Statutory right of first refusal for property transfers makes an unexpected return

Czech Republic: Amendment to the Civil Code restores statutory preemptive right for co-owners of real property

Back in the day, it caused quite an uproar when the “new” Civil Code did not adopt the original rules governing the statutory right of first refusal of co-owners, which was thus essentially abolished as of 1 January 2015 (certain exceptions notwithstanding). The authors of the new Civil Code justified this abolition of the statutory preemptive right by stressing their intention to strengthen the contractual freedom of parties to a contract. They therefore left it to the co-owners of property to come to an agreement as to whether or not create a preemptive right.

However, in the wake of the adoption of (what is known as) a technical amendment to the Civil Code (Act No. 460/2016 Coll.), the statutory preemptive right of co-owners makes a return to Czech law effective as of 1 January 2018, in essentially the same form as under the “old” civil law. Today, however, it will only apply to real property, whereas the statutory preemptive right of co-owners is being abolished entirely in the case of movable assets.

For the period after 1 January 2018, this means that co-owners of a share in real property have a right of first refusal if one of them were to transfer his or her share, unless the transferee is a person close to the transferor (e.g. their spouse, parent, sibling, etc.). This also applies to transfers for no consideration (such as a gift). If the preemptive right is violated, then the injured party may demand from the transferee of the share in co-ownership that they offer them this share for purchase, on the same terms on which the transferee acquired the share from the original co-owner. If the transferee fails to do so, this obligation may be enforced in court.

In this sense, the amendment marks a return to the times before the current Civil Code came into force, at least with respect to real property. It is fair to ask whether this rather substantial interference with the civil-law framework – which was re-built from the ground only recently – was really indispensable, especially when one considers that frequent legal changes to the law will compromise the legal certainty of its subjects.

 

Source: Act No. 460/2016 Coll., on the amendment of Act. No. 89/2012 Coll., the Civil Code, and related laws

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