Czechia: Apartment Owners’ Associations do not have the power to prohibit short-term apartment rentals (including Airbnb)

In one of its recent rulings, the Supreme Court addressed the issue whether an Apartment Owners’ Association (AOA) may in its Articles of Association stipulate that short-term apartment rentals are conditional upon the unanimous consent of all members of the AOA.

The complainant sought the nullification of a part of the newly adopted (recast) articles of association of the Apartment Owners’ Association (AOA) of which they were a member, and specifically of provisions which made the repeated short-term lease of apartment units for fewer than three months (through Airbnb) conditional upon the consent of all members of the AOA. The complainant argued that the AOA was a legal entity within the meaning of Sec. 1194 (1) of the Civil Code; as such, its powers to exercise rights and enter into obligations ought to be limited to matters related to the management, operation, and upkeep of common areas of the building and of the pertinent land plot. According to the complainant, this scope of competencies of the AOA does not encompass the power to restrict the use rights pertaining to individual apartment units in the ownership of the AOA’s members. The complainant went as far as to perceive an infringement of the right to property in violation of Article 11 of the Charter of Fundamental Rights and Freedoms.

The appellate court (i.e., the Prague High Court) had already ruled in favor of the complainant, in a judgment which postulated that the assembly of the AOA has no right to pass or amend a charter which restricts the exercise of the ownership right of unit owners, given that this right principally finds its limits (within the meaning of Sec. 1012 of the Civil Code) solely where it collides with the ownership title of someone else.

The Supreme Court upheld the legal opinion of the appellate court and added, retracing the line of argument of the complainant, that the purpose of the AOA was to procure the proper administration of house and land as such. It is for the fulfillment of this specific purpose that the Civil Code has endowed AOAs with the status of a legal entity, and thus awarded them the capacity to have (within the limits of the law) certain rights and obligations. In addition, an AOA may, through its own legal transactions, acquire rights and assume obligations, but those are always strictly tied to the consummation of its reason for existence.

Consequently, the articles of association of an AOA may e.g. be amended, according to the Supreme Court, with respect to the members’ right to participate in, and cast votes at, the assembly, their right to be elected to the various bodies of the AOA, or the obligation to provide suretyship for debts of the AOA. By contrast, the articles of association must not interfere with the ownership rights of unit owners; such interference, says the Supreme Court, would be in conflict with the statutory definition of the owner’s rights and obligations with respect to their apartment unit. Pursuant to Sec. 1175 (1) of the Civil Code, each such owner may freely dispose of their unit, exclusively use and enjoy it, and carry out structural modifications in the interior of their unit; in this, they are solely limited by the corresponding rights of other unit owners within the building.

Thus, the Supreme Court concluded, an AOA may not impose conditions, in its articles of association, for (among other things) short-term apartment rentals, as it would be unduly restricting the ownership right of the apartment owner in doing so. The Supreme Court thus upheld the decision by the appellate court by which the amendment to the articles of association was declared null and void as per Sec. 235 of the Civil Code.

Source:
Judgment 26 Cdo 854/2022 by the Supreme Court of 15 March 2023

Subscribe to our newsletter

By pressing Subscribe you consent to our data processing terms