real estates prague

Purchase of a real estate, what to pay attention for and what steps to undertake.

It would be a mistake to say that someone is not being serious when purchasing a property. There are several phases as a search of the proper real estate, checking and assessment, contractual phase, and purchase itself, all this together with the negotiation process with the seller, real estate agent, developer, lawyer, banker, financial adviser, technical expert. Nevertheless, I often come across the fact that the same mistakes are made, when buying real estate, although it would seem that the process is quite common, and many interested parties in this process are involved more than once.

Of course, there are different features of buying a property, whether it is commercial real estate, or residential, whether it is a new-build or a resale property, an apartment or a house, part of the house, or a townhouse, whether it is purchase with a mortgage, a bank loan or with the own financial funds, as well as whether there is an easement (věcné břemeno – the burden to be taken, for example, the obligation to bear a nearby siren), or if there is a lien of the seller’s bank on the property.

In this article, I will only consider some introductory points that need to be considered in the preliminary phases of purchase.

Importance of technical checking assessment.

Often I come across the fact that a purchaser does not pay appropriate attention to the importance of technical checking assessment of the real estate before its purchase. The reasons are many, it could be the trust to the seller, especially if it is a large developer or construction company, or the fact that the seller is represented by a real estate agent, or even the absence of visible signs of technical defects. However, when accepting a real estate in a property, fulfilling the handover protocol (in Czech language it is “předávací protokol”), it is important to indicate all defects and deficiencies of the particular real estate, including the technical side (especially if it is a new-building).

It is also necessary to check the technical side with an expert before purchase. For example, after buying a property in a new building, family A encountered a faulty water supply system, and they when informed about it the builder/seller, referring to the part in the agreement regarding the guarantee, the builder/seller denied to repair it, referring to the wrong use of the real estate by the purchaser. And also clarified that if the problem was on the side of the seller, this would be mentioned in the handover protocol, and since it is not a hidden defect, the financial burden of repairing this defect lies with the purchaser (here also comes to the aid of the seller/builder §2629 of the Civil Code of the Czech Republic). Another example is the situation in the family B, who bought a “resale property” – a beautiful two-store house, or rather a townhouse (these are several identical houses connected by one common wall). Without preliminary checking of the technical documentation and the technical side of the real estate, the family was faced the fact that they can not insulate or even rebuild its own (but at the same time common) wall, besides, when the neighboring house/townhouse was demolished, the wall itself not only deformed itself , but also influenced the construction of the whole house. The third example is quite often case in the new building construction and underexposure plan by geodesists. As a result, you can buy real estate in a much smaller metrage than indicated for this real estate both in the land plan and in the cadastral chamber itself. How can this be? There are standards of measurement and there are inaccuracies that accumulate.

What would happen if the expert checked the property?

First, it could significantly affect the price, and secondly, a guarantee for fixing the defects, including possible ones; thirdly, it is your calmness and knowledge of what can happen and what to expect during the ownership or use, and, also how much the documentation of the real estate corresponds to the reality.

 

Communication with the seller, the developer, the real estate agent. Main contracts related to purchase of a real estate.

Each agreement, which was reached between the purchaser, seller, builder, real estate agent must be reflected in the contractual documentation. Often there are 3-4 contracts. This is a reservation agreement, the so-called non-binding agreement, where real estate is “reserving” the real estate for the purchaser, or, in other words, undertaking not to offer this real estate to the other possible purchaser, for some short period of time (from 5 to 14 days) in return for a small amount (often from 50,000 to 150,000 Czech crowns) as a part of the total purchase amount. In a case the purchaser is serious, and wants to buy this real estates, this period is enough to prepare the entire purchase amount and the necessary documentation for the purchase.

Often it also happens that the reservation contract includes two parts – the reservation contract itself and the intermediation contract, where the third party of the contract, the intermediary, is the real estate agent. There have been cases when some real estate agents included in the total purchase amount their provisions, for example in the contract you could find this phrase “Provision is 200,000,-CZK and it is included in the total amount of the purchase.” Why is this condition, to put it mildly, not good for the purchaser? The fact is that the buyer pays 4% of the tax on the purchase of real estate (the relevant regulation of the Senate No. 340/2013 Coll.) from the entire “purchase price”, and of course, such a phrase would mean, that the amount of paid tax would be increased by the intermediary’s provisions.

The next contract is a Preliminary contract, or an agreement on a future contract of sale (Smlouva o uzavření budoucí smlouvy kupní, according to § 1785 of the Civil Code of the Czech Republic). It has more power than the reservation agreement, and this contract is favored by the developer and construction companies, who by this preliminary contract oblige purchasers to pay the entire amount BEFORE concluding a contract of purchase. Why this contract could be dangerous? Despite the fact that, this is a preliminary agreement, however on the basis of this contract – you will be unlikely (or, to be more precise, will not be) registered in the cadastral register as a new property owner. In addition, it is likely that the object may be unfinished, or the Building authority will not issue an opinion on the possibility of using this property (kolaudační souhlas), and so in the demanding of the paid amount purchase, connected to it costs, and, in the case of financing by the bank, fines, it can be very costly and unpleasant.

The related to it issue is payment of the whole purchase price of real estate, as prescribed in the preliminary contract and the contract of purchase, namely, the provisions in the contracts, that the amount should be transferred immediately to the seller’s account. I don’t recommend you to follow this provision, and if it is contained in the contract (and it is contained in 99.9% of cases), then the better choice is to find a third party where this purchase price could be kept. It can be either a “cell” of a lawyer (and a related storage agreement – smlouva o úschově), or a notary, or a special bank account (,jistotní účet‘- however, not all banks are able to provide this account). For a small (relatively) payment, you save the the whole amount, and also will be able to mention the terms and conditions transfer of this purchase amount to the seller’s account, so you will be calm that this amount, in case of problematic situations, will return to you intact.

The last main contract is a contract of purchase itself (Kupní smlouva §2128, Civil Code No. 89/2012 Coll.). Do not be scared if after a 20-pages preliminary contract you will receive a two-page contract of purchase. What should be mentioned there? The main terms and conditions are: the handover of the real estate from the seller to the purchaser, the seller’s obligation to provide the insertion of the new owner property rights to the cadaster register, the seller’s statement that there are no additional obligations, security rights and third party rights on this real estate, and that the purchaser has been informed of all defects, and also the purchaser’s obligation to pay the whole purchase amount and tax on the acquisition of real estate and take over the real estate on time.

This, of course, is not a complete list, but only some points. It is worth to mention, that one of the copies of the given contract should be with the notary authorized signatures of all parties, all for granting to a cadastral register. If the parties of the contract are only the seller and the purchaser, then three copies are sufficient, one for each party, and one copy is provided to the cadastral register.

In the following articles, I will consider in more detail the contracts that accompany the acquisition of real estate, the acquisition of new-build real estate, the related to it importance of the  decisions of the land register and building authority, the cadastral register and its significance, the contracts related to the construction, the lien, the right of building upon the land of another, and the sale of a real estate and its pitfalls.

 

(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 24.09.2018. 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 September 24, 2018, on the web page www.juristpraha.cz

 

Termination of a Lease Contract in the Czech Republic.

Termination of a Lease Contract in the Czech Republic.

Ending a Rental Agreement on an Apartment in the Czech Republic.

The end of the calendar or/and academic year ends raises an important question – how to cease renting an apartment? In which circumstances can a contract for renting an apartment be terminated? How should the termination of a lease contract be carried out? What does «kauce» mean? Should it be returned? This article will help you t find the answers for these questions.

The end of renting an apartment is regulated by the Civil Code of the Czech Republic. From January 1, 2014 , the rights and obligations arising from that period are governed by a new Civil Code (№ 89/2012 Coll). Obligations, arising before 31.12.2013 are governed by the same rules, but with some exceptions – e.g. rights and obligation which are assessed under the “Old Code”, – could be used in conjunction with some of the provisions of the “New Code” (these are referred to in the first chapter of the first part of the new Civil Code).

Renting an apartment can be terminated in the following ways:

  1. Expiration of the term of lease, where the lease contract specified a fixed-term.
  2. On the basis of an agreement between the landlord and the tenant.

The lease contract must be concluded in written form. The contract shall specify the date of the end of the lease terms and the terms of the transfer of the apartment (Dohoda o skončení nájmu bytu).

  1. On the basis of a termination of the lease contract (vypověd’) in written form – from the side of the tenant or the landlord.

The tenant may terminate the lease contract without giving any reason.

  1. the rent of the apartment ends also with the death of the tenant, unless the agreement is transferred to another member of the tenant’s family.

The lease contract may be terminated by the landlord or the tenant. The termination notice must be in writing and delivered to the other party, and must specify the expiration date of the lease, which, according to the law, is – 3 months. The notice period starts on the first day of the calendar month following, from the date,- when the other party received the notice.

 All the reasons,- for which a landlord may terminate a contract,- are specified in the Civil Code.

A condition for the validity of the termination notice (platnost vypovědi), served by a landlord to a tenant,- is

  • the explanation of the tenant’s rights to object to the termination,- and the option of a revision of the termination notice by a court.

The deadline for filing a lawsuit at the court is 2 months from the date, of the termination notice being delivered to the tenant.

REASONS for the termination of a lease contract by a LANDLORD are as follows:

  • the tenant does not pay the agreed rent (and/or services for the use of the apartment), for more than 3 months
  • the tenant or someone living with them, despite written warnings, violate the rules of acceptable behavior and good neighborliness in the house,
  • the tenant uses the apartment for purposes other than those stated in the terms of the lease contract,- or the law,
  • the tenant is convicted of a deliberate crime against the landlord or the landlord’s family members, or against the property those living in the building,
  • the tenant does not use the apartment for any apparent reason,
  • the landlord needs the apartment for family use,
  • the apartment was a “service apartment” and the tenant has ceased to carry out the relevant work, connected to this agreement,
  • the apartment is designated for “special purposes”,- but the tenant is not disabled (this applies to the apartments most suitable for the intended user),
  • the apartment ceases to exist.

The Civil Code, however, under certain conditions allows the landlord, to terminate the lease contract without a notice period (vypovědní lhůta), and to demand from the tenant, without delay and not later than 30 days from the end of the lease, to hand over the apartment.

The landlord can claim this right, if the tenant is in breach of their obligations. The Civil Code provides a list of what can be considered to be a very serious breach of the tenant’s duty:

  • failure to pay the rent for more than 3 months,
  • the tenant causes damage to the apartment of a serious and irreversible nature,
  • the tenant causes serious harm or inconvenience to the landlord or those also, who living in the building,
  • the tenant uses the apartment for reasons other than those specified in the contract.
  • the tenant uses the apartment for purposes – which contradict the details of the lease contract, or the law).

The Civil Code further specifies that landlord may not demand that the tenant stays in the apartment after the period notice, as was the case before. However, if the landlord does not indicate, in the termination notice, the exact nature of the violation of the tenant’s obligations, or demands the terminations in less time than is lawful, then – the termination will not be considered valid.

(*** previously, in the old civil code, before 2014, in certain cases established by law and, in the case of the termination of a rent contract on an apartment by the landlord, the tenant was entitled to receive  a substitute apartment or substitute accommodation, if the termination of the lease was not caused by the violation of the obligations of the tenant. In that case, the tenant could live in the apartment, for which the lease contract was terminated until the landlord substitutes the accommodation of the tenant. The new Civil Code does not provide the right of the tenant for that substitution.)

REASONS for the termination of the lease contract by the TENANT are also provided in the Civil Code.

The tenant is obliged to hand over the apartment to the landlord on the day of the lease contract expiration. If the tenant fails to do so, the landlord is entitled to compensation in the amount of the agreed rent until the day, when the tenant actually hands over the apartment to the landlord. The apartment is considered to be handed over when the landlord receives the keys and has no barriers to access the apartment or its usage.

It is very important at the end of renting an apartment and handing it over to prepare a “Protocol of Handover” of the apartment. In this Protocol both sides confirm the handover of the apartment, as well as the state of the apartment. The Protocol should record the meter data of the water, electricity and gas supply.

During the negotiations on a lease, the landlord may require a deposit (kauce) from the tenant. This is a refundable deposit for the rent, as well as payments for the services for using the apartment. According to the Civil Code, the landlord has the right to determine the amount of kauce, but this must not exceed the sum of six month’s rent on the apartment. The landlord must put the security deposit into special account (this in reality is rarely done). The landlord has the right to use this deposit to cover the debts/underpayments of rent and services related to the housing, caused by the tenant. After the expiry of the lease, the landlord must return the deposit to the tenant, no later than 30 days after the end of the renting of the apartment (expiration of lease or release of the apartment by the tenant).

KAUCE, or in accordance with paragraph 2254 of the Civil Code, the «security» (jistota),  – a deposit – is a financial guarantee, that the tenant will fulfill his obligations under the terms of the lease contract. The condition for the occurrence of this obligation – deposit or Kauce – is a preliminary agreement between the tenant and the landlord.

The landlord must return the deposit to the tenant at the end of the lease term. However, the landlord is entitled to deduct from the deposit the sum of what the tenant owes. In other words, any debts relating to utilities or property damage. One innovation from 2014 is a legal guarantee for the tenant about the right of payment of the percentage of the deposit for the period of paying the deposit until its return.

However, the specific details of the lease contract, on which both parties agreed is very important. Attention should also be paid to the fact, that the return of the deposit is connected to the end of the lease and not – with the cases such as an eviction.

*Note: the rent on an apartment does NOT end:

  • by the eviction: if the tenant wants to move out of the apartment before the end of the lease, they must terminate the lease of the apartment according to the above rules, and by agreement with the landlord. If they do not do this, then the lease is still valid.
  • With a change of landlord. A situation may arise, where the owner of the apartment sells the apartment to another person and as such the landlord changes. The new owner assumes the legal position of the original owner, and the lease cannot be arbitrarily changed or terminated without appropriate reasons.

 

Elmira Lyapina, Prague, 2014


Disclaimer about the nature of the information contained in this article. The information provided in this article is general information, and does not constitute legal advice, and may not be 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 the year 2014. Therefore, while using such information, any changes made to the legislation after that date should be taken into consideration. This is a translation of an article which was published firstly in the Russian language on December 29, 2013, on the web page http://vk.com/jurist_praha?w=wall-60692647_7