Pre-emptive right and its entire abolition?

The institute of pre-emptive right in the form stipulated by the Civil Code since 2018 often caused considerable difficulties and delays in the sale of real estate. A classic example related to cellars and garages for which individual parking places are specified in a contract by numbers regardless of whether they represent, in substance, a share in specific common non-residential property, i.e. a garage. In compliance with the legal regulation, a co-owner found a potential buyer with whom a purchase agreement was concluded. Such agreement was subsequently presented to other co-owners, providing them with a three-month period, offering them the purchase of the respective share in common property. In practice, this period is currently causing a number of issues.

In particular, this period further extends the process of real estate transfer, which is already rather lengthy. For example, if one wants to sell an apartment with a parking place or a cellar representing a share in joint premises and the pre-emptive right has been exercised, it will be necessary to annul the entire existing contractual documentation.

Similar consequences also arose in situations when the offer was not presented (either intentionally or due to the ignorance of statutory duties) to co-owners. The law favours the omitted party, which has an opportunity to contest such a purchase agreement in court within three years, mostly with success.

The approved form of amendment reflects these deficiencies. Originally, exceptions from the statutory pre-emptive right were only proposed for the sale of a residential unit with a share in common property. However, the course of action was reversed during the legislative process – i.e. the pre-emptive right relates to situations in which co-ownership arises from the designated legal circumstances.

Pre-emptive right remains in its original narrow form

We would like to note that before 2014, the institute of the statutory pre-emptive right was defined broadly, see Section 140, the first sentence of the Civil Code in 1964, stating that “if a share in common property is transferred, co-owners will have a pre-emptive right unless the transfer is to a relative”. As in the case of the above-described difficulties relating to real estate, the pre-emptive right was also an obstacle in handling property under the “old” Civil Code. Leaving out real estate from general provisions concerning the pre-emptive right and returning to the situation which existed at the beginning of the effectiveness of the existing Civil Code should eliminate the above difficulties in practice. The statutory pre-emptive right thus remains in its original narrow form when compared to the previous Civil Code, as intended by legislators in preparing the existing Civil Code.

New rules for short-term accommodation

The amendment also brings about other changes that will affect providers of short-term accommodation, such as that provided through Airbnb. The existing state has been in need for a change for a long time; however, the amendment does not have the ambition to cover all related aspects of this business.

The apartment owner will now be legally obliged to inform the building manager about any business or activities that could lead to a long-term disruption of the usual peace and order in the building. Another change is anticipated in this context, which consists in the obligation to report the number of persons in a residential unit, primarily for distributing utility costs (in accordance with Act No. 67/2013 Coll., which regulates certain matters related to provision of performance connected to use of apartments and non-residential premises in a residential building). The existing legislation provides that for the distribution of utility costs, the decisive persons are those who live in the apartment for more than two months. However, in the case of Airbnb-type platforms, this minimum period of time is usually the maximum period of time for which tenants stay in the apartment. Therefore, apartments used for short-term leases were formally occupied by one or two persons.

It is this loophole in the law the amendment is aiming at. The reported number of persons should now better reflect the actual state, i.e. the number of persons who are using the apartment at a given time.

Other significant changes you need to know

Other news include the information obligation of the owner to report all intended construction changes inside their apartment. The obligation will also include changes for which the Construction Act does not require even a notification. This will typically include repairs of internal plasters, wall coverings, floor and tiling, installation of water and sewage pipes, repairs of windows and doors and their coating etc.

A significant change is the possibility to impose a contractual penalty to a tenant who does not fulfil their obligations. The existing legislation did not provide for such a penalty to be stipulated in tenancy agreements for apartments or houses. If an agreement indeed included such a provision, it was considered an apparent legal act and was not taken into consideration (Section 2239 of the Civil Code).

Finally, we would like to point out other changes that could affect apartment owners, such as the transfer of debts of the original owner related to the management of the building or the use of the apartment in case the apartment is sold. Furthermore, forced sale was also amended, as well as the formation of Apartment Owners Association (“SVJ”) comprising one owner of all the apartments. We will look at this topic in more detail in the next article.