Adverse possession of real estate and claims for arrears of rent

And more precisely: Adverse possession real estate, and remuneration for non-contractual use of it - resolution of seven judges of the Supreme Court

On April 3, 2024, the Supreme Court, composed of seven judges, adopted a resolution in response to this legal issue:

Can the former owner be entitled to a claim against the spontaneous possessor of the thing for remuneration for non-contractual use of it (Articles 224, 225 of the Civil Code) for the period preceding the acquisition of ownership of the thing by adverse possession by this holder?

The Supreme Court stated that the loss of ownership of a thing as a result of adverse possession does not extinguish the former owner's claim for remuneration for the use of the thing in the period preceding the expiry of the adverse possession period.

The key issue in the case of adverse possession of real estate concerns the situation in which, as a result of the passage of time, the owner of the real estate, under certain conditions, may acquire ownership of it through long-term and actual full possession of it. What was clearly emphasized in the same decision of the Supreme Court - in such a situation, the person who lost the property as a result of adverse possession has the right to demand payment of rent.

How does the resolution affect the legal situation of the existing properties?

The resolution in question was adopted by seven judges of the Supreme Court. Pursuant to the content of art. 87 § 1 of the Act on the Supreme Court, a panel of 7 judges may decide to give the resolution the force of a legal principle. Currently, there is no annotation on the Supreme Court's website that the Court decided to give this resolution the force of a legal principle. Therefore, the presented position is not absolutely legally binding on other courts. However, due to the status of the Supreme Court, it will certainly be taken into account when adjudicating on adverse possession cases by other courts. Or rather, when the current owner demands payment of rent.

Therefore, former owners of movable or immovable property will certainly be tempted to file a lawsuit against the new owners. These lawsuits will refer not only to the legal provisions regarding remuneration for non-contractual use of real estate, but also to this resolution of the Supreme Court. This means that people filing cases for the declaration of adverse possession will have to take into account that even if they win the declaration of adverse possession of the property, they will be sued by the former owners for the payment of rent.

In turn, people defending the ownership of their real estate in adverse possession cases have gained quite a good way to defend themselves in such cases.

Adverse possession – immovable property, movable property, duration of adverse possession

Pursuant to the provisions of the Civil Code, adverse possession occurs when a holder of real estate who is not its owner acquires ownership and has held the real estate continuously for twenty years as an independent possessor, unless he obtained possession in bad faith - in which case ownership is acquired after thirty years.

It is also possible to acquire ownership of movable property by adverse possession - in this case, ownership acquired after possessing the item continuously for three years as the owner. However, if someone possesses a movable property in bad faith, he will never take possession of it.

Key concepts therefore need to be clarified.

Who is an autonomous possessor?

An autonomous possessor is a person who actually possesses the thing as the owner, even if he obtained possession in an unlawful manner. This legal definition of spontaneous possession does not involve the concept of ownership - what is important is only the actual possession of a given thing or property and manifesting one's actions towards it as an owner. Possession of real estate in the context of adverse possession emphasizes the importance of continuous and open possession as a condition for obtaining a declaration of acquisition of ownership of real estate by adverse possession.

What is good faith as a condition for adverse possession of real estate?

The conditions for adverse possession, including the role of good faith, are crucial to understanding how ownership of real estate can be acquired by adverse possession. Good faith is justified ignorance of the true state of affairs, usually consisting in the existence of some legal relationship or law. The concept of good faith therefore consists of three elements: (1) the belief in the existence of a right or legal relationship (or their non-existence); (2) the incorrectness of this belief and (3) the possibility of justifying the error in the given circumstances[[1]](LINK 1).

Therefore, this is a case where a person who owns a certain thing is not aware that someone else is its owner or assumes that the thing belongs to no one. Many factors may influence this belief, for example: observing that no one appears on a given property; neglected condition of real estate or things; finding an item in circumstances indicating its abandonment. Of course, these circumstances must be real and justifying enough not to constitute possession in bad faith. Importantly, the interested party must exercise due diligence, i.e. make sure that his belief regarding a given property or movable property is actually the same. Good faith is excluded both by positive knowledge of the lack of a right and the lack of such knowledge resulting from lack of due diligence, i.e. negligence[[2]](LINK 2).

What is possession in bad faith in adverse possession?

Not every property may be subject to adverse possession; for example, public goods are excluded, and adverse possession requires meeting certain criteria, such as possession in good faith and the presumption of independent possession. According to the jurisprudence, a person is in bad faith who, invoking a right to which he is entitled, knows that he is not entitled to this right, or a person who, although he is aware that he is not entitled to a specific right, but his ignorance is not justified in the light of circumstances of a given case[[3]].

Therefore, we talk about bad faith when someone knows or should know that someone is the owner of a given property or movable property. There can be many such cases - the simplest is when we use a given thing knowing that someone else is its rightful owner. We also talk about bad faith when, for example, we notice that the appearance of a given item is changing (for example, the property has been renovated, new elements have appeared there) - this should raise reasonable doubts as to whether the item is abandoned. Importantly, it is possible that possession in good faith may be transformed into possession in bad faith. If, during the acquisition of ownership, we find out that someone else is the owner, the conditions for adverse possession of the property change: (1) in the case of real estate, the time after which it is possible to acquire ownership through adverse possession is extended to 30 years, while (2) in the case of case of movable property adverse possession becomes impossible.

To sum up the issue of the duration of adverse possession - how many years does adverse possession last?

• Real estate – in good faith 20 years.
• Real estate – bad faith 30 years.
• Movable property – in good faith, 3 years.
• Movable property – in bad faith it is impossible.

Importantly, the provisions of the Civil Code provide for the presumption of good faith.

This presumption is rebuttable - it means that unless it is adequately proven that the holder possessed a given thing or property in bad faith, it is considered that he did so in good faith. This is definitely an advantage for the sole proprietor, but it does not prevent the owner from asserting his rights. There are also court judgments with the force of a legal principle, which determine in advance who is in good faith and who is in bad faith and in what situation. To help determine this, please visit consultation.

What is the property owner's claim for remuneration for non-contractual use?

The provisions of the Civil Code provide for rights for the owner of an item in the event of its use by an unauthorized person (an independent possessor) - of course, this problem was resolved differently in the case of an autonomous possessor in bad or good faith.

Let's first discuss the bona fide holder situation:

Article 224 of the Civil Code

• 1. An independent possessor in good faith is not obliged to pay for the use of the thing and is not responsible for its wear and tear, or for its deterioration or loss. He acquires ownership of natural benefits that have been separated from the thing during his possession, and retains the civil benefits collected if they have become due at that time.
• 2. However, from the moment the independent possessor in good faith learns that an action for the delivery of the thing has been brought against him, he is obliged to pay for the use of the thing and is liable for its wear, deterioration or loss, unless the deterioration or loss occurred without his guilt. He is obliged to return the benefits collected from the above-mentioned moment and which he has not used, as well as pay the value of those which he has used.

In the light of the adopted resolution, for an autonomous possessor in good faith, this would mean that despite adverse possession of real estate or movable property, the former owner could claim payment from him for the use of the property. The spontaneous possessor may also be liable for the wear and tear of the item, its deterioration or loss, unless these events occurred without his fault. If a given thing (real estate or movable property) brings benefits, the autonomous possessor would be obliged to return those benefits that he has not used, and in the case of those used up - to return their value.

This issue seems problematic because in the case of possession of real estate, these claims can reach a significant amount.

When does the previous owner's right to the property lose?

The resolution of seven judges of the Supreme Court states that the loss of ownership of real estate as a result of adverse possession does not extinguish the former owner's claim for remuneration for the use of the thing in the period preceding the expiry of the adverse possession period.

This is because in the case of adverse possession, the acquisition of ownership by the spontaneous possessor and its loss by the current owner of the property takes place ex lege (by the power of law) on the date of expiry of the adverse possession period. Therefore, bringing an action for the issuance of real estate after adverse possession of the property should be dismissed due to the groundlessness of the claim, because the former owner no longer has the ownership right to the real estate or movable property.

It would be possible to bring an action for payment of remuneration for the free use of real estate or movable property, but then the plaintiff would have to justify his claim by stating that at one time, during a given period, he was actually the owner of the given facility. However, will this not constitute excessive favoring of former owners of existing real estate or movable property? This problem may not be so severe in the case of movable property, because in this case adverse possession occurs after three years. Real doubts and large amounts of claims usually arise in the case of adverse possession of real estate.

Doubts as to the deadline for the admissibility of claims for remuneration for the use of real estate subject to adverse possession

The use of real estate for 20 or 30 years may take the form of a claim for payment of an exorbitant amount. What if the interested party (owner) did not exercise his property rights intentionally, de facto abandoning the property? It is conceivable - and even very common - that the owner of the property is outside Poland and the property he owns is not managed or supervised by anyone in any way. There are also many factual situations in which the owners disclosed in the relevant registers are dead, and it is impossible to obtain information about the living heirs. What if someone neglected to correct information in the registers, but remembers that they are the owner of such property? It is possible to use your (already expired) right and demand remuneration - despite the possession of adverse possession of the property.

In the case of the resolution regarding adverse possession of real estate, the justification has not yet been published - therefore it is not possible to read the full details of the adjudicating panel's considerations. Only after reading the legal analysis and the conclusions drawn will one be able to assess whether such a position is detailed and logical or not. The essence of adverse possession is the legal acquisition of ownership of real estate or movable property due to the failure of the previous owner to exercise his right. It should also be noted here that the acquisition of ownership by adverse possession has a character primary acquisition – therefore, we assume it fictitiously as if the entity occupying the property was the first owner of the property. This means that there is no legal connection with the previous owner - therefore, as a rule, all previous legal encumbrances on a given item expire upon adverse possession.

Previously, in 2016, the Court of Appeal in Krakow commented on the issue of the claims of the former owner of the property after adverse possession of the property:

"The function of adverse possession prevents the former owner from being granted any claims based on the ownership right against the possessor who has become the owner, which would include supplementary claims for the period preceding the date of adverse possession, including a claim for remuneration for the use of the thing. Order, legal order, stabilization of relations relating to the ownership of things, i.e. everything that adverse possession aims to ensure, would again be disturbed by disputes regarding the claim for remuneration for the use of goods, which is related primarily to ownership issues. items in the period preceding the date of adverse possession. Granting the former owner such a claim against the possessor who became the owner would therefore be incompatible with the purpose of adverse possession.”[[4]](LINK 1)

To fully comment on the position of the Supreme Court, we must wait for the publication of the justification for the resolution and read it. This will allow us to understand the thinking of the adjudicating panel and assess whether, compared to the Judgment of the Court of Appeal in Krakow, there are any other reasonable arguments that would support granting the former owners the right to claim payment for non-contractual possession of real estate or goods.

However, this resolution certainly has a significant impact on court decisions from the day it is issued.

[[1]](Yes: P. Machnikowski [in:] Civil Code. Comment, ed. prof. Ph.D. Edward Gniewek, prof. Ph.D. Piotr Machnikowski, Warszawa 2023, Issue 11, art. 7, n.b. 1

[[2]] Decision of the Supreme Court of April 6, 2018, III CSK 322/17, LEX no. 2490601

[[3]] Ibid.

[[4]] Judgment of the Court of Appeal in Kraków - 1st Civil Division of March 31, 2016, I ACa 1780/15, Legalis