Amendment to Civil Code abolishes pre-emptive right
In April 2020, an amendment to the Civil Code that may significantly enhance the liquidity of residential units was published in the Collection of Laws. Although a drop in real property prices is expected in connection with the COVID-19 outbreak, the amendment may be beneficial for both investors and real property owners. The pre-emptive right of real property co-owners will be almost completely abolished from July 2020 and the regulation will return back to its version in effect from 2014 to 2018.
In January 2018, legislators re-established the old concept of the pre-emptive right to real property in co-ownership in the Czech legal order. If you want to sell your co-owner share in real property, you must first offer it to the other co-owners. This negatively affects sales of residential units/apartments associated with sales of some other parts of common premises, typically garage parking places, cellar cubicles, common driveways/pathways within a compound, and front yards.
The above duty often causes problems when selling residential units: it makes the entire transaction longer and more complicated. Moreover, if any co-owners show interest in the co-owner’s share in non-residential premises on offer, this may reduce the price of the unit being sold.
We already informed about the amendment a year ago. According to the original plan, the amendment was supposed to enter into effect from January 2020; however, its effectiveness has been postponed until July 2020. Nevertheless, the amendment should be beneficial for the real estate market and has the potential to become an efficient anti-crisis measure, as it may significantly accelerate transfers of residential units and related shares in common premises, thus helping owners to sell their property as best as they can and as quickly as possible.
The abolishment of the pre-emptive right from July 2020 will not only affect transfers of residential units but, thanks to amending proposals, also transfers of co-owners’ shares encumbered with pre-emptive rights relating to other types of real property. Transfers of shares in co-ownership arising from inheritances form an exception, unless the co-owner transfers the share to another co-owner or to a family member. In such cases, the duty to first offer the share to other co-owners will apply for the period of six months of the date the co-ownership originated. The pre-emptive right must also be adhered to upon sales carried out before the amendment’s effective date.