Interest, inflation, and compensation in case of late payment of expropriation compensation

1. Expropriation Compensation and the Principle of "Fair Compensation"

1.1. Legal nature of expropriation

Expropriation is a compulsory transfer of ownership carried out using public authority . Whether or not the owner consents, the right of ownership over the immovable property is terminated; the owner then becomes the recipient of a monetary claim

Therefore, the expropriation price is:

• It should reflect the true value of the property .

• We should not allow arbitrary discounts in favor of the administration

• The payment date and method should leave the owner in a financially stable position .

The principle of real compensation is not only about the nominal amount determined; when and under what conditions this amount is paid is equally important. If the value of the property is, for example, 1 million TL, and the owner receives this money 8-10 years later, eroded by inflation and with low interest, it will often not be possible to speak of "real compensation" in a real sense.

1.2. Timely payment is part of property security

of the expropriation compensation upfront and in cash guarantees two fundamental results for the property owner:

1. The owner loses the right to dispose of the property but simultaneously receives the monetary compensation; they do not "fall into an economic void.".

2. This prevents the state from using expropriation as a means of financing

Late payment;

• The owner's opportunity to invest,

• Purchasing power,

• Their financial plans

This seriously damages the situation. Especially in cases of delays spanning years, mere of the nominal price is often not considered sufficient; claims for interest, inflation adjustments, and additional compensation come into play.

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2. Late Payment of Expropriation Compensation: What Situations Constitute Late Payment?

2.1. Classic scenario: Prolonged valuation lawsuit

The most common situation encountered in practice is when the administration files a lawsuit to determine the expropriation price;

• Expert examinations,

• Valuation debates,

• Appeal and cassation processes

The reason is that the process takes years. The ownership of the property has effectively passed to the administration; the owner has become unable to use the property; and the compensation has only the final decision or payment order, often with a delay.

In this scenario, the property owner is deprived of both their real estate and their money for many years; therefore, the difference between interest and inflation becomes critically important.

2.2. Payment delays following court decisions

Another scenario is when the court rules on the compensation for expropriation, but the administration delays the execution of the decision.

For example:

• The decision is final

• The payment order has been issued

• However, the administration did not make the payment for years, citing reasons such as budget, procedures, and internal approval.

In this case, the discussion is no longer limited to interest accruing "from the date of determination to the date of payment"; the liability of the administration for delay, , is also on the agenda.

2.3. Installment payments and late installment payments

For many years, it has been common practice for a portion of the expropriation compensation to be paid upfront, with the remainder paid in installments .

The following questions become important when it comes to installment payments:

• Will separate interest be charged for each installment?

• What interest rate will be applied if installments are not paid on time?

• Will interest be calculated only on the unpaid amount, or on the entire amount?

At this point, a wealth of case law has been established stating that the maximum interest rate applied to public receivables from the due date should be used for each installment

2.4. Expropriation without compensation and de facto seizure

If the administration physically intervenes in a property even without an expropriation decision, such as constructing a road, park, or public facility on it, this constitutes an act of unlawful seizure without expropriation , differing from the classic expropriation process

Here are the items the owner can claim:

• The market value of the property,

• Interest from the date of seizure,

• Additional compensation that takes into account inflation losses for different periods

It appears in this form.

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3. Types of Interest for Late Payment of Expropriation Compensation

3.1. Legal interest and default interest

The general system in Turkish law is:

• Unless a different rate is stipulated, statutory interest on receivables is...

• In the event of the debtor's default, default interest will be charged

It envisages its implementation.

Regarding compensation for expropriation, there is a different sensitivity compared to the classic "debtor-creditor" relationship. This is because expropriation is not about an equal relationship between private individuals; the state using its public power .

Therefore, simply applying interest rates used in private law to expropriation relationships is often insufficient in terms of property rights.

3.2. The highest interest rate applied to public receivables

The constitutionally accepted principle is that the interest applied to expropriation compensation cannot be less than the highest interest rate set for public receivables .

This principle is based on two fundamental ideas:

1. Just as the state applies high interest rates when it is owed money, a similarly protective interest rate should be applied when it is owed money by citizens.

2. Otherwise, the delayed payment of expropriation compensation would essentially turn into a "profit-generating financing model" for the administration; this would be incompatible with the principle of the rule of law.

Therefore, when calculating interest in case of late payment of expropriation compensation, it has become a generally accepted method to take into account the periodically changing interest rates on public receivables and to apply the rate of that period for each year

3.3. Interest commencement date

One of the most debated points in practice is from what date interest should be calculated. The starting date may vary in different scenarios:

• If the compensation has not been paid despite the expropriation decision: From the date of the decision or the date of seizure by the administration,

• If a lawsuit has been filed to determine the expropriation compensation: Date of the lawsuit,

• If there has been actual seizure: Date of actual seizure,

• If the court has ruled on the fee but the administration has not paid: The date on which the decision becomes final or enforceable,

It can be put forward as a starting point for interest.

Clearly and specifically requesting the commencement date for interest accrual in the lawsuit petition significantly reduces potential interpretation disputes later on.

3.4. The problem of interest becoming compound interest

In Turkish law, the general principle is that interest should not be compounded on interest. However, in expropriation cases spanning several years, calculations can be made by considering the principal amount plus the interest for each year as the new principal amount at the end of each year, effectively resulting in outcomes close to compound interest .

What's important here is that the calculation;

• Transparent,

• Auditable,

• This should be done using a method that reasonably compensates for the effects of interest rates fluctuating over the years and inflation .

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4. Inflation, Real Value, and the "Real Equivalent" Problem

4.1. Distinction between nominal price and real price

When determining the compensation for expropriation, experts calculate the value of the property the market value at the time of assessment . However, in economies like Turkey, which experience high inflation from time to time;

• If many years have passed between the date the price was determined and the date it was actually paid ,

• If prices have increased exponentially in the economy,

A significant gap emerges between the market value of the property at the time and the price paid years later.

Therefore, the calculation to be made in case of late payment of the expropriation compensation is as follows:

• Not just in terms of nominal figures,

• This needs to be done with a realistic approach that takes into account how inflation erodes purchasing power .

4.2. Is interest rate alone sufficient to combat inflation?

Theoretically, interest aims to compensate the creditor for the losses incurred during the delay period. However;

• the interest rate behind inflation ,

• Especially with prolonged delays,

Interest rates alone are not enough to compensate for the depreciation.

Therefore, in Supreme Court rulings, in cases where the compensation for expropriation is paid late;

• Simply imposing a fixed interest rate,

• It is insufficient to protect the homeowner during periods of high inflation,

It has been emphasized that in some decisions, additional compensation or higher interest rates have been evaluated in light of factors such as inflation data, economic indicators, and price increases in the real estate market

4.3. Developing the tangible results of inflation loss

In practice, the following methods can be used to concretize the loss due to inflation:

• The Consumer Price Index (CPI) or Producer Price Index (PPI) published by the Turkish Statistical Institute should be used as a basis.

• Examining the price increases of similar properties in the area where the property is located over the years

• Analyzing purchasing power based on macroeconomic data (exchange rates, construction cost indices, housing price indices, etc.) .

If this data is included in expert reports, the court will;

• Not only will we stop at legal interest rates,

• If necessary, it may order additional compensation or increased interest

It can provide infrastructure.

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5. Compensation Claims in Cases of Late Payment of Expropriation Compensation

5.1. Additional compensation claim (difference in compensation)

In some cases, the compensation awarded by the court low even in nominal terms ; or the interest paid between the date of the decision and the date of payment may not cover the increase in the value of the property.

In these cases, the owner;

• the expropriation compensation was insufficient ,

• They can file a lawsuit for additional compensation against the administration .

The goal of an additional compensation lawsuit is to "reach the true value of the property." The lawsuit petition states:

• The initial expropriation decision and the amount paid,

• Inflation, market conditions, comparable cases,

• How the difference emerged

It should be explained in detail; an expert examination should be requested accordingly.

5.2. Claims for moral damages

An excessively long expropriation process or compensation payment can cause the property owner to suffer not only economically but also psychologically.

Especially;

• The duration of the lawsuit exceeding a reasonable time,

• The failure to enforce a final judgment for years,

• The administration's behavior is characterized by blatant negligence or indifference

In this case, in addition to the right to property, the right to a fair trial may also be violated.

In such cases, the owner;

• Before national courts,

• If the necessary conditions are met, through individual application

It is possible to claim compensation for moral damages

5.3. Expropriation without compensation and compensation

In cases where the property is actually allocated to public service without expropriation, the owner often:

• The market value of the property ,

• Interest from the date of seizure ,

• arising from long-term use (similar to compensation for unauthorized use)

is requesting.

Here, the date of expropriation is of key importance, both of valuation and the commencement of interest calculation . If the expropriation continues for years without the administration carrying out the expropriation, the damage suffered by the owner cannot be considered limited to "a single payment + simple interest"; there is a continuous violation of rights.

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6. Individual Application and International Application Procedures

6.1. Individual application to the Constitutional Court

Late payment, insufficient payment, or non-payment of compensation for expropriation;

• Property rights,

• The right to a trial within a reasonable time

Allegations of violations can be brought before the Constitutional Court.

In individual applications, the Constitutional Court particularly considers the following criteria:

• How long did the expropriation process take in total?

• On what date was the property price estimated, and on what date was it paid?

• Is the applied interest rate sufficient to compensate for inflation and market conditions?

• Has Malik effectively utilized national legal remedies?

If the Constitutional Court finds a violation;

• Monetary compensation in favor of the applicant (additional expropriation compensation + interest)

• Compensation for non-pecuniary damages, if necessary

They are able to make decisions; moreover, the relevant case law serves as a significant guide for lower courts in similar disputes.

6.2. International application opportunities

After exhausting national remedies, it is also possible to apply to the European Court of Human Rights (ECtHR) if the conditions are met.

The European Court of Human Rights, in cases where compensation for expropriation is paid late or incompletely;

• The principle of proportionate interference with property rights,

• fair balance

The state applies its tests. If the state, while providing public benefit through expropriation, places an excessive and unusual burden on the landowner, a violation may be concluded.

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7. Frequently Asked Questions in Practice

7.1. Does interest automatically accrue if the expropriation compensation is paid late?

Generally yes; if the compensation for expropriation is paid late, interest is awarded along with the court decision, and the administration is responsible for this interest. However;

• Interest rate,

• Start date,

• Type of interest (legal interest, default interest, interest on public receivables)

Unless explicitly requested in the lawsuit petition, the court's discretion may be limited. Therefore, it is important to formulate the interest claim very clearly and in detail .

7.2. What can I do if interest alone is not enough?

If the interest paid is insufficient to compensate for the real value of the property against inflation;

• Additional compensation lawsuit,

• If the conditions are met, an individual application.

This could come to the forefront. In this process, requesting a strong expert examination supported by economic data strengthens the pursuit of justice.

7.3. A partial payment has been made, how will interest be calculated on the remaining amount?

In the case of partial payments, the interest accrued up to the payment date will be deducted from the amount paid. Interest will continue.

For example, if the administration pays half of the amount and delays the other half for years, a calculation should be requested on the remaining amount using the highest interest rate applied to public receivables

7.4. The compensation for expropriation was paid years ago, but the property's value has increased significantly today. Is a retroactive claim possible?

What is important here is how close the amount paid at that time was to the actual value at the time of assessment , and whether the interest accumulated over time has compensated for inflation.

If the deficiency is obvious, an additional compensation claim may be brought; however, in the specifics of the case, institutions such as statute of limitations, abuse of rights, and res judicata must be evaluated.

7.5. Do I need to file a separate lawsuit for interest and inflation losses?

In most cases, correctly establishing the interest claim from the outset within the expropriation compensation lawsuit provides a solution without the need for a separate lawsuit. However;

• If the court decision is insufficient,

• If the claim for interest is not presented adequately during the trial phase,

• If a clear loss of rights has occurred in light of new case law,

A separate claim for additional compensation or an individual application may be filed.

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8. Strategic Recommendations for Practitioners

8.1. The claim for interest in the lawsuit petition is based on a strong currency

There is always a possibility that compensation for expropriation will be paid late. Therefore, from the very beginning;

• The requested price,

• The value according to the date of valuation,

• Type of interest (specifically referring to the interest rate on public receivables),

• Interest start date,

• Systematic measures (including variable rates) will be applied as long as the delay continues

It should be written clearly and in detail.

8.2. Reflect inflation data and market realities in the file

Expert reports often focus solely on technical evaluation. However;

• CPI/PPI indices,

• Housing/land price indices,

• Construction costs and regional comparable sales

If submitted to the court, this would allow the court to make a more realistic and equitable decision regarding interest and compensation

8.3. Actively challenge expert reports

One of the most critical elements in expropriation is expert reports. The report should include:

• The nature of the property,

• Usage possibilities,

• Zoning status,

• Comparative values ​​in the region

If the matter has not been given sufficient consideration, with concrete, technical grounds . If necessary, a new expert report should be requested.

8.4. Don't miss deadlines: Appeals, cassation, and individual applications

Ways to seek redress in cases of delayed payment of expropriation compensation;

• The first instance court,

• Appeal,

• Appeals if necessary

• Individual application after finalization

The process unfolds in this manner. The timeframes at each stage are quite short. The short period starting from the finalization , should be carefully monitored.

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9. Conclusion

Expropriation is one of the most delicate areas of balance between the state and the individual. While the state seizes property on the grounds of public interest, the owner has the right to receive fair and timely compensation

Late payment of expropriation compensation;

• It's not just a matter of "interest calculation,"

• Affecting the essence of property rights,

• In a high-inflation environment, this can lead to significant economic losses for the owner

This is a serious problem.

Because;

• Interest rates should be determined in a manner consistent with interest rates on public receivables

• Demonstrating the erosive effect of inflation on purchasing power with concrete data,

• If necessary, resort to seeking additional compensation and damages for moral damages

• Timely utilization of national and international appeal channels

It is of great importance.