At the end of 2016, Act No. 89/2012 Coll., the Civil Code (the "Civil Code") was amended for the first time by Act No. 460/2016 Coll. (the "Amendment"). With effect from 1 January 2018, the Amendment will bring a fundamental change to the Civil Code in a form of reintroduction of co-owners' statutory pre-emption rights to co-owned real estate.
As of 1 January 2014, the Civil Code removed the general statutory pre-emption rights of co-owners to co-owned property shares originally stipulated under its predecessor, Act No. 40/1964 Coll., the Civil Code, and replaced it with a statutory pre-emption right applicable only if the respective co-ownership was established (i) by disposition mortis causa; or (ii) by any other legal event (act) that disables co-owners from influencing their rights and obligations arising out of the co-ownership from the beginning. In addition, the new limited pre-emption right is generally time-barred to a six-month period from the establishment of the co-ownership, unless the co-ownership relates to an agricultural establishment (in Czech: zemědělský závod), which has no time limitation.
Renewal of statutory pre-emption right to real estate
According to the Czech Ministry of Justice, limitation of co-owners' statutory pre-emption rights by the Civil Code, does not correspond to actual social needs and expectations. Therefore, it proposed the reintroduction of a statutory pre-emption right to real estate (see below) under the Amendment enacted at the end of 2016. The reintroduction of the statutory pre-emption right is intended primarily to prevent situations where third parties may enter into co-ownership against the will of other co-owners.
What is new?
The Amendment introduces new wording to Sections 1124 and 1125 of the Civil Code. Unlike the current legislation, the new statutory pre-emption right shall not have any time limitations, but will relate only to transfers (both gratuitous and for consideration) of co-ownership shares in real estate (as mentioned above).
Co-owners of real estate shall be entitled to preferentially purchase any transferred shares from other co-owners, unless the transfer is made to a related person (in Czech: osoba blízká) of the transferor, such as the transferor's relatives, spouse or some other family members and related legal entities (e.g. parent company towards a subsidiary or its managing persons, or other members of a corporate group). In case of multiple co-owners (apart from the transferor), the co-owners shall be entitled to buy a transferred share in proportion to their shares in the co-ownership, unless they have agreed otherwise.
The Amendment also preserves the rule that in case of gratuitous transfers, co-owners shall be statutorily entitled to preferentially buy the transferred share (or its part) for a usual price. Unlike under the current legislation, however, this rule on determination of price shall no longer apply to other statutory pre-emption rights stipulated by the Civil Code or other legislation.
A further introduction is that any co-owner shall be entitled to waive its pre-emption right with effect also for its legal successors. Furthermore, the waiver of the statutory pre-emption right shall have to be registered in the public register (i.e. in the Cadastral Register), provided that the co-owned real estate is subject to registration in the respective register.
The provisions on the new statutory pre-emption right of co-owners to co-owned real estate shall become effective as of 1 January 2018 and shall fully replace the current wording of Sections 1124 and 1125 of the Civil Code.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.