New tools for the recovery of arrears
Starting this year, the tax authorities are not limited by local jurisdiction when recovering tax arrears. At the same time, from 1 July 2025, the customs administration can use a new power in the event of an u…
Legal News [September 2024]: the Supreme Court dealt with the depreciation of a flat in case of a structural failure
In September’s edition of Legal News, for example, we cover a Supreme Court judgment in a dispute concerning the depreciation of a flat as a result of a structural failure in an apartment building. Among other decisions, the Court examined when the possession of part of a yard may be considered justified, and also addressed the issue of whether it is legally permissible to include a severance clause in a debt forgiveness agreement. For more information on these decisions, please refer to our article.
- In judgment under case No. 26 Cdo 2294/2023, the Supreme Court addressed the issue of the commercial depreciation of a flat caused by a structural failure in an apartment building. The dispute centered on defects in the load-bearing structure of Part D of the apartment complex, rendering the building uninhabitable. The applicant, who owned a flat in Part C, sought compensation for damage due to both the termination of a lease contract and a reduction in the flat’s market value. Both the First Instance Court and the Court of Appeal rejected the applicant’s claims. However, the Supreme Court reaffirmed its earlier rulings that the market value of immovable property can diminish due to a damaging event, even after the property has been repaired and its technical and functional qualities restored. The Court highlighted that a property’s value can decline even in the absence of actual (physical) damage. At the same time, the Court criticised the lower courts for insufficiently addressing the legal basis on which the applicant’s compensation claim was founded —whether it was for defective performance or damages. The Supreme Court clarified that liability for defects was not applicable in this case, as the property’s value did not decrease at the time of ownership transfer or immediately after, but rather as a result of the accident in the apartment building as the applicant claimed. The Court suggested that market apprehensions regarding latent defects could have contributed to the flat’s decreased value. With that conclusion, the Court remanded the case to the Court of First Instance, as it was necessary to examine more closely the causal link between the damage and the unlawful conduct.
- Judgement No. 22 Cdo 1615/2024 addressed two key questions: (i) whether possession can be deemed lawful simply because it is in compliance with real estate registration data under Act No. 22/1964 Coll., and (ii) how to assess the lawfulness of the possession held by the Municipality, as the predecessor of the applicant. The dispute involved the ownership of a section of a courtyard between the properties of the applicant and the respondents. The applicant claimed ownership through usucaption under old legislation, which included prior possession by the town of Český Krumlov and the Fousek family. The District Court in Český Krumlov dismissed the action, finding that the applicant had failed to prove uninterrupted possession for the required ten-year period. The Regional Court in České Budějovice upheld this decision. On the first issue, the Supreme Court ruled that while possession in compliance with the real estate register data under Act No. 22/1964 Coll. can be considered in evaluating the possessor’s good faith, it is not sufficient on its own to establish the lawfulness of possession. On the second issue, the Court emphasised that, when assessing the Municipality’s good faith, it is important to consider whether, under the specific circumstances, the Municipality—through its representatives—should have reasonably been expected to detect even minor possession deviations in the property boundaries from what was being possessed. As a result, the Supreme Court remanded the case back to the Court of Appeal for further examination.
- In judgment No. 21 Cdo 119/2024, the Supreme Court addressed whether a person registered as a pledge beneficiary in the Land Registry has a compelling legal interest in confirming the existence of that right. The applicant sought a declaration from the District Court for Prague 5 that their pledge over several properties in Prague 5–Sobín remained valid and had not been extinguished. They argued that an involuntary auction of the properties was invalid, as it had been conducted based on a null and void arbitral award. The Court of First Instance dismissed the claim, ruling that the applicant lacked an urgent legal interest. This decision was upheld by the Municipal Court in Prague. The applicant then appealed to the Supreme Court, asserting that the lower courts had misinterpreted the issue of the relevance of confirming the continued existence of the pledge and the legal standing to defend it. The Supreme Court overturned the lower courts’ rulings and remanded the case back to the Court of First Instance. It justified its decision by emphasising that the principle of material publicity protects the pledgee registered in the public register, as outlined in Section 17(1) of the Land Registry Ordinance. If a pledge is at risk of being removed—typically through a document submitted to the cadastral office allowing for its deletion—the pledgee has a legitimate and urgent legal interest in seeking confirmation of the pledge’s existence to prevent its removal.
- In its recent judgment No. 29 ICdo 59/2023, the Supreme Court examined the possibility of negotiating a resolutive condition in a debt forgiveness agreement. The Court clarified that, from the creditor’s perspective, debt forgiveness is a legal act “in favor of the debtor.” It is within the creditor’s discretion to either forgive the debt outright or to make the debt forgiveness (its effects) conditional. If the legal act (forgiveness) is tied to a condition precedent, the effects of the debt forgiveness—namely the extinction of the debt—will take place once the condition is fulfilled. Conversely, if forgiveness is subject to a resolutive condition, the effects of the forgiveness will cease (ex nunc) upon fulfillment of the condition, meaning the debt will be reinstated. The Supreme Court confirmed that, if the parties intended for the debt forgiveness to be contingent upon a resolutive condition—such as the debtor’s bankruptcy decision—the debt could indeed be “reinstated” upon fulfillment of that condition. The Court found no reason why such an arrangement would not be possible (and valid), provided this was the agreed intention of the parties.
- In case No. 27 Cdo 3499/2023, the Supreme Court ruled on the effectiveness of a unilateral substantive act delivered via e-mail. The case involved a notice sent to the chairman of the board of directors, who was on “vacation” at the time it was delivered to his work e-mail. The central question was whether, and when, the notice came within the chairman’s sphere of disposal. The Supreme Court, referencing legal literature, held that for an e-mail communication to enter the recipient’s sphere of disposal, it must be obvious that the recipient routinely uses the e-mail address or have invited the sender to use it and that the e-mail was deposited in the recipient’s inbox. In this case, the Court concluded that the notice was within the chairman’s sphere of disposal from the moment it was delivered to his e-mail box. The Court emphasised that the chairman’s vacation did not constitute an objective obstacle preventing him, as a person holding a 24/7 office, from accessing the notice. While the Court acknowledged that delivery through e-mail communication has inherent disadvantages—such as the non-existing legal regulation of its quality —it stated that the sender is the party assuming the risks associated with choosing delivery by e-mail. However, if it is uncontested that the e-mail was successfully deposited in the recipient’s inbox used by the recipient routinely, and there are no objective barriers to delivery, the notice is deemed to be within the recipient’s sphere of disposal.
- In case No. I. ÚS 3362/22, the Constitutional Court addressed the incorrect application of tariff values when calculating the lawyer’s fees in a case involving non-pecuniary damage to personal rights (health). The Court examined whether the lower courts had acted constitutionally in determining the obligation to pay legal costs and in calculating the lawyer’s fee for the complainant’s legal representation. The controversy centred around the determination of the tariff value for partial claims related to compensation for non-pecuniary damage, including pain and suffering, and social impairment. When deciding about the compensation of legal costs, the Court of First Instance determined their value based on the total amount awarded, as outlined in Article 8(1) of the Lawyer’s Tariff. However, the Court of Appeal calculated their amount based on a flat-rate value of CZK 50,000, according to Article 9(4) of the Lawyer’s Tariff. In contrast, for claims related to damage compensation (pecuniary damage), both courts based their calculations on the actual amounts awarded. The Constitutional Court ruled that compensation for legal costs in disputes over non-pecuniary damage to health must reflect the complexity of such cases. Setting an excessively low lawyer’s fee could deter other similarly situated victims from seeking justice, thereby breaching the State’s duty to ensure effective judicial protection in non-pecuniary damage to health disputes. The Court concluded that when the subject of the proceedings involves non-pecuniary damage to health (such as compensation for pain and social impairment) which, during the effectiveness of the “old” Civil Code, was considered the damage (pecuniary damage), the legal costs should be calculated in accordance with Article 8(1) of the Lawyer’s Tariff, despite the effectiveness of the “new” Civil Code. The use of Article 9(4)(a), applicable to other non-pecuniary damages, was found to be inappropriate in these cases. Applying the incorrect tariff value, as happened in this case, could violate the constitutionally guaranteed right to judicial protection.
