When does a municipal authority act as a private individual

“The management of municipal property belongs to the sphere of private law”

Municipal authorities like the state, have real estate which they manage privately in order to meet their cash needs, acting as a private individual, to develop the property and derive financial benefit. In this context, they conclude agreements with private individuals to whom they grant license to use a property or part of it and charging a relevant fee which is determined as well as the terms of the use. Upon the expiration of the term of the permit, it ceases to be valid and the private individual no longer has rights over the property. If the municipal authority decides not to renew the permit or to limit the extent of the granted property, the private individual does not acquire rights and cannot review the decision of the municipal authority by filing a recourse with the Administrative Court.

The decision of the municipal authority constitutes property management and falls within the sphere of private law. The fact that the decision is taken by the municipal council and notified by the mayor does not change its character. Also, the fact that the decision affects a certain number of citizens does not serve the public interest and is not considered to originate from a public body in the exercise of its public authority.

Supreme Constitutional Court Decision

The Supreme Constitutional Court, in its decision issued in Appeal No.10/20, dated 18.11.2024, definitively resolved the dispute between the Municipality of Larnaca and two restaurant business owners on the coastal avenue of Finikoudes. Specifically, a shop that operated next to a restaurant changed its use and was converted into a restaurant. It applied to the Municipality of Larnaca and requested the granting of part of the paved area located in front of the restaurant, which was previously occupied by the neighbouring restaurant under a license.

The Municipality of Larnaca, in a letter to the owner of the first restaurant business, informed him that it had rejected his request to be granted the same paved area as before and that it had approved the allocation of space in front of his restaurant as specified in the letter, restricting his right to occupy the paved area accordingly. The owner did not accept the decision of the municipal council and filed a recourse to the Administrative Court requesting its annulment.

The Administrative Court examined the issue of jurisdiction and whether the contested act constituted an act of public or private law. It decided that it constituted an act of private law and ruled that the Municipality acted within the framework of the management of its property and did not take a decision for purposes of public interest, dismissing the recourse. The Supreme Constitutional Court recorded the above and agreed with the first-instance decision, stating that the license had expired and that the competent management committee of the Municipality examined the issue of re-granting a license to the owner of the first restaurant as well as to the owner of the new restaurant and took the specific decision.

 It referred to the authority of Antoniou v. Municipality of Larnaca (2009) 3 AAD 130, adopting what was mentioned there and specifically on the subject. In that decision, the Municipality of Larnaca granted part of the coastal area to the owner of a beer hall and this was done to serve its financial interests, charging a relevant fee. It was held that the decision of the municipal authority was not intended to promote a public purpose and although it affects a certain part of the public, it does not affect the general public as required by case law.

It was emphasized that one point that indicates that this is a private law act is the fact that if the owner violates the terms of his permit, the Municipality of Larnaca will have to recourse to the District Court to regain possession of the site. This is an act of property management of the Municipality and the character of the decision as private law remains unchanged, since its primary purpose is the regulation of private law rights.

 Conclusion

The Supreme Constitutional Court concluded that the judgment of the Court of First Instance that the contested decision falls within the sphere of private law is correct. This is a private law relationship that, based on the facts of the case, constituted a license and not a lease. It adopted relevant case law in which the crystallized principle was reiterated that the right of use based on an existing license terminates upon expiration without creating any other right was reiterated. It added that the Court of First Instance was right not to examine the grounds for invalidity, which is attributed to it as an error in the appeal, since it prejudged that it did not have jurisdiction and dismissed the appeal.