AS TO THE ADMISSIBILITY OF

                       Application No. 10522/83
                   by Leopold MELLACHER and another
                            against Austria

                                   *

                       Application No. 11011/84
                       by Johann MÖLK and others
                            against Austria

                                   *

                       Application No. 11070/84
               by Christiane WEISS-TESSBACH and another
                            against Austria

        The European Commission of Human Rights sitting in private on
8 May 1986, the following members being present:

                MM G. SPERDUTI,  Acting President
                   F. ERMACORA
                   M.A. TRIANTAFYLLIDES
                   G. JÖRUNDSSON
                   S. TRECHSEL
                   B. KIERNAN
                   A.S. GÖZÜBÜYÜK
                   A. WEITZEL
                   J.C. SOYER
                   H.G. SCHERMERS
                   H. DANELIUS
                   G. BATLINER
                   H. VANDENBERGHE
               Sir Basil HALL

               Mr  H.C. KRÜGER, Secretary to the Commission

        Having regard to Art. 25 of the Convention for the Protection
of Human Rights and Fundamental Freedoms;

        Having regard to the application introduced on 5 August 1983
by Leopold and Maria MELLACHER against Austria and registered on 12
August 1983 under file No. 10522/83;

        Having regard to the application introduced on 22 May 1984 by
Johann, Ernst and Anton MÖLK and Maria SCHMID against Austria and
registered on 18 June 1984 under file No. 11011/84;

        Having regard to the application introduced on 4 July 1984 by
Christiane WEISS-TESSBACH and Maria BRENNER-FELSACH against Austria and
registered on 6 August 1984 under file No. 11070/84;

        Having regard to the Commission's decision of 4 December 1984
to give notice of the applications to the respondent Government and to
invite them, in accordance with Rule 42 para. 2 (b) of the Commission's
Rules of Procedure, to submit observations in writing on the
admissibility and merits of the applications;

        Having regard to the observations submitted by the respondent
Government on 4 March 1985 (application No. 10522/83) and 19 March 1985
(applications Nos. 11011/84 and 11070/84);

        Having regard to the observations in reply submitted by the
applicants on 11 April 1985 (application No. 10522/83) and 9 May 1985
respectively (applications Nos. 11011/84 and 11070/84);

        Having regard to the Commission's decision of 8 July 1985 to
join the three applications and to invite the parties, in accordance
with Rule 42 para. 3 (b) of the Rules of Procedure, to submit further
observations on the admissibility and merits orally at a hearing before
the Commission;

        Having regard to the oral submissions of the parties at the
hearing on 8 May 1986;

        Having deliberated;

        Decides as follows:

THE FACTS

        The applicants are house-owners who complain essentially that
rent due to them under tenancy agreements made before the entry into
force of the 1981 Rent Act (Mietrechtsgesetz, Fed. Law Gazette No.
520/1981) was reduced by operation of section 44 of this Act.

        A system of rent control has existed in Austria since World War
I.  The 1922 Rent Act (Mietengesetz, Fed. Law Gazette No. 872/1922),
which remained in force until 1981, provided for the freezing of rents
at the 1914 level.  However, it did not apply to flats constructed
after its entry into force, for which no rent restrictions applied.
After 1967 (Mietrechtsänderungsgesetz, Fed. Law Gazette No. 281/1967),
rent restrictions were continued only for earlier tenancy agreements
which remained in existence.   For new tenancy agreements, however,
there were no restrictions on the rent which could be agreed freely,
even for flats which had previously been subject to rent control.  In
1974 (Mietengesetz- novelle, Fed. Law Gazette No. 409/1974), fresh
restrictions were introduced for new leases of sub-standard flats, for
which rents were to be calculated on the basis of a fixed maximum rent
per square metre.

        The 1981 Act, which entered into force on 1 January 1982,
extended the system of maximum rents per square metre to other
categories of flats.  Section 16 (2) provides for certain maximum rents
per square metre for new leases:  AS 22.- for class A; AS 16.50 for
class B; AS 11.- for class C and AS 5.50 for class D.  Any rent
agreement covered by this provision can be declared void insofar as it
exceeds those amounts.  Moreover, the system of maximum rents was
extended to pre-existing tenancy agreements:  by section 44 (2) and (3)
a tenant occupying a flat under a previously uncontrolled contract may
apply for a reduction of his rent to a maximum of 150% of the above
amounts.  Thus, the rent agreement is not automatically affected by the
legislation.  Only if the tenant so requests, the competent authorities
will declare the agreement void to the extent that it provides for a
rent exceding the legal maximum amount.  This declaration does not
render the agreement void ab initio, but only as from the month
following the tenant's request.

        However, the above provisions are not of general application.
The Act in fact exempts numerous types of flats from the system of
fixed maximum square metre rents, either by excluding them from the
scope of applicability (cf. section 1/4 according to which no
restrictions apply to flats in buildings constructed without public
subsidies after 1953, to flats in family houses and to freehold flats;
section 1/3 according to which flats in buildings of non-profit making
housing associations come under a different rent control system
established under the Non-Profit Housing Act = Wohnungsgemeinnützig-
keitsgesetz 1979) or by providing for another type of restrictions
(appropriate amount of rent which can be agreed according to section
16/1 for flats in buildings constructed after 1945, for flats in
historical buildings to whose preservation in the public interest the
landlord has made considerable financial contributions, for flats
upgraded in standard by considerable financial contributions of the
landlord, for class A and B flats beyond a certain size, and generally
for all flats after 6 months of tenure).

        The Rent Act further contains a number of provisions concerning
the use of the rent proceeds by the landlord.  They must in principle
be used for the maintenance of the building and only if they are not
sufficient for this purpose is there a possibility for the landlord to
ask for increased rents according to section 18 or for maintenance
contributions according to section 45 of the Act.  Further provisions
limit the landlord's right to give notice to his tenants.

This right is in principle limited to important reasons specified in
section 30 of the Act.  Even the death of the tenant does not terminate
the lease as various persons are entitled to continue the contractual
relationships according to section 14.

        The facts in the particular cases may be summarised as follows:

Application No. 10522/83

        The applicants, a married couple residing in Feldkirchen, are
both Austrian citizens.  They are represented by Mr. H.G. Medwed, a
lawyer practising in Graz.

        The applicants jointly own a block of flats in Graz with
several apartments leased out to tenants.

        One of these apartments consisting of two rooms and a kitchen
(with a total surface of 40 m2) was let on 15 September 1978 under a
freely negotiated tenancy contract according to section 16 (1) of the
1922 Rent Act as amended in 1967.  The rent in this particular case was
set at AS 1,870.-- per month.

        In application of the 1981 Rent Act, the tenant of the above
apartment on 5 February 1982 applied to the competent Arbitration Board
(Schlichtungsamt) of the City of Graz to reduce his rent to AS 330.--
(= 150% of the legal maximum rent for class D) as from 1 March 1982.
After holding a hearing on 25 May 1982, the Board ruled on 7 June 1982
to allow the application.

        The applicants being dissatisfied with this decision then took
the case to the courts, and the Board's decision thereby lost its
effect.  The tenant claimed that when he rented the apartment it was
without running water and toilet facilities.  These facilities were
subsequently installed in the apartment at the tenant's cost.

        By a decision of 22 October 1982, the District Court of Graz
confirmed that the apartment was in class D and that under section 16
(2) of the Rent Act the regular monthly rent therefore should not
exceed AS 5.50 per m2.  Under section 44 (2), the rent had to be
reduced to 150% of the regular amount, which in this case was AS
330.--.  The overcharge as from 1 March 1982 (AS 12,320.--) had to be
paid back to the tenant by virtue of section 37 of the Act.

        The applicants appealed claiming in particular that the
restrictions resulting from the application of section 44 of the Rent
Act were unconstitutional.  In this respect they invoked the
Commission's decision on Application No. 8803/77 (DR 17, 80) which had
dealt with the earlier rent protection legislation and had found the
restrictions under this legislation to be at the very limit of
permissible interferences with property rights.  Given the even more
restrictive nature of the new legislation, it was submitted that this
legislation went beyond the permissible limits.  The reduction of a
freely and lawfully negotiated rental amount in favour of the tenant
in fact amounted to an expropriation of the landlord's property without
compensation. For these reasons, the applicants suggested that the
appellate court refer the matter to the Constitutional Court for an
examination of the constitutionality of the relevant legislation.

        In addition, the applicants claimed that in the absence of a
specific request by the tenant, the Court should not have adjudicated
the reimbursement of the overcharged rent, and that the amount of the
reimbursement was exaggerated because it included tax which the
applicants had already paid but could not recover from the revenue
office.

        The Regional Court of Graz, however, rejected this appeal on
18 February 1983.  It did not feel prompted to seize the Constitutional
Court with the question of the constitutionality of section 44 of the
Rent Act, having regard to the Constitutional Court's case-law
concerning similar issues.  As regards the reimbursement, the court
found that under the applicable provisions it had to be adjudicated ex
officio, and the question of taxation was not in issue in the present
proceedings.

        This decision is final, no further remedy being available to
the applicants under the domestic law.

Application No. 11011/84

        The applicants, four Austrian citizens born in 1902, 1908, 1948
and 1956, respectively, are all members of the same family and reside
in Innsbruck.  They are represented by Mr. Ludwig Hoffmann, a lawyer
practising in Innsbruck.

        The applicants jointly own an apartment house in Innsbruck as
a community of heirs.  One of the apartments in this house with a total
surface of 68 m2 and consisting of three rooms and a kitchen, plus
toilet and water facilities accessible through the corridor outside the
apartment, was let on 7 December 1972 under a freely negotiated tenancy
contract according to section 16 (1) of the 1922 Rent Act as amended
in 1967.

        The rent in this particular case was set at AS 800.-- per month
until August 1975, and at AS 1,500.-- per month as from 1 September
1975 having regard to certain investments to be made by the tenants
(including in particular the transfer of the water installations to the
apartment itself).  The rent was furthermore subject to an indexing
provision on the basis of the consumer price index for 1966.  As of
April 1983, the rent would therefore have been AS 2,985.-- per month.
The tenants actually paid AS 1,308.30 as from November 1982.

        On 4 October 1982, in application of the Rent Act 1981, the
tenants of the above apartment applied to the competent Arbitration
Board (Schlichtungsstelle) of the City of Innsbruck to reduce the rent
to 150% of the legal maximum rent for class D.  The Board allowed the
application by a decision of 6 April 1983.

        However, the applicants then took the case to the courts, and
the Board's decision thereby lost its effect.  A new decision had
accordingly to be taken by the District Court of Innsbruck.

        Before the court, the applicants argued in particular that the
apartment in question was at present in class B.  Although the
improvement of standard had not been financed by themselves, but by the
tenants, they observed that such improvements at the tenants' costs had
in fact been agreed in the original contract and had led to a reduction
of the rent for the initial period.  The tenants objected that the
costs of their investments had by far exceeded the amount by which the
rent had temporarily been reduced.

        The court decided on 22 June 1983 that the chargeable rent was
in fact to be based on class D because the apartment had been in this
class when the tenancy contract was concluded and the standard had not
been improved by the landlords.  It accordingly reduced the rent to AS
561.-- as from November 1982.  At the same time, it ordered the
applicants to pay back to the tenants the overpayments received since
that time (amounting to some AS 4,000.--).

        The applicants appealed against this decision, claiming in
particular that the application of the legal provisions to them
amounted to an expropriation or other disproportionate interference
with their property rights as guaranteed by Article 5 of the Basic Law
and Article 1 of Protocol No. 1.  They suggested that the question of
constitutionality should be referred to the Constitutional Court.
Apart from that they again claimed that the chargeable rent should in
any event be based on class B and not class D.

        The Regional Court of Innsbruck partially allowed the appeal
by a decision of 15 November 1983.  It found that the court of first
instance had failed to take into account the indexing provision of the
initial contract.  Apart from that it confirmed the decision.  In
particular it considered that the apartment had not been wrongly
classified as a class D apartment having regard to its standard at the
time of the conclusion of the tenancy contract.

        The court had no doubts as to the constitutionality of the
applicable legislation.  Section 44 of the 1981 Act provided for an
expropriation which was in conformity with the requirements of the
Constitution and of the Convention.  The public interest served by this
legislation was the safeguarding of stable, socially and economically
justified housing rents for apartments which as a rule served the
urgent needs of those broad sectors of the population who depended on
tenancy contracts.  Such apartments were often provided by the
landlords without any considerable expenditure of their own. In those
circumstances it could hardly be maintained that the legislator had not
acted in the public interest.  Insofar as the legislation did not
provide for any compensation for the landlords in respect of the above
expropriation, the court referred the applicants to the possibility to
claim such compensation in the appropriate proceedings (i.e.
non-contentious proceedings under the Railway Expropriation Act).

        Following this suggestion of the court, the applicants made an
application to the District Court of Innsbruck on 28 December 1983 in
which they claimed compensation from the State for legal expropriation,
in the amount of AS 26,600.-- (concerning the 14-month period between
November 1982 and December 1983).  The application was rejected on 5
July 1984 and the applicants did not appeal in time against this
decision.  Their subsequent application to be granted leave to appeal
out of time was finally rejected by the Innsbruck Regional Court on 3
April 1986.

        The applicants also filed an appeal against the Regional
Court's above decision of 15 November 1983 in which they repeated in
particular their arguments as to the unconstitutionality of the
applicable legislation.  On 6 March 1984, the Supreme Court rejected
this appeal as inadmissible.  It found that the appeal was directed
against that part of the Regional Court's decision which had confirmed
the District Court's decision.  An appeal against a decision of an
appellate court was, however, admissible only insofar as it had not
confirmed the decision of the court of first instance or if the
appellate court itself had granted leave to appeal in view of the
fundamental importance of the legal issue involved.  In the present
case leave to appeal had not been granted.  In these circumstances
there was no room for dealing with the applicants' arguments, in
particular as regards the alleged unconstitutionality of the 1981 Rent
Act.

Application No. 11070/84

        The two applicants are Austrian citizens born in 1924 and 1899
who live in Vienna.  They are each represented by a different lawyer,
i.e. by Mr. O. Weiss-Tessbach and Mr. F. Leon, respectively. At the
hearing before the Commission, they were represented by yet another
lawyer, Mr. G. Benn-Ibler of Vienna.

        The first applicant is the owner, the second applicant the
usufructuary of a house in Vienna with several apartments leased out
to tenants.

        One of the apartments consisting of six rooms, a kitchen, a
corridor, a bathroom and a toilet (total surface 200 m2) was let on 1
April 1979 under a freely negotiated tenancy contract according to
section 16 (1) of the 1922 Rent Act as amended in 1967.  The rent in
this particular case was set at AS 3,800.-- per month, subject to an
indexing provision on the basis of the consumer price index for 1976.
The rent had risen to AS 4,236.51 by January 1982.

        In application of the 1981 Rent Act, the tenant of the above
apartment wrote to the house administration on 23 December 1981 asking
them to reduce his rent to AS 3,300.-- (= 150% of the legal maximum
rent for class C) as from 1 January 1982.  The applicants' lawyer
replied on 13 January 1982 that the request was unjustified.

        On 19 February 1982, the tenant applied to the competent
Arbitration Board (Schlichtungsstelle) of the City of Vienna to reduce
the rent to AS 3,300.-- as from January 1982 according to the above
legal provisions.  After holding a hearing on 24 February 1982, the
Board decided on 28 May 1982 to allow the application.

        The applicants being dissatisfied with this decision then took
the case to the courts, and the Board's decision thereby lost its
effect.  The applicants observed in particular that the tenant had in
his original application referred to a square metre rent of AS 16.50,
i.e. the maximum rent corresponding to class B apartments.  They
submitted that this qualification of the apartment was correct and that
the reduction of the rent was inadmissible in the case of apart- ments
of class B exceeding a surface of 130 m2 (section 16 (1) 4 of the Act).
They further submitted that the house was situated in an area of
protection of monuments, and that the reduction of the rent was
inadmissible also under section 16 (1) 3.  The tenant contested these
arguments.

        After holding several hearings, the District Court of Vienna
City decided on 31 August 1983 to reduce the rent to AS 3,300.-- per
month as from 1 January 1982.  It held that the apartment had in fact
been in class C at the date of the conclusion of the tenancy contract,
and that section 16 (1) 4 of the Act was therefore inapplicable.
Section 16 (1) 3 was likewise inapplicable because it had not been
proven that the house was situated in a zone of monument protection.
It was true that the applicants had made considerable investments (in
the total amount of AS 563,745.--), but this did not change the
situation.

        The applicants appealed from this decision alleging in
particular that the apartment had been wrongly classified in class C,
and that the application of section 16 (1) 3 had been wrongly denied.

        The Regional Court of Vienna rejected the appeal by a decision
of 13 December 1983.  It considered that the court of first instance
had correctly assessed the evidence and had rightly concluded that
neither section 16 (1) 4 nor section 16 (1) 3 of the Act were
applicable.  In particular it had not been proven that the investments
made by the applicants had been financed from other means than their
rent income which they were legally obliged to use for maintenance
purposes.  It had therefore not been shown that they had borne a
considerable financial risk of their own.  In these circumstances the
legal conditions for reducing the rent were fully established.

        This decision is final.

COMPLAINTS

1.      The applicants in all three cases complain that their property
rights under Article 1 of Protocol No. 1 to the Convention have been
violated.

        They claim that the reduction of the rent due to them under
lawfully concluded tenancy contracts cannot be described as a
legitimate measure to control the use of property in accordance with
the general interest.  They generally consider the degree of
interference with the landlords' rights brought about by the 1981 Rent
Act as being disproportionate and in particular deny a pressing social
need justifying an interference with existing rent agreements.  In
their opinion the reduction of the rent amounts to a legal
expropriation (Legalenteignung) of their contractual claims and at the
same time to an expropriation of their real property whose value was
considerably diminished by this measure.  This expropriation is
allegedly unjustified because it does not serve the public interest.
It is further claimed that the expropriation in question violates
Convention law because there is no possibility for the landlord to get
any compensation.

2.      The applicants in case No. 11011/84 further claim a violation
of Article 14 of the Convention, read in conjunction with Article 1 of
the Protocol.  In their view, the legislation is discriminatory of
private house-owners who have to bear a heavier social burden than
certain others including public house-owners.

PROCEEDINGS

        Application No. 10522/83 was introduced on 5 August and
registered on 12 August 1983.

        Application No. 11011/84 was introduced on 22 May and
registered on 19 June 1984.

        Application No. 11070/84 was introduced on 4 July and
registered on 6 August 1984.

        The Commission began its examination of the admissibility of
application No. 10522/83 on 14 May 1984, but decided to adjourn the
further consideration.  The examination of admissibility was resumed
on 4 December 1984, when the Commission had also before it the two
further applications No. 11011 and 11070/84.  The Commission decided
to give notice of all three applications to the respondent Government
and to invite them, in accordance with Rule 42, para. 2 (b) of its
Rules of Procedure, to submit observations in writing on the
admissibility and merits of these applications which, however, were not
joined at this stage.

        The Government were requested to submit their observations
before 22 March 1985.

        The Government submitted observations concerning application
No. 10522/83 on 4 March 1985 and observations concerning each of the
other two applications on 19 March 1985.

        The applicants in application No. 10522/83 submitted
observations in reply on 11 April 1985 and the applicants in each of
the other two applications submitted theirs on 9 May 1985.

        The Commission resumed the examination of the admissibility of
the three applications on 8 July 1985.  It decided to join the cases
and to invite the parties, in accordance with Rule 42, para. 3 (b) of
the Rules of Procedure, to submit further observations on the
admissibility and merits orally at a hearing before the Commission.

        The date of the hearing was first scheduled for 6 March 1986,
but at the Government's request had to be postponed to a later date.
On 23 December 1985, the new date of the hearing was fixed on 8 May
1986.  On 14 March 1986, the parties were informed of the details of
the hearing and were asked to deal in particular with a number of
specific questions.

        The hearing took place on 8 May 1986.  The parties were
represented as follows: The Government by their Agent, Botschafter Dr.
Helmut TÜRK, Head of the International Law Department, Federal Ministry
of Foreign Affairs, who was assisted by Ministerialrat Dr. Wolf
OKRESEK, Federal Chancellery, Constitutional Law Department, and
Ministerialrat Dr. Robert TSCHUGGUEL, Federal Ministry of Justice,
Advisers.   The applicants by Rechtsanwalt Dr. Hans Günther MEDWED,
Graz,  and Rechtsanwalt Dr. Gerold KLEINSCHUSTER, Counsel for the
applicants in application No. 10522/83;  Rechtsanwalt Dr. Ludwig
HOFFMANN, Innsbruck,  Counsel for the applicants in application No.
11011/84; Rechtsanwalt Dr. Gerhard BENN-IBLER, Vienna, Counsel for the
applicants in application No. 11070/84.

                 SUMMARY OF THE PARTIES' OBSERVATIONS

A.    The Government

1.    On exhaustion of domestic remedies

        According to the Government, the applicants have not complied
with the requirements of Article 26 of the Convention because they
failed to take or to pursue proceedings with a view to obtaining
compensation on account of the alleged legal expropriation.

        Such proceedings are in principle possible under Article 13 of
the Administrative Proceedings (Simplification) Act (Verwaltungs-
entlastungsgesetz, Fed. Law Gazette No. 277/1925) which provides that
in all cases of expropriation which do not come under special
legislation the Railway Expropriation Act (Eisenbahnenteignungsgesetz,
Fed. Law Gazette No. 71/1954) shall apply in the proceedings. According
to section 22 of the latter Act, the compensation due on account of an
expropriation shall be determined by a judicial decision if no
agreement can be reached between the parties.  The judicial proceedings
in question are governed by the Non-Contentious Proceedings Act
(Ausserstreitgesetz, Imp. Law Gazette No. 208/1854). It has been
clarified by the highest jurisdictions in Austria, namely the
Constitutional Court and the Supreme Court, that the competence of the
ordinary courts in non-contentious proceedings is also established if
the claim for compensation is based on an alleged expropriation by
legislation.  The Government refer to the Constitutional Court decision
of 5 December 1974 (A 2/74-8 = Slg. 7421), and the Supreme Court
decision of 9 December 1975 (5 Ob 241/75) which both concerned the case
underlying application No. 8003/77 to the Commission (cf. DR 17, 80).
The applicant in that case had claimed compensation in respect of an
alleged legal expropriation brought about by the 1922 Rent Act.  While
it is true that in last resort it was confirmed by another decision of
the Supreme Court of 1 March 1977 (5 Ob 542/77) that the claim in that
case was without foundation, this does not mean that similar claims
could not succeed in the present cases.

        The Government admit that they themselves consider such claims
as being unfounded.  Such claims cannot be based on section 365 of the
Civil Code which provides that an individual must cede even his total
right of property for an adequate compensation if this is required in
the public interest.  The case law of the Austrian courts has clarified
that the principle of compensation stipulated in this provision is not
inherent in the constitutional guarantee of property laid down in
Article 5 of the Basic Law on the Rights of Citizens (Staatsgrundgesetz
über die Rechte der Staatsbürger, 1867), and that in each case a
special legal basis is required for any compensation in respect of
measures interfering with property.  The 1981 Rent Act itself does not
provide such a legal basis.  However, the Constitutional Court has
developed a case law based on the principle of equality according to
which legislation may be unconstitutional if it does not provide for
compensation in respect of special disadvantages (Sonderopfer) imposed
in the public interest on certain persons but not on others.
Originally this jurisprudence was developed in connection with cases
of genuine expropriation, but more recently it has been extended to
cover also cases of the regulation of the use of property in the
general interest.

        In this respect the Government refer in particular to
litigation brought by the owners of a nuclear power station against the
State for compensation in respect of the Nuclear Power Abolition Act
(Atomsperrgesetz) prohibiting the operation of nuclear power stations
in Austria.  By a decision of 15 March 1984, the Regional Court
(Kreisgericht) of St. Pölten recognised a compensation claim based on
section 365 of the Civil Code.  While this decision was not upheld by
the Supreme Court on the ground that section 365 did not in itself
provide a sufficient basis for compensation, the Supreme Court
nevertheless interrupted the proceedings and submitted the matter to
the Constitutional Court by a request under Article 140 of the
Constitution.  The Constitutional Court was asked whether the failure
of the legislation to provide for compensation in respect of the
special disadvantages arising for the above nuclear power station was
unconstitutional.  The Constitutional Court's ruling on this question
is still outstanding.

        The Government do not conceal that in the proceedings
concerning the nuclear power station they opposed the compensation
claim in question.  The development of the case nevertheless shows that
a compensation case is in principle arguable even in respect of
measures regulating the use of property in the general interest.  A
Constitutional Court decision of 16 December 1983 (G 46/82) had
clarified that the Nuclear Power Abolition Act involved such measures,
and the restrictions brought about by the rent legislation are of the
same nature.  In this latter respect the Government refer to the
qualification of the restrictions under the 1922 Rent Act by the
Austrian Supreme Court (decision of 1 March 1977, 5 Ob 542/77) and the
Commission (decision on application No. 8003/77, DR 17,80); they
further refer to the qualification of the restrictions under the 1981
Rent Act in the Supreme Court's decision of 3 July 1984 (5 Ob 86/83).

        As regards this latter decision, the Government observe that
it concerned a procedure for the reduction of rent under section 44 of
the 1981 Act.  It is true that in this connection the Supreme Court
confirmed the constitutionality of this provision and refused to seize
the Constitutional Court with a request for reviewing the
constitutionality of the legislation (Art. 140 of the Constitution).
However, it is submitted that different criteria would apply in a
compensation procedure brought under Art. 13 of the Administrative
Proceedings (Simplification) Act read in conjunction with section 22
of the Railway Expropriation Act.  Therefore the Supreme Court's above
decision of 3 July 1984 does in no way prejudge the issue of
compensation.

        The Government observe that the applicants in cases No.
10522/83 and No. 11070/84 did not bring any compensation proceedings
while the applicants in case No. 11011/84 in fact brought such
proceedings in the District Court of Innsbruck.  However, they did not
pursue the proceedings after the latter court had rejected their claim
by a decision of 5 July 1984.  They later asked to be allowed to appeal
against this decision out of time (Wiedereinsetzung in den vorigen
Stand), but their request was rejected by the District Court on 28
November 1984 and finally by the Regional Court of Innsbruck on 3 April
1986.  Therefore none of the applicants has exhausted the domestic
remedies in this respect.

2.      On compliance with Article 1 of Protocol No. 1

        The Government consider that the restrictions on property
contained in the 1981 Act cannot be regarded as a deprivation of
possessions within the meaning of Article 1 para. 1 of Protocol No. 1
to the Convention.  In this respect they rely on the Commission's
decision on application No. 8003/77 v. Austria (DR 17, 80), where it
was said that this provision is not applicable to restrictions on
property imposed by rental law regulations.  The 1981 Act has not led
to any fundamental change in the legal position on which the Commission
based this decision.  The new Act did not interfere with the
applicant's title as owners of the property nor with the substance of
their property.  Further, there is no shift of property to the State,
but only a redistribution of financial advantages as between the
landlords and tenants.  For this reason, too, the measure of rent
reduction cannot be considered as an expropriation.

        This conclusion is not altered by the applicants' allegation
that there was not a deprivation of the thing itself (the real
property), but a deprivation of a right attached thereto (i.e. the
contractual claims under the rent agreements concluded in respect of
this property).  Every restriction on property means that some of the
rights associated with the ownership of the object, such as the right
to financial benefit, are reduced to a smaller or greater extent by the
legislation.  This does not entail a deprivation of possessions
contrary to the Convention.  The other partial rights of ownership such
as the right to sell, bequeath or mortgage the property in question
have remained totally unaffected.

        In this connection the Government submit that despite the rent
restrictions introduced since 1982, the value of housing property has
recently increased and even big investors such as banks, insurance
companies etc. continue to acquire such property.  The reason is that
according to the applicable valuation principles (Realschätzordnung),
the value does not only depend on the rent proceeds (Ertragswert) but
also on other factors (Substanzwert).  In practice it is possible to
encumber half of the value with mortgages for loans, although it is
admitted that under the system of the Rent Act only loans for
investments in the property itself can be repaid from the rent income
while loans for other purposes must in principle be repaid from other
sources.

        In the Government's view, the 1981 Act only contains rules on
the use of property as referred to in Article 1, para. 2 of the
Protocol.  In this respect the Government refer to the long-standing
case law of the Constitutional Court (since decision No. 1123/1928)
concerning the rent legislation in Austria.  While the Constitutional
Court itself has not expressed itself on the constitutionality of
sections 16 and 44 of the 1981 Rent Act, the Supreme Court in its
above-mentioned decision of 3 July 1984 has dealt with this issue and
did not find it necessary to refer the matter to the Constitutional
Court.  It held that although the disadvantages brought about by the
rent reform for the landlord might be more important than the
advantages, the legislation nevertheless involved no expropriation but
only a restriction on property.  Under Article 5 of the Basic Law, such
restrictions could be ordered without infringing constitutional law if
they did not impinge on the essential content of the fundamental right
to inviolability of property or did not in any other manner violate a
constitutional principle.  The transitional provisions of section 44,
paras. 2 and 3 of the Act were necessary in the public interest for the
general good because they fitted in with the balanced structure of the
adjustment of old law to new law and represented part of this necessary
and useful approximation.  In conclusion the Supreme Court held these
provisions to be compatible with Article 5 of the Basic Law and Article
1 of the Protocol.  It further did not find a violation of the
principle of equality because it considered the provisions to be
entirely justified in view of the actual situation and not
disproportionate in the overall framework of the reform.  In this
context no arbitrariness or excess was seen in the discretion left to
the tenant by the legislation.  The Supreme Court finally observed that
leases of apartments were continuous obligations which were not
completely immune from a certain amount of adjustment and change also
in other cases.

        The Government observe that in this decision the Supreme Court
relied on the Commission's decision on application No. 8003/77 (DR 17,
80).

        The Government further invoke the Eur. Court H.R. Handyside
judgment of 7 December 1976 (Series A, No. 24) where it was said that
those legal rules concerning the use of property are admissible which
a State considers necessary in accordance with the general interest and
that in this context the Contracting States are to be considered as the
sole judges of the necessity of any such interference.

        The protection afforded to property in Article 1 of the
Protocol is couched in general terms and admits of more far reaching
restrictions through national legislation than are admissible, for
instance, under the exceptions stated in Article 8, para. 2 of the
Convention.  It is explicitly reserved to States to order restrictions
in the general interest.  Article 1 thus places the determination of
the substantive content of property rights largely in the hand of the
national parliaments.  This has also been confirmed by the Eur. Court
H.R. judgment of 21 February 1986 in the case of James and others, to
be published in Series A, No. 98.  The Government refer in particular
to the following statements of the Court:

        "Because of their direct knowledge of their society
        and its needs, the national authorities are in principle
        better placed than the international judge to appreciate
        what is in the public interest...

        The Court, finding it natural that the margin of appreciation
        available to the legislature in implementing social and
        economic policies should be a wide one, will respect the
        legislature's judgment as to what is in the public interest
        unless that judgment be manifestly without reasonable
        foundation....

        Modern societies consider housing of the population to be a
        prime social need, the regulation of which cannot entirely be
        left to the play of market forces.  The margin of appreciation
        is wide enough to cover legislation aimed at securing greater
        social justice in the sphere of people's homes, even where such
        legislation interferes with existing contractual relations
        between private parties and confers no direct benefit on the
        State or the community at large." (loc. cit., paras. 46 and
        47).

        The Government admit that the 1981 Act subjected the property
rights of the applicants to certain statutory restrictions including
intervention in rental agreements concluded prior to the entry into
force of the Act by reduction of the rent at the tenant's request to
150% of the rents listed in section 16, para. 2 of the Act.

        It is, however, submitted that restrictions of this kind are
covered by Article 1, para. 2 of the Protocol.  Paras. 2 and 3 of
section 44 of the Act pursue a legitimate objective of social policy,
namely the protection of tenants' interests in a situation where
reasonably priced accommodation is scarce.

        The Government insist that there is indeed a scarcity of cheap
accommodation in Austria and that many tenants had to leave flats with
free rent agreements because they were unable to afford the rent.

        In order to ensure fair rents, Parliament in section 16, para.
2 of the Act laid down, stating maximum amounts, what rents are
reasonable (i.e. may not be exceeded) in new tenancy contracts so as
not to overtax the resources of people looking for an apartment who,
in order to get it, might be prepared to pay amounts which are
unreasonably high taking into account all relevant circumstances.  Had
no rule been introduced in addition to section 16, para. 2 to cover
"old" tenancy contracts already existing on 1 January 1982, then this
would have led to unjustifiable discrimination between old tenants and
new tenants.  Tenants who signed a contract before this date deserve
the same protection in social policy terms, being in the same situation
where they had to pay any price they could just barely afford, simply
to get the apartment.

        The Government further submit that the interference with
property complained of is reasonable and does not transgress the margin
of appreciation conceded to national parliaments by Article 1 of the
Protocol.  In this respect they refer to the Eur. Court H.R. Sporrong
and Lönnroth judgment of 23 September 1982, Series A, No. 52, according
to which a reasonable balance must be struck between the protection of
the community's general interest and the respect for property enjoined
by Article 1 para. 1.

        The Government Bill proposing the legislation stated the
following on the question of general interest:

        "All measures taken in this area must take account of
        the principle that housing accommodation is one of the
        basic vital needs of every human being.  In the further
        development of socially desirable rental housing law,
        a special significance attaches to the conservation of
        houses worthy of preservation and to preventing con-
        versions of apartments into shops and offices resulting
        in the depopulation of our city centres to strengthen-
        ing the rights of tenants and other persons entitled to
        the use of apartments, and to the introduction of a fair
        price for all dwellings.  Appropriate steps should be taken
        to counter the undesirable practice of allowing apartments
        to remain unoccupied.  The prime concern is for provisions
        aiming to ensure fair housing prices and to protect houses
        worthy of preservation."

        The Government add that special protection is required in view
of the fact that the financial burden is far heavier, and thus less
fair,on tenants who have to pay an unreasonably high rent month after
month for accommodation rented on a permanent basis, than it is for
other groups of consumers.  Thus the provisions of the Act minister to
a basic need of society, namely housing.  Special attention has to be
paid in this context to the social conditions prevailing in Austria.

        In the Government's view there is no contradiction with the
public interest because by ensuring fair prices and by conserving
houses worthy of preservation, an important service is rendered to the
general interest and it would be onesided to speak of unilateral
benefits to the tenant.

        One of the aims of section 44, paras. 2 and 3 of the Act is to
adapt old tenancy contracts to the whole system of reformed rental law
and to minimise the hiatus between the former and the new system.
Suitable machinery is introduced for making this adjustment.  It is
conceded to the owner that he will get 50% more rent than he would if
the old tenant terminated the tenancy and the apartment would thus have
to be re-let.  On the other hand, the old tenant is protected from
having to pay an excessive rent if he is not willing or able to
terminate the contract and rent an apartment elsewhere.  In adopting
these transitional provisions, Parliament had in mind the provision of
section 934 of the Civil Code ("consideration less than one half of
true value"), a provision which was on the statute books at the time
when the tenancy contract was signed and this is why Parliament allowed
a reduction to one and a half of the reasonable rent newly fixed in
section 16, para. 2 of the Act.

        This concession to tenants must be considered within the
overall framework of the reform rather than in isolation.  The
possibility for the tenant to ask for a reduction under section 44,
paras. 2 and 3, which puts a burden on the owner, is accompanied by a
number of provisions easing the previous stringent tie on the amount
of rent claimable under old contracts whose amount had remained
unchanged since 1951.  Thus there is a possibility to charge a higher
rent than hitherto in the case of the succession of a new tenant,
(section 46, para. 2).  Further, the Act introduces a new possibility
for the owner to charge maintenance contributions even against the
tenant's will in addition to the rent, where the previous rent is so
low that it does not reach two thirds of the maximum amounts laid down
in section 16, para. 2 (section 45).

        Thus, section 44, paras. 2 and 3 is only one of the measures
introduced to adjust tenancy contracts concluded prior to 1 January
1982 to the overall system of the new Act.  This Act is designed to
bring rents negotiated at different times closer together in the
general interest, taking into account the social policy objectives
pursued by rental law.  The rents were changed in two directions at the
same time, up as well as down.

        The applicants' assertion that owners cannot obtain financial
benefits from rented houses coming under the Act is incorrect.  If he
does maintenance and improvement work, the owner can use for himself
without specific accounts 20% of the cost of such work, these amounts
to be taken out of the rents perceived (section 20, para. 1 (2)(b) of
the Act).  Moreover, he is free after ten years to dispose of all rent
income in so far as he has not used the rents for maintenance and
improvement work. Even within this ten-year accounting period, the
rents including interest are the owner's property.  Only his freedom
to dispose of the rent proceeds is restricted as a result of his
obligation under the tenancy contract to keep the leased premises
useable for the agreed purpose (cf. section 1096 of the Civil Code and
section 3 of the Rent Act). He must use the rent during this period to
maintain or improve the house if at least one of the tenants requires
him to do so under sections 3 or 4 of the Act.

        In connection with the owner's obligation to maintain the
premises, cost of raising outside capital and reasonable debit interest
on such capital as well as a reasonable sum for interest foregone (at
capital market rates) where own capital is used, are deemed to be costs
of maintenance work (section 3 para. 3 (1) of the Act).

        The applicants' assertion that a square metre rent of AS 25.-
per month is necessary to maintain a rented house is in the
Government's submission incorrect and totally unsubstantiated.  The
survey conducted in this respect in 1981 by a private interest group
contains components which have nothing to do with regular maintenance.
There is no reliable calculation of average cost, and it would hardly
be feasible to make such a calculation since each house is in a
completely different condition depending on its age, the intensity of
previous maintenance work, etc.  Where the rent is not sufficient to
maintain the house, the required additional amount may be ordered to
be raised even over the tenant's objections for each house individually
under the new procedure permitting increases of rents (sections 18 and
19 of the Act).

        The maximum square metre rents laid down in section 16 (2) of
the Act are based on an average calculation.  The starting point for
this calculation is the rent claimable for flats in new buildings
constructed with public subsidies under the Federal Housing Subsidies
Act (Bundes-Wohnbauförderungsgesetz 1968) which has now been replaced
by the Non-Profit Housing Act (Wohnungsgemeinnützigkeitsgesetz 1979).
This legislation contains detailed regulations on rents which are based
on the principle that they may not exceed the costs incurred by the
owner.  The average rent under this legislation is AS 29,37 per square
metre and 80% of this has been taken as the basis for the class A rent
under the 1981 Rent Act, the deduction of 20% being justified by the
fact that the flats covered by this Act are not new and that the
construction costs are generally paid off.  A deduction of 25% has been
made for each further class in view of its lower standard.  In this way
account has been taken of the differences existing between various
types of flats.  It has not been possible to differentiate according
to the situation of each building, but where the rent proceeds
calculated on the above basis are not sufficient to cover the owner's
costs he has the possibility to ask for an increased rent under section
18 of the Rent Act.

        The fact that the reduction depends on the tenant's decision
to make an application under section 44 is explained by the private law
nature of the rent agreements.  In private law relationships there is
generally no public interference ex officio.  The fact that the
decision is left to the tenant also tends to limit the interferences
with existing rent agreements to cases where the reduction is really
justified.  The legislation provides that after six months of tenure
a higher rent may be agreed, and tenants are often prepared to accept
a higher rent e.g. in view of necessary maintenance and repair work
because, in this way, they can avoid a costly procedure under section
18 of the Act to increase the rent by a judicial decision.  In these
circumstances it can be said that the principle of proportionality has
been respected.

        The Government finally submit that the restrictions complained
of are of a nature that they do not call for a compensation.  Apart
from the fact that the domestic remedies have not been exhausted in
this respect, the Government rely in particular on applications No.
9006/80 etc, Lithgow and others v. UK, Comm. Rep. 7.3.84, claiming that
there existed specific grounds based on legitimate consideration of
public interest to exclude the grant of compensation claims.  There was
no substantial disproportion between the burden placed on the
individual and the public interest pursued by the legislation, namely
to adjust the rents to the aims of social policy and remove excessive
disparities between the rents claimed for the same apartments.

        The Government conclude that the applicants' complaints under
Article 1 of the Protocol are manifestly ill-founded.

3.      On compliance with Article 14 of the Convention read in
        conjunction with Article 1 of the Protocol
        (Application No. 11011/84)

        The Government state that there is no difference of treatment
as between public and private house owners.  The 1981 Rent Act applies
to all house owners alike, including public corporations such as the
Federation, the Provinces and the municipalities who in this sphere act
iure gestionis and are thus subject to exactly the same legal treatment
as private parties.

        Nor does the Act delimit the scope of applicability of the rent
restrictions in such a way that they cover mainly private house owners
while public house owners would normally not be struck by such
restrictions.  It is however true that the housing property of public
corporations is usually organised in the form of non-profit making
housing associations (gemeinnützige Wohnbaugesellschaften) which are
exempted from the provisions of the Rent Act and instead come within
the scope of special legislation, the Non-Profit Housing Act 1979. But
this legislation also contains rent restrictions based on the principle
that the rent may not exceed the costs incurred by the owner.  Any
difference which may exist between the two systems of rent control are
justified by objective and reasonable considerations, in particular the
consideration that in the case of the non-profit making housing
associations the construction costs have not yet been paid off and the
further consideration that they must be able to accumulate certain
reserves in order to continue their building activities in the social
interest.

        As regards the various exceptions from rent control laid down
in the Rent Act itself, the Government claim that they are in each case
justified by special circumstances.  The special treatment of family
houses and freehold flats is not discriminatory  because they
cannot be compared with blocks of flats.  They are not usually built
for profit and mostly serve the owner's need for housing, with some
apartments being occasionally or temporarily let to other persons. Also
the different treatment of subletting is justified by special
circumstances.

        The exemption of flats in buildings constructed without public
subsidies since 1953 or in all buildings constructed since 1945 is
justified by the consideration that the costs of these buildings have
not been paid off and that an incentive should be given for the
construction of new houses.  The same is true for the preservation of
historic buildings or the renovation of flats at the risk of the owner.
The big class A and B apartments are exempted because they do not
normally serve as accommodation for people with small incomes who need
social protection.  Such protection finally is not needed after the
tenant has established himself in the apartment and therefore it is
legally permitted to agree on a higher rent after 6 months of tenure.

        The Government submit in conclusion that there is no element
of discrimination in the rent legislation, and that therefore the
applicants' complaint under Article 14 is manifestly ill-founded.

B.    The applicants

1.      On exhaustion of domestic remedies

        The applicants observe that their complaint concerns a
reduction of rent brought about by the operation of the 1981 Rent Act,
which they consider as unjustified in itself, irrespective of a
possible compensation.  Therefore they submit that it must be
sufficient for them to have taken all remedies available to them in
order to challenge the reduction of the rent in question.  The
applicants have in fact contested the reduction in non-contentious
proceedings before the competent civil courts, but their remedies
failed.  The civil courts did not consider it necessary to seize the
Constitutional Court with the question of the conformity with the
Convention of the applicable legal regulations, and this corresponds
to the approach taken by the Supreme Court in its decision of 3 July
1984.  On the other hand the applicants did not have any direct access
to the Constitutional Court.  In particular there was no possibility
for them to make an individual petition for the review of the
constitutionality of the legislation under Article 140 of the
Constitution because the legal regulations in question were not
immediately applicable without a judicial decision.

        As regards the institution of compensation proceedings
according to Article 13 of the Administrative Proceedings
(Simplification) Act and section 22 of the Railway Expropriation Act
as suggested by the Government, the applicants consider that they were
not required under Article 26 of the Convention to use this remedy. In
this respect they rely on several reasons.

        First, it is submitted that the taking of this remedy would not
square with the object of the applications, namely to obtain a finding
that the reduction of rent provided by the 1981 Rent Act is a measure
which is in itself contrary to Article 1 of the Protocol, irrespective
of whether or not compensation is granted.

        Secondly, it is illogical for the Government to insist on this
remedy because the Government themselves are of the opinion that a
compensation claim would have no basis in substantive law.  In the
applicants' view it is irrelevant that a formal competence of the civil
courts in non-contentious proceedings may exist for claims of this
nature by virtue of section 22 of the Railway Expropriation Act. The
decisive criterion is not the existence of a competent court, but the
existence of a legal basis for the claim.

        In the applicants' submission it results from the case law of
the Austrian courts that a compensation claim is bound to fail because
of the lack of a basis in substantive law.  Section 365 of the Civil
Code as interpreted by the courts and the legal doctrine does not
provide such a basis.  According to the constant case law of the
Constitutional Court (decisions Nos. 1123, 2572, 2320) the principle
of compensation stipulated in this provision is not inherent in the
constitutional guarantee of property as laid down in Article 5 of the
Basic Law, and an expropriation without compensation is therefore not
unconstitutional.  This has been confirmed by the Constitutional Court
in case G 46/82 on 16 December 1983 (JBl. 1984, 662).  This view is
shared by the Supreme Court (cf. EvBl 55/1962 and Supreme Court
decisions of 3 June 1976 and 15 October 1985).  Also the Supreme Court
decision in the nuclear power case (4 Ob 513/84) is based on the
consideration that section 365 of the Civil Code is not in itself a
sufficient basis for a compensation claim, and that such a basis must
be found in special legislation.

        The Rent Act 1981 does not provide for a compensation claim of
the landlord, and the Government Bill for this Act expressly states
that the Act will have no financial implications for the State.  That
such a claim does not exist also results from the Supreme Court
decision of 1 March 1977 (5 Ob 542/77) given in respect of the earlier
rent legislation and from the decision of the Innsbruck District Court
of 5 July 1984 given in respect of the compensation claim which the
applicants in case No. 11011/84 had actually raised.  It is true that
the applicants did not appeal from this decision in time, and that
their request to be granted leave to appeal out of time was finally
rejected.  However, the taking of appeal proceedings would in no way
have changed the legal situation according to which the claim had no
prospects to succeed in the absence of a special provision on
compensation.

        The Government argue that a constitutional requirement to enact
legal provisions on compensation may be deduced from the principle of
equality.  However, the applicants observe that until very recently
this jurisprudence was limited to cases of genuine expropriations and
did not cover mere restrictions of property.  The extension of the
principle to restrictions on property has been suggested by the Supreme
Court in the nuclear power case, and the Constitutional Court has not
yet decided on this issue.  In any event these developments are
posterior to the facts of the applicants' cases.

        The applicants further argue in this context that the only
possibility to achieve the recognition of a compensation claim is
through the Constitutional Court to which the applicants do not have
direct access.  They therefore depend on the willingness of the civil
courts to refer this matter to the Constitutional Court.  However, the
civil courts refused to do so in the applicants' cases and also in the
case which was decided by the Supreme Court on 3 July 1984 where it was
held that the reduction of rent under section 44 of the Rent Act is
merely a restriction of property for which there is no right to
compensation.  The applicants do not see why the same courts when
seized with an identical question in the context of different
non-contentious proceedings should reach a different conclusion.

        The remedy suggested by the Government is therefore in the
applicants' opinion ineffective and for this reason is not required to
be exhausted under Article 26 of the Convention.

2.      On compliance with Article 1 of the Protocol

        The applicants contest the Government's view that the reduction
of rent under section 44 of the 1981 Rent Act is only a regulation of
the use of property in accordance with the general interest.  They
claim that by this measure they have been victims of a deprivation of
their possessions.  In case No. 11070/84 this deprivation struck not
only the owner of the property, but also the usufructuary, and
therefore both applicants in this case can claim to be victims within
the meaning of Article 25 of the Convention.

        The applicants point to the difference of the present
applications from application No. 8003/77 where the Commission
qualified restrictions under the earlier rent legislation as a
regulation of the use of property.  Unlike the applicant in that case
they were not confronted with the application of legal restrictions
which had existed already when they acquired the property nor could
they hope for a gradual reduction of the impact of such restrictions.
In fact the 1981 Act introduced new and more far-reaching restrictions
which interfered with the substance of their property rights.  While
the restrictions under the earlier legislation had still been
considered as proportionate to the aims of social policy permitted by
Article 1 para. 2 of the Protocol, this could not be said of the new
additional restrictions under the 1981 Act even if they were to be
qualified as regulations of the use of property.  The applicants claim,
however, that these new restrictions in fact amounted to expropriation
measures, and that therefore they come within the scope of Article 1
para. 1 of the Protocol.

        The difference between expropriation measures and regulations
on the use of property has not been clearly established by the Austrian
jurisprudence and doctrine.  However, the Constitutional Court has
considered it to be essential for an expropriation that there should
be a transfer of economic values (Vermögensverschiebung) from the owner
to third persons in that the former is totally or partially deprived
of his property or suffers an encumbrance of his property while
corresponding rights are transferred to or created for the latter.
This is clearly the case here as property is transferred month after
month from the owner to the tenant.

        The applicants in case No. 10522/83 observe that the monthly
transfer in their case is about AS 1,500.- without taking into account
the indexing provision in the relevant rent agreement, and that the
total loss which they have suffered in this way is some AS 80,000.-.
They further observe that their contractual claim has been reduced to
a more or less symbolic amount of rent (AS 330.-) which corresponds to
no more than the price of a meal for two persons in a cheap restaurant.
The applicants in case No. 11011/84 state that the reduced monthly
square metre rent corresponds roughly to the price of 1/2 litre of
petrol. The applicants add that the rents originally agreed were in no
way exaggerated and corresponded to the market conditions on the free
market.

        The view that section 44 of the 1981 Act involves expropriation
measures has also been confirmed by legal writers.  The applicants
refer to the articles by Glassl (Österr. Immobilienzeitung 1983 p. 4)
and Kassowitz (ibid 1985 p. 156).

        As regards the nature of the alleged expropriation, the
applicants refer to two different aspects: they consider that there has
been a legal expropriation of their contractual claims under the rent
agreements, and at the same time a de facto expropriation of the
substance of their real property.

        On the first aspect it is observed that the rent agreements
concluded by the applicants before the entry into force of the 1981 Act
were fully in conformity with the earlier legislation as it had existed
since 1967.  The 1981 Act had a retroactive effect in that it allowed
the tenants to obtain a judicial decision by which these earlier
agreements were partially declared void.  In this way the tenants were
encouraged to commit a breach of contract in respect of the obligations
which they had accepted under the said agreements. The applicants claim
that their contractual claims under these agreements are "possessions"
within the meaning of Article 1 of the Protocol. They refer to the case
law of the Constitutional Court according to which the concept of
"property" means all private rights of economic value, including
besides the full right of ownership any part of this full right as a
special right.  They further claim that the general principles of
international law, to which Article 1 of the Protocol refers, likewise
are based on a concept of "property" which extends to all acquired or
vested rights of economic value, including contractual claims.

        All applicants claim that there has been a partial legal
expropriation of their contractual claims under the rent agreements.
The applicants in case No. 10522/83 submit that these claims were
expropriated but for a token amount of rent.  The applicants in case
No. 11070/84 claim that apart from the legal expropriation of
contractual claims under the rent agreement there has in addition been
a legal expropriation of the contractual claims under the usufruct
agreement between the two applicants.

        The applicants concede that the interference with their
contractual rights has not been brought about immediately by the
legislation because this interference depends on the decision of the
tenant to ask for a reduction of rent.  However, it is nevertheless
justified to speak of a legal expropriation.  In fact the tenant has
been authorised by the legislation to expropriate the landlord, and no
discretion is left to the authorities in this respect.

        As regards the second aspect, the alleged de facto
expropriation of the applicants' real property, it is submitted that
it belongs to the substance of the ownership right in a block of flats
to be able to draw benefit from leases.  This has also been recognised
by the Commission in application No. 8003/77.  However, by the
cumulation of the various restrictions contained in the rent
legislation, the landlord is practically reduced to the state of a mere
administrator of his own property.  The philosophy underlying this
legislation is that the landlord shall not be able to obtain any profit
from his property.  He must in principle use the whole of the rent
proceeds for the maintenance and repair of the building, and his right
to give notice to his tenants is very severely restricted.  For
instance, it is virtually impossible to give notice to a tenant on the
ground that a flat is needed for housing purposes of the owner himself,
while on the other hand a very restrictive approach is taken when the
ground of notice is that the tenant does not really need the flat. The
tenants' right to transfer the tenancy contract to other persons is
very broad, and a tenant may even change his flat with another person
without the landlord's consent being required.  The landlord in
practice keeps no more than the nudum ius, i.e. the title in the
property, but he is deprived of the possibility to make an economically
reasonable use of it.

        The applicants claim that by the introduction of new
restrictions on the landlord, in particular as regards his right to fix
the amount of rent by agreement with the tenant, the 1981 Act has led
to a considerable reduction of the value of the real property which in
fact amounts to a de facto expropriation of this property. According
to the regulations concerning the assessment of real property
(Realschätzordnung) the value of blocks of flats depends mainly on the
income value (Ertragswert), and this value has considerably dropped by
the introduction of new maximum rents.  In particular the applicants
in case No. 10522/83 claim that they now could sell their property only
at a loss.

        They had bought the house in question in 1978 from a
compensation which they had received for another house which had been
expropriated.  They considered this to be a safe investment having
regard ot the rental legislation then in force which allowed the
conclusion of freely negotiated tenancy contracts.  The price which
they had to pay at the time reflected the circumstance that there were
several unoccupied flats in the house which could be leased out on the
free market.  By the introduction of the restrictions of the 1981 Act,
the value of the house was drastically reduced.  This decrease in value
amounts to some AS 184,000.- only by virtue of the reduction of rent
in the case at issue.  But there are several other tenants who would
likewise be entitled to ask for a reduction (from AS 750.- to AS 232.-,
from AS 2,850.- to AS 546.-, and from AS 1,841.60 to AS 314.-
respectively), with the necessary consequence of a further considerable
decrease in the value of the house.  An analogous reduction was not
possible in one case where the tenancy contract had been concluded for
a limited period of time (on the basis of a monthly rent of AS
1,300.-), but there were two further tenants with contracts concluded
before 1968, whose rent was accordingly frozen under the earlier
legislation at the level of 1913 (on the basis of AS 23.75 and AS 23.80
respectively).  The total loss is estimated at AS 300,000.- at least.

        The applicants admit that the formal right to mortgage their
real property for the purpose of obtaining a loan has not been taken
away, but also in this respect it is claimed that there has been an
interference with their property rights.  The value of the real
property having dropped, there is no longer the same economic basis
for taking out a mortgage.  In practice, loans can be obtained for
mortgage only if they are intended for maintenance or repair work.
Loans for other purposes would have to be paid back from other sources
than the rent income.  The applicants finally refer to the difficulty
of those landlords who have contracted a loan under the earlier regime
which they now are unable to pay back from the reduced rent income.

        The applicants contest that the public interest justifies the
alleged expropriation measures.  On the contrary, it is submitted that
these measures violate the public interest.  Reference is made in this
context to the severe criticism of the legislation by representatives
of all political parties, including the governing parties.  Also it is
claimed that it contradicts the public interest to encourage tenants
to act against the principles of good faith and to commit breaches of
contract.  But the main criticism is that the measures lack a social
justification and are disproportionate to the aim pursued.

        There was no urgent need for this legislation. The housing
shortage to which the Government refer does not in reality exist. There
are in fact some 100,000 - 150,000 unoccupied flats, and a considerable
proportion of these are in houses struck by the legislation.  Moreover,
many of the flats coming under the legislation are not really needed
by the tenants because they frequently have more than one flat.  This
is a consequence of the rent protection legislation itself by the
combined effect of cheap rents and generous application of provisions
to protect tenants against termination of their contracts or provisions
enabling them to transfer their tenancy rights to others.  The
legislation leads to a situation where the landlords prefer to leave
flats unoccupied rather than letting them at an economic loss.  The
Vienna provincial legislation even introduced special taxation to curb
this effect, but this legislation was subsequently quashed by the
Constitutional Court.  The applicants finally observe that there is a
trend away from rented apartments to owning property.  In 1982 already
52% of the population lived in houses or apartments of their own.  This
shows that the economic and social importance of the rent legislation
is less than the Government suggest.

        The proportion of cases in which rent reductions under section
44 of the Act take place is very small.  There was a total of 100 cases
in Graz, of which 30 were reductions of rent by judicial decisions and
the remainder reductions by agreement between the parties.  The lacking
need for this legislation is also shown by the fact that the decision
is left to the tenant, and that the legislation provides for many
exceptions.  Also, it was not considered as necessary in 1974 when
maximum rents were first introduced for substandard flats to interfere
with existing rent agreements.  The 1981 Act now allows to interfere
with such agreements even in respect of other categories of flats.

        The maximum rents fixed by the 1981 legislation do not
correspond to economic realities.  The applicants have submitted a
study prepared by a private house-owner association according to which
a square metre rent of AS 25.- would be absolutely necessary only to
maintain houses.  They further have submitted a survey of rents paid
on the free market which are considerably above the legal maximum rents
but in no way exaggerated.  The general level is about 20% above that
applicable to flats rented from municipalities.  These figures show
that tenants are actually able to pay economically reasonable
rents.  The average income in Austria is comparable to that in other
Western European States, but the level of rent envisaged by the
legislation is very far below the standard in these countries.  It
would be socially justified for a tenant to spend about 20 to 25% of
his income for rent.  The legislation does not make any social
differentiation, every tenant can ask for a reduction of rent
irrespective of his income.  It would be more in line with a social
housing policy to give subsidies to tenants who really cannot afford
the rent.  The applicants observe that a system of rent subsidies does
in fact exist and that under the applicable legislation tenants who
cannot afford the rent have a legal right to get such subsidies.  The
proportion of expenditure for rent which is considered as justified in
this context is about 20-25% of the income.

        The applicants further observe that the calculation of the
legal maximum rents is not based on sound economic principles.  They
state that the mode of calculation explained by the Government at the
oral hearing comes as a surprise for them.  They do not recall that
this argumentation was used when the legislation was being prepared.
Moreover, the Government had themselves earlier stated that there was
no reliable calculation of average cost, and that it would be hardly
possible to make such a calculation since each house is in a completely
different condition.  In this context the applicants submit that no
differentiation is made between individual houses according to their
particular conditions, nor any distinction with regard to regional
differences.  The same level of rent is applicable in big cities and
rural areas, in the capital and elsewhere despite considerable regional
market differences.

        The applicants deny that the restrictions placed on the
landlord are counterbalanced by other measures in favour of the
landlord.  First, these measures are in themselves insufficient because
they do not allow the landlords to adjust rents to an economically
justified level.  In fact the maintenance contributions under section
45 of the Act cover only two thirds of what the Government themselves
consider as a justified rent, and moreover these contributions must
entirely be used for maintenance of the building and must be repaid if
they are not used for this purpose.  The same applies to the
possibility to increase rents under section 18. Therefore these
provisions, too, involve disadvantages for the landlord.  The other
improvements cited by the Government are of negligible importance.  In
any event none of the provisions allegedly improving the situation of
the landlord was applicable in the present cases.

        In conclusion, the applicants submit that there was no public
interest which could justify the measures taken against them, in
particular the public interest to preserve property of private
house-owners was disregarded.  It is further submitted that the
measures in question did not strike the right balance between the
public interests which may legitimately be pursued by a social housing
policy, and the individual interests of the house-owners, and for this
reason, too, these measures were wholly disproportionate and contrary
to Article 1 of the Protocol as exceeding the margin of appreciation
conceded by this provision.

3.      On compliance with Article 14 of the Convention
        (Application No. 11011/84)

        The applicants admit that there is no formal distinction
between private and public house-owners in the Rent Act itself.

        However, the applicants submit that the provisions of the
Non-Profit Housing Act benefit mainly public house-owners as non-profit
housing associations are usually set up and owned by public
corporations.  The rent permissible under section 14 of this Act
includes a profit of some 8% of the capital invested, while a similar
profit is not conceded to private house-owners struck by the provisions
of the Rent Act.  While the income of the non-profit housing
associations may in principle be used for other purposes, the rent
proceeds of the private house owners must be entirely used for
maintenance and repair.  The applicants allege that this amounts to
discrimination of private house-owners contrary to Article 14 of the
Convention.

THE LAW

1.      The applicant landlords complain of the reduction of rental
claims against certain of their tenants brought about by court
decisions taken in pursuance of section 44 of the 1981 Rent Act. They
claim that this measure amounted to a deprivation of possessions
contrary to Article 1 para. 1 of Protocol No. 1 (P1-1) to the
Convention consisting, on the one hand, in a legal expropriation of
their contractual claims under the relevant rent agreements, and on the
other hand in a de facto expropriation of their real property.  The
Government object that the contractual claims cannot be considered as
a separate property and that the measure complained of involved no more
than a regulation of the use of the applicants' real property in
conformity with Article 1 para. 2 of the Protocol (P1-1-2).

2.      The Government submit that the applicants have not exhausted
all available domestic remedies as required under Article 26 (Art. 26)
of the Convention because they failed to introduce (or in case No.
11011/84 to pursue) compensation proceedings under Article 13  of the
Administrative Procedure (Simplification) Act read in conjunction with
section 22 of the Railway Expropriation Act which is considered to be
applicable in this type of case.  The applicants claim that they have
in fact exhausted domestic remedies by challenging the court decisions
ordering the reduction of rent.  They consider that they were not
required under Article 26 (Art. 26) to take compensation proceedings.

3.      The Commission finds that the applicants were not required to
use the remedy suggested by the Government because this remedy must be
considered as ineffective for the reasons set out below:

4.      It is not contested that the applicants had no hope to obtain
compensation from the civil courts on the basis of the actual legal
situation.  A compensation claim could not be based on section 365 of
the Civil Code as interpreted by the constant case law of the
Austrian courts, but only on a special legal provision which provides
for such a claim.  It is clear that no special provision existed either
in the Rent Act itself or otherwise.  In particular section 22 of the
Railway Expropriation Act did not provide a substantive basis for a
compensation claim, it only established the jurisdiction of the civil
courts in non-contentious proceedings for this type of claim.  This has
been confirmed by the Constitutional Court decision of 5 December 1974,
the Supreme Court decision of 1 March 1977, and finally also by the
Innsbruck District Court's decision of 5 July 1984 given in case No.
11011/84.

5.      Since the applicants could not hope to be awarded compensation
on the basis of the existing legislation, the only possibility for them
was to challenge the constitutionality of this legislation because it
failed to provide for a compensation claim.  The Constitutional Court's
case law on the principle of equality has in fact established a basis
for attacking legislation interfering with property on the ground that
it does not provide compensation for special disadvantages arising for
certain individuals.  The Supreme Court has recently suggested in the
"nuclear power" case that this principle might also be applicable to
legislation regulating the use of property.  However, the
Constitutional Court's decision on this issue is still outstanding.
Therefore it is not entirely clear whether the principle could be of
assistance to the applicants on the basis of the case-law of the
Supreme Court which qualifies the restrictions under the Rent Act as
regulations on the use of property.

6.      Under Article 140 of the Constitution, the review of
legislation as to its constitutionality is the exclusive competence of
the Constitutional Court.  Therefore the applicants' above claim could
only succeed if the Constitutional Court was seized with the matter and
ruled that the Rent Act was unconstitutional for failure to provide for
compensation.  However, it is clear that applicants did not have any
direct access to the Constitutional Court.  Proceedings under Article
137 of the Constitution were bound to fail in view of the
Constitutional Court's decision of 5 December 1974.  Proceedings under
Article 140 could not be taken by the applicants themselves because
they were not directly affected by the applicable legislation whose
operation in relation to them depended on judicial decisions given in
respect of requests by tenants to reduce the rent.  In such
circumstances it is provided that only the courts of second instance
dealing with the matter can refer the question of the constitutionality
of the applicable legislation to the Constitutional Court if they
should have any doubts in this respect.

7.     In the present cases there were two different court proceedings
in which the question of reference to the Constitutional Court could
arise: the rent reduction proceedings under section 44 of the Rent Act,
and the compensation proceedings under section 22 of the Railway
Expropriation Act.  The applicants exhausted the remedies in the former
proceedings and in this connection suggested to the courts that they
should refer the question of the constitutionality of section 44 of the
Rent Act to the Constitutional Court.  However the courts
declined to do so.  Their approach in this respect was in line with the
Supreme Court decision of 3 July 1984.  The constitutionality of
section 44 was considered in this decision and the Supreme Court
qualified the measures under this provision as a regulation of the use
of property in accordance with the general interest in respect of which
no compensation was due.  It had no doubts as to the constitutionality
of the legislation in this respect and refused to refer the matter to
the Constitutional Court.  Therefore it is clear that at least in
connection with the non-contentious proceedings on the reduction of
their rental claims the applicants could not achieve a review of the
rent legislation as to its constitutionality.

8.     The Government submit that different legal considerations might
be applicable in compensation proceedings under section 22 of the
Railway Expropriation Act which the applicants did not pursue. However,
the Government have not specified what further legal considerations
could be relevant.  The Commission notes that the proceedings in
question would again be non-contentious proceedings and that they would
take place before the very courts which had dealt with the rent
reduction proceedings.  As the problem of the constitutionality of the
rent legislation, including the absence of compensation, had already
been dealt with in the latter proceedings, it is difficult to conceive
how in these circumstances the courts could adopt a different approach
on the same question.

9.     It follows that the taking of compensation proceedings according
to section 22 of the Railway Expropriation Act would have been
ineffective for the applicants because they could neither hope to
obtain compensation on the basis of the existing law, nor expect the
competent courts to refer the matter of the constitutionality of the
legislation to the Constitutional Court.  The Government's argument as
to the non-exhaustion of the domestic remedies must therefore be
rejected.

10.     As regards the substance of the applicants' complaints under
Article 1 of the Protocol (P1-1), the Commission has taken note of the
arguments of both parties.  This includes, in particular, the
applicants' submission that they were unjustifiably deprived of their
possessions including their contractual claims to the monthly rent,
that this deprivation was not in the public interest and that it was
grossly disproportionate to any legitimate aim of a social housing
policy.  It further includes the Government's submission that the
legislation involved no expropriation and in particular no
expropriation of contractual claims, but merely a regulation of the use
of real property in pursuance of a legitimate social housing policy
which was both necessary in the public interest and proportionate to
the aim pursued, and which therefore was covered by the margin of
appreciation conceded to the Contracting States by Article 1 of the
Protocol (P1-1).  In the light of these submissions the Commission
finds that the cases raise complex and difficult issues of importance
for the interpretation and application of Article 1 of the Protocol
(P1-1) which require to be determined as to their merits.  The
applicants' above complaints therefore cannot be rejected as being
manifestly ill- founded within the meaning of Article 27 para. 2
(Art. 27-2) of the Convention.

11.     The applicants in case No. 11011/84 have submitted an
additional complaint under Article 14 (Art. 14) of the Convention in
conjunction with Article 1 of the Protocol.  They allege that the rent
legislation is discriminatory against private house-owners in
particular in comparison with public house-owners.  The Commission is
satisfied that the applicants have exhausted the domestic remedies in
respect of this complaint by invoking the constitutional principle of
equality before the law.  As regards the substance of this complaint,
the Commission considers that it is so closely linked to the remainder
of the case that it cannot be separated.  Accordingly this part of the
application must also be reserved for a consideration as to the merits
and cannot be rejected as being manifestly ill-founded.

        For these reasons, the Commission, without in any way
prejudging the merits,

        DECLARES THE APPLICATIONS ADMISSIBLE.

Secretary to the Commission         Acting President of the Commission

       (H.C. KRÜGER)                           (G. SPERDUTI)