Jan Cienski in Warsaw -

Warsaw’s local government election campaign is turning on a topic that is almost 70 years old – the confiscation of much of the city’s private property after the war. This is an issue that continues to drain the city’s budget, haunts real estate developers and fills thousands of tenants with terror.

The reason is that the Polish capital has never dealt with the consequences of the 1949 law, promulgated by Boleslaw Bierut, the hardline Moscow-backed leader at the time, which seized most of the property in the devastated city. The ostensible reason was to allow for a quick and uncomplicated reconstruction of the ruins left behind by the German occupation, but the main goal was to redefine property in Warsaw to conform to the new communist system.

Although Polish communism ended in 1989, the legally tangled and very expensive issue is still largely unresolved. As a result, students in one of the city’s best middle schools, located in the heart of downtown Warsaw, are preparing to move after the city was forced to return part of their school territory to a businessman who had bought the claim on the property from the heirs of its pre-war owners.

In another case the heirs to the Zamoyski family, Poland’s wealthiest pre-war aristocrats, two years ago regained a plot of land located inside one of the city’s loveliest downtown parks. In another case, the previous offices of the mayor of Warsaw have been handed back to heirs of the last pre-war owner. Even the Polish parliament has been stymied in its effort to construct a new office building close to the legislature because the ownership of the land is in question.

Sitting tenants

Elsewhere, pre-war owners are regaining apartment buildings filled with tenants. In many such cases the new/old owners increase rents both to make their properties economically viable and in some cases as a way of expelling tenants in order to upgrade and sell valuable buildings.

In September, dozens of protesters holding banners denouncing the return of pre-war properties disrupted a city council meeting. In many such cases, the pre-war owners, exhausted by years of court battles and tangles with the city bureaucracy, sell their rights to well-connected business people who seem to have a knack for quickly bringing such cases to a conclusion. In 1999, Jan Zamoyski, the last pre-war owner of the family fortune, sold off his rights to a downtown Warsaw palace for a fraction of its value after trying for a decade to get it back. The new owner managed to arrange the return of the property in just a few weeks.

The issue also bedevils property developers, who have to deal with claims from pre-war owners which make it almost impossible to develop many downtown lots.

The city of Warsaw had tried without success to get parliament to do something about reprivatisation. As a result, about 10% of the city’s annual budget is spent on compensation for confiscated property. In all, about 8,000 cases have been filed against the city, and the full value of the claims comes to about €10bn, or more than three-times the city’s annual revenues. Only about 200 cases are resolved every year, meaning that the issue will continue to complicate life in the capital for decades. “The problem is that Poland did not conduct reprivatisation after 1989,” Hann Gronkiewicz-Waltz, Warsaw’s mayor, told the Rzeczpospolita newspaper, noting that before the war only about 15% of Warsaw was public property. “In the first instance we have to defend schools and playing fields against which claims have been filed.”

Poland is the only Central and Eastern European country that has avoided dealing with the issue of pre-war property owners. And it is not just thousands of Warsaw properties. When the communists came to power, all landed estates were confiscated around the country, as were most factories, shops and private businesses. While Hungary, the Czech Republic and other CEE countries have largely resolved the problem – often by paying previous owners a fraction of the property’s value – Poland has not.

One reason is that there is little political will to pay out enormous sums or to return attractive properties to the children and grandchildren of Poland’s pre-war elite.

Another is the added complication of Jewish owners. Poland had Europe’s largest pre-war Jewish community, most of which was wiped out by the Germans. Most of their property was taken over by Poles, and the Polish government has been sluggish about returning it to the heirs of Holocaust survivors, creating a perennial irritant in relations between Poland and Jewish communities in the US and Canada.

In 2001, a bid to pay owners 50% of the value of their properties was vetoed by the president as it applied only to Polish citizens and would have excluded foreign nationals. Since then, governments have proposed various legislative solutions, but the efforts have stalled because of the enormous costs and political risks of such a scheme. “Finding PLN20bn (€4.8bn) in a situation when the state is fighting with the deficit proved to be impossible,” Marcin Kerwinski, an MP for the ruling Civic Platform party and author of a reprivatisation bill languishing in parliament, told the Gazeta Wyborcza newspaper.

But the failure to craft an acceptable solution has saddled the Polish capital with huge potential costs and risks.