Division of a Building into Units from a Lawyer's Perspective –

Why isn't owning a "part" of a building enough? The difference that can be worth millions

Owning an ideal share in a building, for example, one-half, means in practice that you do not own any specific apartment or space. You are a co-owner of the entire property, and your rights are limited by the rights of others. Any significant action—whether it's renovating an apartment, renting it out, or selling it—requires the consent of the other co-owners.

For a business plan, this is a paralyzing situation. Imagine not being able to use "your" apartment as collateral for a bank loan because you don't own a separate immovable property, but only a share in the whole. Furthermore, all co-owners are liable for debts associated with the property jointly and severally, which represents a huge business risk.

What security does condominium ownership offer?

In contrast, there is condominium ownership, a special legal regime created precisely by dividing a building into units. Each unit defined in this way (an apartment or non-residential space) becomes a separate immovable property registered in the Land Registry. You can freely dispose of this unit—sell it, donate it, rent it out, or encumber it with a lien to obtain a mortgage, all without needing to ask for the consent of the other owners in the building.

This transformation from a risky share into a portfolio of secure and liquid assets is the foundation of a successful development project. The market value of a legally sound and independently defined unit is significantly higher than the value of a corresponding share in the building, often by tens of percent. The process of dividing a building into units is therefore not just an administrative act, but a key strategy for maximizing profit and minimizing risk.

The key to success: What is an owner's declaration and why is it so important?

The cornerstone of the entire property division process is a document called the owner's declaration. This is not a mere formality, but a kind of "constitution" for the building that defines the rights and obligations of all owners for decades to come. Its precise preparation determines whether the management of the building will be trouble-free or become a source of constant disputes and legal complications.

What are the mandatory requirements of an owner's declaration?

The content of this key document is strictly defined by Section 1166 of the Czech Civil Code. Every high-quality declaration must contain at least the following parts:

• Property details: Precise identification of the land plot, building, building number, municipality, and cadastral area.

• Definition of units: Each unit must be unambiguously named and designated (by number, location on the floor), its purpose of use must be specified (e.g., apartment, studio, office), and its floor area must be precisely calculated.

• Definition of common areas: A detailed description of all common areas of the property. It is necessary to distinguish between areas that serve all owners (e.g., roof, foundations, corridors) and areas reserved for the exclusive use of the owner of a specific unit (typically a balcony, terrace, or cellar cubicle).

• Size of shares in common areas: Determination of co-ownership shares, which are usually based on the ratio of the unit's floor area to the total floor area of all units in the building. This share determines the weight of a vote at the owners' meeting and the amount of contributions for the management of the building.

• Rights and encumbrances: Specification of which real rights (e.g., easements) and encumbrances (e.g., liens) are transferred to the new owners of the units.

• Management rules: If a homeowners' association (SVJ) is not established in the building, the declaration must contain rules for the management of the building and for the use of common areas.

• Attachments: An integral part are the floor plans of all floors (or their schematics), which clearly show the location of individual units and common areas, and include data on floor areas.

A well-drafted owner's declaration is the foundation for creating trouble-free condominium ownership. This technical term refers to a legal regime where the ownership of a unit is inseparably linked to an ideal share in the common parts of the immovable property.

At ARROWS, we specialize in preparing owner's declarations. Our Prague-based lawyers draft these key documents daily for development projects and property managers, ensuring they are not only legally sound but also practical and commercially prudent for future management and sale.

What steps await you? The division process from A to Z

The process of dividing a building into units is a sequence of precisely defined steps that require the coordination of several experts and authorities. Any mistake can delay the entire project by months. Let's look at the whole process step by step.

Step 1: Preparation and surveying

Everything begins with technical preparation. It is essential to have a plan of the building and units drawn up. This plan will precisely survey and calculate the floor areas of all future units and define the common areas. The plan is an attachment to the owner's declaration and a basis for registration in the Land Registry.

Step 2: Drafting the owner's declaration

This is the crucial legal phase where technical data is transformed into a legally binding document. As described above, the declaration must contain all statutory requirements. It is here that the lawyers at ARROWS take full responsibility to ensure that every detail is in accordance with the law, case law, and, above all, your business plan.

Step 3: The role of the building authority

The involvement of the building authority is a frequent source of confusion. The following applies:

• If you are only legally dividing an existing, properly approved building without any construction modifications, you generally do not need the consent of the building authority.

• However, its active role is necessary if the division is associated with construction changes, such as an extension, addition, change of use, or re-approval (e.g., from a family house to an apartment building).

• It is possible to request a certificate from the building authority confirming that the definition of the unit is in accordance with building regulations. This document increases legal certainty for future buyers, and the Land Registry can register it as a note to the unit.

ARROWS will handle all communication with the building authority on your behalf to obtain the necessary permits and certificates.

Step 4: Registration in the Land Registry

Units legally come into existence only upon their registration, or entry, in the Land Registry. This registration has a constitutive effect—meaning it establishes the right, not merely confirms it. For a successful registration, a registration application must be filed with the relevant Land Registry office along with all attachments:

• A completed registration application form.

• The original owner's declaration with an officially certified signature.

• Site plans of the units and common areas.

• Any consents from third parties (e.g., consent from a bank if a lien is attached to the property).

An administrative fee, currently CZK 2,000, is payable for filing the registration application. At ARROWS, we see this entire process not just as a legal act, but as project management.

We save our clients time and eliminate the risk of delays by coordinating with the surveyor, communicating with authorities, and guaranteeing the flawlessness of all documents.

What to avoid? The most common mistakes that can cost you time and money

Preparing an owner's declaration may seem like a routine task, but hidden mistakes can have fatal consequences. Even a minor inaccuracy can lead to disputes, financial losses, or even the invalidation of the entire process. Here are the most common problems we encounter in practice.

• Unclear definition of units and common areas: Vaguely described boundaries between private and common property are a ticking time bomb. Who is responsible for repairing the terrace? Can an owner take over part of the hallway for a shoe rack? Without clear rules in the declaration, these questions are a source of endless disputes.

• Inaccurate calculation of shares: An error in calculating the share in common areas, even by a fraction of a percent, permanently affects voting rights and the amount of contributions to the repair fund. Correcting such an error after years is extremely difficult.

• Obsolescence and non-compliance with the law: Using an old template that does not respect the current Czech Civil Code and Government Regulation No. 366/2013 Coll. can lead to parts of the declaration being invalid.

• Ignoring easements and liens: If a lien is attached to the property (e.g., a bank mortgage), it will automatically encumber all newly created units after the division. This can completely block their sale if the bank does not grant consent to limit the lien to only some of them.

• Absolute invalidity: The worst-case scenario is when the Land Registry or a court finds the declaration to be fundamentally flawed and declares it invalid. This can lead to the cancellation of already existing units, the invalidation of purchase agreements, and chaos in financing.

Common areas of the building: Hidden battlegrounds and how to prevent them

No area in apartment buildings evokes as much emotion and dispute as the management and maintenance of common areas. For developers and property managers, understanding this issue is key to establishing functional and conflict-free relationships in the building. The legal framework is primarily defined by Section 1160 of the Czech Civil Code and the implementing Government Regulation No. 366/2013 Coll.

Which parts of the building are always common areas?

Many owners are surprised to learn what is considered a common part of the property from a legal perspective. This includes not only foundations, load-bearing walls, the roof, corridors, and staircases, but also elements that seem to be part of the apartment:

• Balconies, loggias, and terraces: Even if they are accessible only from one unit, the law strictly defines them as common areas. The owner of the unit only has the right of exclusive use. This means that while they pay for minor maintenance themselves, more costly renovations (e.g., repairing waterproofing) are borne by the entire homeowners' association.

• Windows and apartment entrance doors: Yes, even windows and entrance doors are considered common areas, specifically as part of the building envelope.

• Cellar cubicles and garage parking spaces: These spaces are typically defined as common areas designated for the exclusive use of specific owners.

The correct definition of these areas and the rules for their maintenance and repairs in the owner's declaration is the best prevention against future disputes. The lawyers at ARROWS have extensive experience from managing a portfolio of more than 150 joint-stock companies and 250 limited liability companies, many of which are involved in property management, and can set up rules that work in practice.

Have a project abroad? No problem.

In today's globalized world, it is common for developers, investment funds, and management companies to operate in multiple markets. However, real estate law is highly local, and procedures that apply in the Czech Republic may be completely different in other countries. This fragmentation poses a significant administrative burden and legal risk for international players.

Projects with an international element are daily business for us at ARROWS. Thanks to our ARROWS International network, built over ten years, we are able to provide comprehensive legal services for property division, acquisitions, or development in dozens of countries worldwide.

We coordinate teams of local experts and provide you with a unified and understandable output that protects your investments regardless of borders. Our added value is the role of a central project manager who saves you the trouble of managing several local offices and ensures a consistent strategy across your entire portfolio.

How can we at ARROWS specifically help you?

Dividing a building into units is a complex process where every mistake can be costly. At ARROWS, we therefore offer a comprehensive service that covers the entire project lifecycle—from the initial concept to long-term management. Our goal is to provide you not only with legal certainty but also a strategic advantage.

Our services include, among others:

• We will draft internal directives and rules for building management that work in practice.

• We will prepare all documentation to protect you from fines and penalties, whether from the building authority or other bodies.

• Our legal consultations are focused on prevention—we protect you from the risks of future disputes and costly inspections.

• We will prepare or review all contracts, from work contracts with suppliers to lease agreements for common areas.

• We will provide you with full representation before courts and administrative authorities, including the Land Registry and the building authority.

• Do you need to obtain licenses or necessary permits for re-approval? We will take care of the entire process.

• We also offer expert training for employees or management of your property management company, including a certificate, to keep you one step ahead.

Our experience is backed by long-term cooperation with more than 150 joint-stock companies, 250 limited liability companies, and 51 municipalities and regions. We pride ourselves on speed, high quality, and a practical approach to problem-solving.

Take the first step towards a seamless division of your property

A professionally prepared owner's declaration and a correctly managed property division process are not an expense, but an investment. An investment in the higher value of your property, in legal security, and in future trouble-free management. Avoiding mistakes at the beginning means saving yourself a huge amount of time, money, and worries in the future.

Whether you are at the beginning of a development project or looking for a more effective way to manage an existing portfolio, the right legal steps are the foundation of success. Contact us at ARROWS. We will be happy to discuss your plan and propose a tailor-made solution.

Moreover, at ARROWS, we value business ideas and actively connect our clients when we see interesting investment or business opportunities. We look forward to hearing about your project as well.