape the market and are potentially uncertain, a finding of a lack of constitutional conformity must be surrounded with particular caution. This means that a judgement that compensation has exceeded that which is fair, in a way that offends the principle of equality, on the level of the external relationship, must only be reached in the face of a criterion which very clearly displays the existence of a manifest disproportionality between the amount of compensation that has been set and the value of the asset in question.
The Ruling was the object of a dissenting opinion. Its author argued that the norm should have been held to be constitutional, on the grounds that an analysis of the compensation from the perspective of the external expropriation relationship (comparing owners who are expropriated and others who are not) should not be undertaken on the basis of conjectures as to the market value (which is a social reality, not a normative one) of the plots of the other, unexpropriated owners, in a calculation based on a fictional, hypothetical sale of their plots.
See Rulings nos. 39/88 (9-02-1988), 275/2004 (20-04-2004), 114/2005 (1-03-2005), 417/2006 (11-07-2006), 118/2007 (16-02-2007), 234/2007 (30-03-2007), and 469/2007 (25-09-2007).