Czech Law Firm

Tag: property

  • Common Commercial Lease Terms in Czechia

    Commercial leases in the Czech Republic are governed by the Civil Code, with a distinct set of provisions applying to premises used for business purposes. Compared with residential tenancy, where much of the regime is protective and mandatory, commercial leasing leaves considerably more to the parties, which means the drafting carries correspondingly more weight.

    Term and termination

    The first structural question is whether the lease runs for a fixed term or indefinitely, because the exit rights differ substantially. An indefinite lease is generally terminable on notice by either party, with statutory notice periods applying where the parties have not agreed otherwise. A fixed term gives certainty and restricts early exit, which is an advantage or a trap depending on which side of it you are on. Break rights, if wanted, have to be drafted; they are not implied.

    Rent and its adjustment

    Rent is freely agreed. What is not automatic is indexation: unless the lease provides a mechanism, rent does not rise with inflation, and a great many disputes have followed from an indexation clause that named an index imprecisely or failed to say who calculates it and when. Service charges are a separate head from rent and should be defined as to what is included, how they are apportioned and how they are reconciled.

    • Define the premises precisely. Area, measurement standard and what is included beyond the demised space.
    • Allocate repairs explicitly. Who maintains what is the most common source of ongoing friction.
    • Address fit-out and reinstatement. What the tenant may install, and what must be removed at the end.
    • Deal with assignment and subletting. Silence is not the same as permission or prohibition.

    Security and transfer of the business

    Landlords commonly require a deposit or a guarantee, and the terms on which security may be drawn down and must be replenished belong in the lease rather than in correspondence. A related question worth settling in advance is what happens if the tenant’s business changes hands, since the Czech concept of the transfer of a business establishment can carry lease rights with it in ways the parties may not have anticipated.

    Registration and third parties

    A lease may in appropriate cases be recorded in the cadastral register, which affects its position against a subsequent purchaser of the property. Whether to do so is a commercial question, but it is one the parties should decide deliberately rather than by omission, particularly where the tenant is investing substantially in fit-out.

    Because the Civil Code leaves so much of a commercial lease to the parties, the document really does govern the relationship. A short lease is not a simple lease; it is one in which the questions that were not addressed will be resolved later, more expensively, and by someone else.

    This article is general information about Czech law and is not legal advice.

  • Buying Property in the Czech Republic

    Property transfer in the Czech Republic runs through the cadastral register, and understanding the register is most of understanding the transaction. Ownership does not pass on signature or on payment; it passes on registration. Everything else in the process is arranged around that fact.

    The register

    The cadastre records land, buildings and units, together with ownership and the encumbrances attached to them: mortgages, easements, pre-emption rights, and various notes indicating that a proceeding is under way. It is publicly accessible, and an extract is the starting point for any purchase. The register carries a degree of legal protection for a person who relies on it in good faith, which makes checking it before contracting considerably more than a formality.

    The sequence of a purchase

    A typical transaction involves a written transfer agreement with certified signatures, an application to the cadastral office, and a statutory waiting period before the entry is made. Because the gap between signature and registration carries risk for both sides, the price is normally held by a third party such as a notary, a bank or a lawyer, and released against evidence of registration. Skipping that escrow arrangement is the most common way for a straightforward purchase to become a serious problem.

    • Read the extract, including the encumbrances. Section C of the extract is where the unwelcome surprises live.
    • Check land and building separately. They are not always in the same ownership.
    • Use escrow. Payment released only against registration protects both parties.
    • Watch the notes. A pending proceeding recorded against the property is a warning to stop and investigate.

    Units and common parts

    Buying an apartment means buying a unit, which carries with it a share in the common parts of the building and membership of the owners’ association. The relevant enquiries therefore extend beyond the unit itself to the association: its financial position, its reserve fund, any planned major works, and whether the seller is in arrears on contributions. These are contractual and factual enquiries rather than register ones.

    Tax and cost

    The costs of a purchase include the cadastral fee, notarial or legal fees, and any agent commission. The Czech real estate acquisition tax was abolished in 2020, which changed the arithmetic of transactions materially; income tax questions on the seller’s side and, for those letting the property afterwards, ongoing tax obligations remain relevant considerations.

    The pattern across almost every problematic Czech property transaction is the same: something visible in the register was not read, or money moved before registration did. A purchase where the extract is examined properly and the price sits in escrow until the entry is made is, in the overwhelming majority of cases, an uneventful one.

    This article is general information about Czech law and is not legal advice.

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