Real Estate

Czech Republic: Significant Changes in Real Estate Law under the New Civil Code

In May 2012, the New Czech Civil Code was published in the legal code collection (New Civil Code). After almost 50 years, the current Civil Code will be replaced by the New Civil Code starting 1 January 2014, which changes the civil law entirely. The New Civil Code will also substantially amend and change the real estate law.

New definition of real estate rights

The New Civ­il Code will intro­duce a new wider cat­a­logue of real estate rights, includ­ing estab­lish­ment of new legal insti­tutes such as the right of con­struc­tion and the trust of for­eign prop­er­ty. The cur­rent encum­brances will be divid­ed into servi­tudes (the own­er of a bur­dened plot must refrain from an activ­i­ty or allow an activ­i­ty of a third per­son) and real bur­dens (the own­er of a bur­dened plot must do some­thing in favour of a third per­son).

The cur­rent Civ­il Code does not con­tain any def­i­n­i­tion of a thing, but legal the­o­ry con­sid­ers a thing to be only mate­r­i­al objects that are con­trol­lable and serve the needs of humans. The New Civ­il Code will intro­duce a wide def­i­n­i­tion of a thing where­by the object of legal rela­tion­ships can be a mate­r­i­al or an imma­te­r­i­al thing. In real estate law, cer­tain defined rights will be legal­ly con­sid­ered as an immov­able thing (eg, the right of con­struc­tion).

The principle of Superficies solo cedit and the right of construction

Under the cur­rent Civ­il Code, a build­ing is not part of the plot on which it was con­struct­ed. This means that the own­er of the plot and the own­er of the build­ing on the plot can be dif­fer­ent per­sons and may dis­pose of the build­ing and the plot sep­a­rate­ly.

The New Civ­il Code returns to the clas­sic Roman prin­ci­ple used in most Euro­pean states: struc­tures firm­ly con­nect­ed to the plot are con­sid­ered as parts of the plot. As of 1 Jan­u­ary 2014, build­ings placed on the plot will become part of the plot if the own­er of the build­ing and the plot are the same and the owner’s trans­ac­tions with the plot will always also include the build­ing on the plot.

If the own­er of the build­ing dif­fers from the own­er of the plot on 1 Jan­u­ary 2014, the New Civ­il Code cre­ates a statu­to­ry pre-emp­tion right of the own­er of the plot with respect to the build­ing, and vice ver­sa. The pre-emp­tion right is effec­tive towards all third per­sons; the own­er of the plot will be oblig­ed to offer the plot to the own­er of the build­ing in the case of any trans­fer of the plot to a third per­son. If the pre-emp­tion right is not used, it will also bur­den the new own­er of the plot in favour of the own­er of the build­ing. How­ev­er, if the pre-emp­tion right is used, the sep­a­rate own­er­ship of the plot and the own­er­ship of the build­ing will cease to exist.

In con­nec­tion with the above new prin­ci­ple, a new legal insti­tute will be intro­duced by the New Civ­il Code: the so-called right of con­struc­tion, which is a real estate right declared by the New Civ­il Code for an immov­able thing. All pro­vi­sions reg­u­lat­ing immov­able things in the New Civ­il Code apply to the right of con­struc­tion accord­ing­ly. The per­son own­ing the right of con­struc­tion may build and use a struc­ture on the bur­dened plot up to 99 years. The right of con­struc­tion can be cre­at­ed against pay­ment or free of charge, is trans­fer­able and her­i­ta­ble and becomes legal­ly effec­tive by entry into the land reg­istry. Also, the acqui­si­tion of this right by usu­ca­pio will be legal­ly pos­si­ble.

Acquisition of ownership from a non-owner

Under the cur­rent Civ­il Code, the acqui­si­tion of own­er­ship from a non-own­er is legal­ly not pos­si­ble. The acquir­er can only become a pos­ses­sor with the pos­si­bil­i­ty to acquire the own­er­ship in the future by usu­ca­pio. As this prin­ci­ple also applies in real estate law, one gen­er­al­ly can­not rely on the entry in the land reg­istry on own­er­ship of real prop­er­ty. The per­son inscribed own­er in the land reg­istry may not be the legal own­er of the prop­er­ty because the own­er­ship was not acquired accord­ing to the law.

The New Civ­il Code intro­duces the gen­er­al pos­si­bil­i­ty to acquire the own­er­ship right also from a non-own­er. With respect to the real estate law and the admin­is­tra­tion of the land reg­istry, the New Civ­il Code changes the cur­rent par­tial mate­r­i­al pub­lic­i­ty of the entries in the land reg­istry to full mate­r­i­al pub­lic­i­ty. If some­one acquires real prop­er­ty from a non-own­er that was – based on an invalid legal title – entered as own­er of the prop­er­ty in the land reg­istry, the acquir­er will still become the legal own­er of the prop­er­ty. This fol­lows the new prin­ci­ple that every­body who relies in good faith on the entries in the land reg­istry is pro­tect­ed as if the entry cor­re­spond­ed to the actu­al legal sta­tus.

The impacts of the changes intro­duced by the New Civ­il Code on the cur­rent legal rela­tion­ships regard­ing real estate is unpre­dictable and still a hot top­ic among legal pro­fes­sion­als.

The New Civil Code introduces the general possibility to acquire the ownership right also from a non-owner.