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 
 
¶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