Transfer of garage parking place without pre-emptive right again?

The government approved and submitted to the parliament another amendment to the Civil Code, which prescribes, among other things, an exception from the pre-emptive right to a co-owner’s share in real property in certain cases of residential co-ownership. The amendment is proposed to be effective from 1 January 2020.

Not long ago, our lawmakers re-established the pre-emptive right to real property in co-ownership into the Czech legal order, which has brought serious problems where co-ownership involves a unit with a defined garage parking place (or a cellar cubicle) that is usually associated with another unit’s ownership.

Garage parking places are usually co-owned by a larger number of persons and, as a result, to meet the legal requirements as to the pre-emptive right is practically unfeasible. To mitigate the risk that another co-owner exercises their pre-emptive right, the seller’s transaction documentation often includes various complex arrangements, such as the overestimation of the purchase price of a parking place or encumbering a parking place with the right of use. This may have resulted in a higher tax burden for all parties to the transaction.

According to the proposed amendment, the pre-emptive right should not be exercised where the transfer involves a co-owner’s share in a non-residential unit (or real property that is in terms of its function associated with real property divided into units), but only provided that such a share is transferred along with another unit (either residential or non-residential) related to one another in terms of function.

Consequently, after 1 January 2020, where a co-owner’s share in a garage is being transferred along with a function-related unit, the seller need not offer their share to the other garage co-owners.  If, however, only a share in a garage or a share in a residential unit is transferred separately, the pre-emptive right concept remains in place.