Cancellation of the pre-emptive right to the ownership share in immovable property and other changes effective as of July 1, 2020
On July 1, 2020, the amendment to the Act no. 89/2012 Coll., the Civil Code (hereinafter referred to as the “Civil Code”), which cancels the pre-emptive right of the co-owners to the ownership interest share in immovable property and which significantly changes some aspects of flat co-ownership and association of unit owners (hereinafter referred to as the “AUO”), as well as which introduces the possibility of stipulating a contractual penalty in flat-lease and house-lease relationships entered into force. This amendment also amends the Act no. 90/2012 Coll., the Business Corporations Act, by changing some stipulations of cooperatives.
Cancellation of pre-emptive right
Cancellation of the pre-emptive right of the co-owners to the ownership interest share in immovable property is without a doubt the most important change made by the amendment. The pre-emptive right is preserved only in cases of co-ownership which was established by a disposition mortis causa and will be granted for a period of 6 months as of the establishment of the co-ownership, just like it used to be.
The pre-emptive right caused issues mainly in cases of transfers of ownership to parking spaces in AUO houses. A parking space in an AUO house is usually defined as a co-ownership interest share in a garage unit, which includes all parking spaces in the given immovable property. According to the law effective before the amendment, anyone selling “their” parking space in an AUO house was forced to offer it to the other parking spaces owners as the co-owners of the garage unit. The whole transfer process was administratively demanding as well as time consuming, especially because the person entitled from the pre-emptive right had a 3-month period to pay the purchase price to the seller instead of the intended buyer.
According to the amendment, the seller of the ownership interest share in immovable property (typically the seller of a garage parking space in an AUO house), will no longer have to wait for the other owners to use their pre-emptive right, so the hard-to-realize administrative burden doesn’t exist anymore. The legislators thereby restored the original concept which was later changed by the amendment effective as of January 1, 2018, introducing the general pre-emptive right of all co-owners of all immovable property.
Changes regarding the association of unit owners
The amendment further introduces some conceptual changes to the regulation of flat co-ownership and AUO. We’ve summarized the most important ones for you below.
The amendment introduces succession of debts connected to the unit. As a general rule, the debts connected to the unit shall now be transferred to the new owner together with the unit, if the new owner could have been aware of their existence. When the unit is being transferred, the transferor shall hand over to the transferee a confirmation of (non)existence of debts connected to the unit issued by a person responsible for administration of the building. If such confirmation does not include some of the existing debts, it shall be deemed that the transferee could not have been aware of them and the transferor thereby remains the debtor of such debts.
Further, the process of forced unit sale is simplified by the amendment. Such sale can be ordered by a court upon a request submitted by a building administrator with approval of the majority of unit owners in the respective immovable property. A request for forced transfer can be submitted, if the unit owner breaches their obligations in a way significantly restricting or preventing the exercise of the rights of other unit owners, despite a prior warning sent to such unit owner by the building administrator.
Concurrently, an AUO can now be established by just one owner of all units. Since this allows to establish an AUO before selling the units in a given building, it is mainly the developers of new housing projects that will benefit from this change. The amendment also changes the rule for compulsory establishment of an AUO. According to the amendment, an AUO has to be established, if there are at least 5 units in the building out of which at least 4 are owned by 4 different owners.
Lastly, the amendment changes the conditions for the declaration of the immovable property owner on division of the building into units as well as simplifies the AUO establishment procedure and other acts related to the AUO.
Contractual penalty for flat-lease and house-lease relationships
The amendment introduces a possibility of stipulating a contractual penalty in flat-lease and house-lease relationships (i.e. lease for housing needs). Under the previous regulation, it was not allowed to stipulate a contractual penalty for cases of breach of the contractual obligations by lessee. The amendment allows for stipulating a contractual penalty, however, the contractual penalty together with the deposit may not overreach the amount equalling to three-months’ rent.