business czech

Purchase of a real estate (new building), what is kolaudace, why do you need it?

Kolaudace is a final inspection, an official approval to use the building, or in other words, an official confirmation of the conformity of the property with the specified objectives, in the case of residential premises – the suitability of the house / building/ apartment for housing or living.

Paragraph 119 of the Law on Spatial Planning and Building Regulations (Building Law, Stavební zákon) No 183/2006 Coll., amended to 1.1.2018, defines colaudation/final inspection in this way: „the completed construction, or part of the building intended for separate use … can only be used on the basis of the approval: consent (kolaudační souhlas) or decision (kolaudační rozhodnutí). The builder will ensure that all tests and measurements are carried out in accordance with special legal acts“.

That is, the building authority (stavební úřad), having received the application, within 30 days checks the project documentation and the condition of the premises for compliance with technical standards, norms, legal requirements, and stated in the documents, and issues permission to use. This is not only documentation, real estate must meet all standards, requirements and rules. All legislative changes, safety rules (fire detector, fire extinguisher, stair railings, fire-resistant drywall, control measurement of radon values, etc..) ​​in the house must be observed. The building must have completed walls, floor, bathroom and kitchen, and at least one living room. However, if within 30 days the construction department will not issue an approval/ deny your application, then in this case it is valid: “what is not prohibited is permitted”.

From 1.1.2018 kolaudace is subdivided into consent (kolaudační souhlas, §122 of Law No 183/2006 Sb) and decision (kolaudační rozhodnutí). Consent will be applied, in the event that you yourself build a house (family house / rodinný dům), but in case you purchase from a developer, you need kolaudační rozhodnutí.

It is interesting to learn about § 123 of this Law, which refers to the possibility of early use of the building/real estate. It often happens that a person buys a house from a developer, even if it has not been completed. Moreover, buying a new house, (for financing purposes) is selling an old one, and at the moment, when kolaudace/approval has not yet been issued, the person already wants to move to its new sweet home. Paragraph 123 states that the building authority may issue a time-limited permit for early use of the building before its completion, unless it has a significant impact on the use of the building, does not endanger the safety and health of people or animals or the environment.

Often in contracts for the purchase of real estate in a new building, namely, in the preliminary (purchase) contract, it is said about the obligation of the seller to provide a confirmation of the final inspection/kolaudace before paying the entire purchase price for the property. However, in practice, this clause is often not contained, and the purchaser “receives” confirmation of approval for use of the building only in words. You can say “well, no, I buy from a trustworthy developer”, however, unscrupulous representatives, wanting to get their commissions, may not comply with a couple of points, hoping for your trust for them. Always ask for a copy of the confirmation of the final inspection/kolaudace.

On the other hand, some people may decide on the purchase of incompleted building/family house. It is cheaper and more convenient, when a person wants to complete by his own design. However, Why is kolaudace/final inspection so important?

In addition to the fact that, as mentioned above, this is a fundamental check of the building being consistent and in accordance with technical and legal norms, and approval of the absence of a threat to life and safety, also the absence of colaudation can lead to fines. Obtaining permission to use the building or real estate is not a joke, because there is a fundamental verification of compliance with technical standards, and the building department may request such seemingly absurd documents as confirmation of an archaeological inspection. Therefore, pay attention to this clause in the contract, and point out to this obligation of the seller / developer to provide confirmation of the final inspection/kolaudace.

(c) Elmira Lyapina, LL.M., Ph.D.


Disclaimer about the nature of the information contained in this article.

The information provided in this article is the general information, and does not constitute legal advice, and may be not valid in a particular situation. To obtain qualified legal consultancy, you should contact a lawyer with the provision of the necessary documents regarding the case. For example, by email: juristpraha@gmail.com.

This article was prepared on the basis of an analysis of legislative regulations for 04.12.2018. Therefore, while using such information, should be considered the changes to be made to the legislation after that. This article was published the first time on December 4, 2018, on the web page www.juristpraha.cz

Few words about consumers’ rights or What should you know about the Czech Trade Inspection Authority (Česká Obchodní Inspekce).

Many of us have got into a situation, when the phone rings and a nice (mostly) female voice, not giving an opportunity to say something, offers a very profitable and beneficial service or a product. What do you do in this case? Would you behave very politely – giving an opportunity to describe the product or service, and then – hang up the phone after refusing? Or you cut the conversation short in the middle of it? Or you could not resist such a nice offer from a pleasant voice and would agree accepting the pen with a name, super omega-3 or a free razor? If you, even in order not to offend the person on the phone, have agreed on a “free” product or special service, but now you do not know how to stop the transferring of money and accepting useless things due to the threats of the unscrupulous seller to make a claim against you in the court? Then, this article may be useful for you.

Let’s start with two basic laws governing rights of consumers in the Czech Republic:

  1. The Civil Code of the Czech Republic (No 89/2012 Coll), in which you can find not only provisions on the conclusion of contracts (including consumer contracts, or those, concluded remotely – via the internet or telephone), but also clauses on liability for a damage, caused by the defect of the product.
  2. The Law on Consumer Protection (No 634/1992 Coll), which imposes on the seller and manufacturer requirements on the good faith practice, informative obligations about the products and their features and quality, as well as instruction on the complaint procedures regarding the defect product.

In addition, there are number of specific laws relating to the issues of consumer rights.

The competent authority in the field of consumer rights in the Czech Republic is the Czech Trade Inspection Authority (Česká Obchodní Inspekce). Many people underestimate the Czech Trade Inspection Authority (CTIA), some people even never heard about it. Meanwhile, the CTIA is of great importance, as for the entrepreneurs, so for the consumers or “random” purchasers.

Nowadays, we can see many pictures of the goods, bought in the internet, which in reality are different from the product described in the e-shop. Maybe you also faced with such situationwhen you wanted to buy some dress, the size of which was too far from the mentioned one. So, what to do in that case?

Of course, if you have some entrepreneurial skills, you can re-sell it to somene else, whom the size will fit,or you can just have fun and post it in the internet sharing this sad, but also funny, incident.Or probably you would like to return the good, and ask your money back from the seller, or to exchange the good for a suitable one.

According to the Czech legislation, namely the Civil Code (Law No 89/2012 Coll) and the Law on protection of the consumer (No 634/1992), the consumer or the buyer/purchaser should be instructed about his rights to return the good he bought in the e-shop and withdraw from the purchase agreement within 14 days since the receipt of the goods.

If there is no such provision in the Commercial Conditions (Obchodní podmínky), the consumer can claim (stížnost)  it to the Czech Trade Inspection Authority (http://www.coi.cz/en/for-consumer/advice-information-consumer-rights/complaints-about-goods-and-services/), where CTIA in some cases can fine the seller up to 50 millions Czech Crowns for not following the legislation. However, it is not the only duty of the CTIA. The full list of responsible areas of CTIA can be found on its webpage (www.coi.cz). Information is provided both in Czech and English and CTIA post warnings about suspicious practices and violators on the webpage frequently.

The CTIA monitors and inspects businesses and individuals, who supply goods to, or sell goods on, the Czech market, provide services or similar activities on the domestic market, provide consumer credits, and operate marketplaces, unless, as a result of special legislation, these activities fall under the authority of another administrative institution.

In addition, it has the out-of-court dispute settlement or ADR (Alternative Dispute Resolution) – this is an instrument, which allows resolving the dispute between the entrepreneur and the consumer with lower financial costs and time required for the entire procedure. A typical consumer dispute – is over defective goods purchased in the store.

Let us return to the problem of already concluded agreement by the phone/internet… How to terminate it?

In accordance with the article 1829 par.1 of the Civil Code, the seller is obliged to inform the buyer about the possibility of cancellation of the contract within 14 days from the date of its conclusion, and without providing any reason (art. 1818). If the seller did not inform the consumer about it, then the period of cancellation can be extended by one year (art. 1829 par. 2).

It is recommended to write a letter of notice on termination of the contract/cancellation of the order (odstoupení od smlouvy/ odstoupení of objednávky), and send this letter with the notification (doporučeně, dodejka) to the address of the seller, together with copies of the sent invoices. You may also end this contract over the phone, if you can record the conversationas an evidence. However, in a case of the fraudster, the seller can use a fictious address, or the address may be somewhere far away, In such situation, do not send it back, but inform the competent organs about the case (could be not only the CTIA, but also police). You may also end this contract over the phone, if you can record the conversation as an evidence.

Finally, if the seller in the good faith will not take into consideration the mentioned will on termination of the agreement, then the behavior might be interpreted as an aggressive commercial practice, which could be fined up to 5 million CZK, in accordance with art.24 par. 1 (a) and par. 12 (d) of the Law on the consumer protection.


Disclaimer about the nature of the information contained in this article.

The information provided in this article is the general information, and does not constitute legal advice, and may be not valid in a particular situation. To obtain qualified legal consultancy, you should contact a lawyer with the provision of the necessary documents regarding the case. For example, by email: juristpraha@gmail.com.

This article was prepared on the basis of an analysis of legislative regulations for year 2016 (February 2017). Therefore, while using such information, should be considered the changes to be made to the legislation after that. This is translation of the article, which was published the first time on February 24, 2017, on the web page www.juristpraha.cz

Doing business in the Czech Republic, or the options: registering Individual Entrepreneurship, or Company, or purchasing the Company.

The frequent question – how to do business legally? – might seem simple.

There are several answers-options: from the registering as an individual entrepreneur (in Czech OSVČ – osoba samostatně výdělečně činná, also commonly used as živnostník), through buying the ready-made  company, to – forming of a new corporations – among most popular are – the Limited Liability Company (LLC or ltd, in Czech s.r.o. – společnost s ručením omezeným), or joint stock company (a.s. – akciová společnost).

  1. What are the main differences between the individual entrepreneur (IE) and the LLC?

The procedure of registering in the Czech Trade Office as IE is relatively easy. You do not need to go to a notary, to spend money on drawing up the notarial record, and the registration itself is relatively cheap – without expenditures for the notary or the lawyer.

It is worth to note, that IE, in contrast to LLC, is not burdened by mandatory shareholders’ meetings, and it is not obliged to spend income for the organization needs and wait for the dividends after paying the taxes. In opposite, IE can use the income on its discretion, including the personal use.

However, it should be taken into account that, the responsibility of the individual entrepreneur is not limited. Whereas LLC is responsible for the debts in the amount of the company property assets, on the IE lays the complete property responsibility for liabilities. That is not the only point why the individual entrepreneurship is not lucrative for some people. These are other minuses of the IE:

  • Lack of relative anonymity : the name of IE in the various documents (vs. title of company on documents)
  • Image and strong (psychological) position of the company (vs. image of the sole person)
  • Share of risks and interests in company, which is quite impossible for IE (which, however could be “replaced” on some point by contractual basis)
  • Higher tax burden of IE
  • Complexity for IE of the business sale
  • And also some business activities are not available for the IE

  1. Let’s consider what is better to register the new company or to buy the “ready” made one?

Limited liability company is the most common form of business, as for small, so for the large ones. LLC in the Czech Republic can be registered even with a sole – shareholder (společník) and director (jednatel) in one person.

The process of company registration in the Czech Republic is quite simple:

  • Choose the name / title of the company (název/firma)
  • Specify the legal address (sídlo) – the address, that will appear in all official documents of the company, as well as in the public register, and will be a contact address of the company to which will be sent all official letters.
  • Subject of business activity – and related license in the Czech Trade Office (Živnostenský úřad)
  • Not the least one – to think who will be the partners in business, and who will lead the company
  • Amount of registered capital (základní kapitál)
  • Should be considered related costs: notary fees, fees for a license, fees for registration company and/or for certificate of incorporation

As a result, armed by and with following documents, just wait for incorporation (from 5 working days):

  • Notary record of incorporation
  • License from the Trade office
  • Statement of the director (jednatel) on possibility to perform its functions (according to par. 6 (2) and 8 of the Trade Licensing Act (No 455/1991 Coll), and par. 63-65 of Business Corporations Act(No 90/2012 Coll))
  • Statement of the responsible person (správce vkladu) of the registered capital deposit
  • Confirmation from the bank on registered capital deposit
  • Consent of the owner for provision of the legal address for the company.

Thus, gathering all necessary documents, getting all necessary confirmation, can be spent for the registration of company – from one week up to month.

The process of purchasing the ready-made company is also associated with a visit of the related official institutions.

While purchasing a ready-made company, should be kept in mind following information:

  • The name/title of company – whether to change of leave it same?
  • The legal address – keep it or change it?
  • Business activity- same or different direction? Expand the field of business activity of narrow it?
  • Changing persons of shareholders and directors also should be made by a notary.

In the end, changes at notary, changes in public registers will result in same amount as the registration of the new company (about 18-25 thousand Czech crowns). Period of incorporations in the public register – also from 5 working days, however, the process may be delayed due to some additional changes.

What are the advantages and disadvantages of purchasing a ready-made company?

Disadvantages:

  • Lack of transparency running a company, and as a result – hard to follow the exact history of the company before purchasing
  • High possibility of purchasing the company with hidden debts, despite the obligation of publishing the annual reports, inquiries of tax and other official authorities.
  • Already taken on commitments or obligations of previous members of the company towards to the third parties
  • Hard definable, often hidden costs while purchasing the company

Advantages:

  • Relative quickness in acquiring the company, in case of zero changes in its documents.
  • Already registered/acquired license for business activities
  • Already paid registered capital
  • Possibility to act immediately on behalf of the company.

Relevant legal Acts:  The Civil Code of the Czech Republic (No 89/2012 Coll), Business Corporations Act (No 90/2012 Coll), Trade licensing Act (No 455/1991 Coll).


Disclaimer about the nature of the information contained in this article.

The information provided in this article is the general information, and does not constitute legal advice, and may be not valid in a particular situation. To obtain qualified legal consultancy, you should contact a lawyer with the provision of the necessary documents regarding the case. For example, by email: juristpraha@gmail.com.

This article was prepared on the basis of an analysis of legislative regulations for year 2016. Therefore, while using such information, should be considered the changes to be made to the legislation after that. This is translation of the article, which was published the first time on November 24, 2016, on the web page www.juristpraha.cz