Jak umí ARROWS řešit složité spoluvlastnické vztahy na činžovních domech

What co-ownership of an apartment building means in practice

Co-ownership by shares means that one property—typically an apartment building or a building with multiple flats—belongs simultaneously to two or more persons, each of whom holds a certain co-ownership share in the property. This share is recorded in the Czech Cadastral Register (katastr nemovitostí) and is usually expressed as a fraction, for example one half, one third or 1/10.

Crucially, however, a share does not mean a specific flat or floor, but an ideal share in the entire property: each co-owner has ownership rights to all parts of the building, only to a different extent depending on the size of their share. The Civil Code expressly provides that each co-owner has the right to possess and use the common property and to take its fruits and benefits. Crucially, however, the share represents ideal co-ownership of the entire property, which means that each co-owner has ownership rights to all parts of the building.

The current regulation of co-ownership in the Civil Code is based on the principle that co-ownership shares determine not only the share in income, but also in costs and decision-making. The attorneys of ARROWS, a Prague-based law firm, therefore recommend putting in place detailed contractual arrangements to prevent deadlocks in future conflicts.

How co-ownership of an apartment building typically arises

In Czech practice, co-ownership by shares of apartment buildings often arises through inheritance, where several relatives take over one building and each of them acquires a certain share. In such a case, the co-owners did not have the opportunity in advance to set their mutual rights and obligations, and they often have different ideas about how the building should be handled going forward.

In addition, under the Civil Code, in the first six months a statutory pre-emption right applies in inheritance co-ownership, meaning that when transferring a share it must first be offered to the other co-owners. This does not apply where the transfer is to close persons, such as spouses, siblings or descendants. In the first six months after co-ownership arises through inheritance, a statutory pre-emption right applies, limiting the transfer of a share to third parties.

Another typical scenario is the joint acquisition of an apartment building by several investors or partners—often family structures, smaller investment clubs, but also capital groups. In such cases, co-ownership arises on the basis of a purchase agreement, or through a combination of contributions to a special purpose vehicle (SPV) and direct co-ownership.

Co-ownership may also arise from the settlement of community property of spouses after divorce, where part of the real estate remains in the co-ownership by shares of the former spouses. In each of these scenarios, it is essential to set the rules in time—if co-owners perceive the situation as only temporary, they risk future loss of value. Timely setting of clear rules is crucial for all ways in which co-ownership arises; otherwise, disputes may escalate quickly and the asset may lose value.

The difference between co-ownership by shares, condominium ownership and a housing cooperative

In practice, it is important to distinguish co-ownership by shares of an apartment building from condominium ownership and cooperative housing. In co-ownership by shares, co-owners do not have their specific flats; instead, each owns only an ideal share in the entire building, and any fundamental disposition requires joint consent.

By contrast, condominium ownership arises by dividing the building into units through an owner’s declaration and registration in the Czech Cadastral Register (katastr nemovitostí). Each unit becomes a separate immovable thing, which the owner may sell, lease or encumber with a mortgage without the consent of the others. Condominium ownership allows each unit to be dealt with independently, which significantly increases its market value and liquidity.

The third regime is cooperative housing, where the owner of the building is a housing cooperative and members only have a lease right to a flat based on their cooperative share. This share can be transferred, but it cannot easily be pledged for a mortgage, which complicates financing for end buyers.

As part of client consultations, the attorneys of ARROWS, a Prague-based law firm, always first verify under which regime the given apartment building is owned and whether it may be appropriate to consider a transformation. Each option has its specific advantages and costs, which must be assessed in connection with the overall business plan. The attorneys of ARROWS, a Prague-based law firm, verify the current ownership regime and recommend the optimal transformation of the building according to your investment plan.

Typical sources of conflicts among co-owners of apartment buildings

The Civil Code distinguishes three basic levels of co-owner decision-making: ordinary administration, significant matters, and decisions requiring the consent of all. Ordinary administration, which includes maintenance, minor repairs and standard leasing, is decided by the co-owners by a majority of votes calculated according to the size of their shares.

Significant matters are considered substantial changes to the common property, such as extensive renovations or a change in the purpose of use of the building, where the law requires a two-thirds majority. In some cases, however—for example when pledging the entire building to a bank—100% consent of all co-owners is necessary. For fundamental decisions such as encumbering the property with a pledge, the law requires 100% consent of all co-owners.

Two co-owners with a 50/50 share cannot decide on administration without mutual agreement, which often leads to the operation of the building being blocked. It is only possible to lease such part of the property to which a co-owner has an exclusive right of use based on a valid agreement.

ARROWS law firm in Prague attorneys often encounter in practice that co-owners underestimate these differences and enter into contracts without the required consent. The consequences may include invalid legal acts, claims for damages, or serious complications when dealing with the financing bank. ARROWS law firm in Prague attorneys help clients prevent the risks of invalid contracts and ensure the necessary scope of consents for all types of transactions.

Excessive use of real estate and conflicts over the use of apartments

The law assumes that co-owners will agree on how the house will be used, and such an agreement does not need to be in writing for internal purposes. However, case law shows that an oral agreement is difficult to prove and often leads to serious disputes over the scope of use of individual premises.

The Supreme Court has concluded that decisions on the manner of use of the common property fall within ordinary administration, for which a simple majority of votes is sufficient. However, if a co-owner uses the property beyond the scope of their share without an agreement with the others, unjust enrichment arises on their part. Using the common property beyond the scope of a co-ownership share without an agreement gives rise to an obligation to disgorge unjust enrichment to the others.

In such a case, the other co-owners are entitled to monetary compensation in the amount of the usual rent, which can be enforced retroactively for several years. In locations with high market rents, these claims can reach millions, further escalating the situation within a family or a company.

ARROWS law firm in Prague helps in these cases to analyse existing agreements, quantify unjust enrichment, and choose an appropriate resolution strategy. The firm’s attorneys also prepare new use agreements that fully reflect current case law and minimise the risk of future disputes. ARROWS law firm in Prague will help you quantify unjust enrichment and prepare a legally watertight agreement on the use of apartments.

Financial imbalance: costs, income, and unilateral investments

Co-owners are obliged to contribute to the costs associated with the administration and maintenance of the house in proportion to their shares, even if they do not use the property at all. A passive co-owner must therefore pay their proportional share of, for example, roof repairs, elevator repairs, or common insurance.

If an investment in the house is made by only one of the co-owners, it is necessary to distinguish whether they had the consent of the others. If consent was granted, the investing co-owner has the right to demand from the others proportional reimbursement of the actual costs immediately during the existence of the co-ownership. An investment made with the consent of the other co-owners gives rise to the right to proportional reimbursement of costs already during the existence of the co-ownership.

However, if a co-owner invests without consent and it is not an emergency repair, they are entitled to compensation only to the extent of the actual increase in the value of the house. This compensation becomes due only upon termination of the co-ownership, and its amount is proven by a complex expert report.

ARROWS law firm in Prague attorneys prepare strategies for clients to legitimise investments and assist with the recovery of outstanding amounts. At the same time, we recommend that clients always support any major repairs with a written decision of the co-owners, which is the cheapest prevention of disputes. ARROWS law firm in Prague attorneys will help you legitimise investments made and safely recover outstanding contributions to the administration of the house.

Entry of third parties: sale of a share, enforcement, and a new co-owner

The current legal regulation has significantly limited the statutory pre-emptive right of co-owners in tenement houses. In general, a co-owner may sell their share to a third party entirely freely without the consent of the others, unless the co-ownership arose through inheritance.

If a co-ownership share becomes subject to enforcement, only that share is sold at auction, not the entire property. However, enforcement against a share fundamentally paralyses the administration of the entire house, prevents it from being pledged for bank loans, or divided into units. Enforcement imposed on the share of one of the co-owners practically blocks any dealings with the house as a whole, including its financing.

The entry of a new, often speculative, co-owner then completely changes the dynamics of relationships and jeopardises the existing administration of the building. At such moments, it is necessary to act quickly and use all legal tools to protect the remaining assets.

ARROWS law firm in Prague helps clients with buyouts of shares at auctions, setting up contractual pre-emptive rights, and preparing administration agreements. Our support ensures that existing co-owners retain control over the house even in the event of unexpected property changes. ARROWS law firm in Prague will protect you when a new co-owner enters and help you secure control over the administration of the house.

How ARROWS attorneys set the rules to prevent disputes

The statutory regulation of co-ownership is relatively general so that it can be applied to a wide range of situations. Therefore, it gives co-owners ample room to regulate their rights and obligations contractually, in particular through a co-ownership agreement. Without such an agreement, co-owners rely on general statutory limits, which is often insufficient for tenement houses.

A high-quality co-ownership agreement for a tenement house precisely defines what is considered ordinary administration and what is already a significant investment requiring a higher qualified majority. It also sets out how co-owners are convened, how voting is conducted, and how decisions are documented, including the possibility of per rollam approvals. The agreement clearly sets financial limits for ordinary repairs as well as decision-making processes, preventing lengthy arguments among co-owners.

It also typically includes provisions on appointing a property manager and the scope of their authority vis-à-vis third parties. From the perspective of preventing conflicts, it is also important to set mechanisms for resolving deadlocks, such as binding mediation or pre-agreed procedures for buyouts of shares.

ARROWS law firm in Prague takes into account in these agreements not only the legal framework but also the specific business motivations of the co-owners. Experience from dozens of cases shows that a high-quality co-ownership agreement can prevent most disputes that would otherwise end up in court. ARROWS law firm in Prague structures co-ownership agreements to protect your interests and effectively prevent court disputes.

Agreements on the use of apartments and non-residential premises

Although the law allows oral use agreements, in the case of tenement houses with multiple apartments such an approach is highly risky. If the rules are not clearly written and do not define who uses specific apartments or parking spaces, it is only a matter of time before disagreements arise over the scope of use.

A use agreement in a tenement house allocates specific apartments for exclusive use, often in a proportion corresponding to the shares. This agreement is usually accompanied by an arrangement of financial relations, where the person who uses the more valuable space pays the others an agreed compensation. A written use agreement clearly sets compensation for excessive use of premises and ensures a fair financial settlement.

Case law emphasises that a use agreement is binding also on the legal successors of the co-owners until a material change in circumstances occurs. This brings stability, but also a risk for those who buy a share without reviewing historically agreed use regimes.

ARROWS law firm in Prague attorneys therefore, during due diligence of tenement houses for investors, always review existing use agreements and their legal effects. Our goal is to ensure that the client purchases a share with a clear understanding of their actual use rights. ARROWS law firm in Prague attorneys, as part of the due diligence, analyse existing use rights and protect your investment from future disputes.

House Rules and Internal Regulations

House rules are a very useful tool for regulating everyday coexistence in an apartment building with multiple tenants. They set out rules for the use of common areas, cleaning, night-time quiet hours, or fire safety, but they must not unlawfully restrict the rights of the building’s residents.

In an apartment building held in co-ownership by shares, house rules may be adopted either by agreement of all co-owners or by a majority decision. If they are well drafted and form an annex to lease agreements, they significantly reduce the risk of minor operational conflicts in the building. Well-prepared house rules prevent operational conflicts between tenants and thus indirectly protect relationships among the co-owners themselves.

ARROWS advokátní kancelář prepares tailor-made house rules for a specific building and its operational needs. Our Prague-based attorneys ensure that internal regulations are fully compliant with applicable Czech legislation and protect the building owner against operational risks.

Addressing specific situations: refurbishment, leasing, division of the building

More extensive refurbishment of an apartment building—replacement of the roof, insulation of the façade, or installation of an elevator—are among the most common triggers of disputes. The reasons include high financial costs, different investment horizons of the co-owners, and differing views on the return on investment. From a legal perspective, it is crucial to distinguish whether this is a necessary repair or above-standard technical improvement.

Necessary repairs and urgent emergency interventions may be carried out even by a single co-owner without the prior consent of the others in order to avert damage. In such a case, the co-owner is entitled to proportional reimbursement of the actually incurred costs from the others. These costs are due already during the co-ownership. For necessary repairs, the investing co-owner is entitled to proportional reimbursement of costs immediately, regardless of whether the co-ownership continues.

For planned refurbishments, however, it is necessary to have an approved decision of the co-owners in advance, to the extent of the required statutory or contractual majority. For these purposes, Czech law generally requires a two-thirds majority of the votes of all co-owners calculated according to the size of their shares.

Právníci ARROWS advokátní kanceláře assist with the formal approval of refurbishment works as well as with the preparation of works contracts with suppliers. The advice also includes assessing compliance with the Building Act, which sets out procedural steps for construction permitting. Právníci ARROWS advokátní kanceláře ensure the formal approval of refurbishments and secure contractual relationships with general contractors.

Leasing apartments: lease vs. accommodation, tax and licensing implications

An apartment building is an income-generating asset, and from a legal perspective the difference between long-term leasing and accommodation is absolutely fundamental. A lease is a long-term relationship intended to satisfy housing needs, whereas short-term accommodation via online platforms constitutes business activity under Czech trade licensing rules.

Rental income is subject to income tax without the obligation to pay social security and health insurance contributions, which is advantageous for many owners. By contrast, income from accommodation is income from self-employment, is subject to contributions, and requires registration in the new state register eTurista. Short-term accommodation entails stricter tax, contribution, and registration obligations, led by the new eTurista system.

Before purchasing a building, it is essential to carry out legal due diligence of the existing lease agreements to uncover hidden risks and unfavorable terms. Lease agreements automatically transfer to the new acquirer upon the transfer of ownership and can significantly affect the value of the property.

Právníci ARROWS advokátní kanceláře systematically analyze these agreements and alert investors to risk areas. We help you set up an optimal leasing model that is fully compliant with tax, construction, and trade licensing regulations. Právníci ARROWS advokátní kanceláře conduct in-depth reviews of lease agreements and propose safe models for both long-term and short-term leasing.

Division of an apartment building into units

Dividing a building into units and transitioning to the condominium co-ownership regime is a common way to resolve co-ownership disputes. This process begins with precise measurement of the building, delineation of the residential units, and subsequent preparation of the owner’s declaration.

The owner’s declaration precisely defines the individual apartments, the common parts of the building, and any exclusive use rights to balconies or cellars. Each unit is always inseparably linked to the corresponding co-ownership share in the common parts of the building and the land. By dividing the building into units, co-owners obtain separate real estate assets that they can freely trade.

This step makes it possible to sell apartments separately or encumber them with a mortgage, which significantly increases the market value of the building. However, if at least five units are defined with three different owners, a statutory obligation arises to establish a unit owners’ association (SVJ).

ARROWS advokátní kancelář provides comprehensive turnkey legal services in such cases. We will prepare the owner’s declaration, set up the bylaws of the new SVJ, arrange registration in the Cadastral Register of Real Estate, and guide you through the entire process without unnecessary delays. ARROWS advokátní kancelář will ensure the complete division of the building into units and the establishment of the SVJ for you, with flawless registration in the Cadastral Register.

How ARROWS handles co-owner breakups and court settlement

No one can be forced to remain in co-ownership, and everyone has the right to request separation or termination of co-ownership at any time. However, because court proceedings are lengthy and costly, the most appropriate first step is usually an attempt to reach an out-of-court agreement.

Out-of-court settlement most often consists of one co-owner buying out the others’ shares at a price determined by an expert valuation. Another option is a joint sale of the entire property to a third party and subsequent distribution of the proceeds according to the ownership shares. An out-of-court agreement on a share buyout or a joint sale of the property saves time as well as the high costs of court proceedings.

A joint sale requires agreement on the choice of real estate broker, the minimum purchase price, and how transaction costs will be allocated. Without clear contractual provisions for these parameters, even an attempt to reach agreement can quickly turn into another conflict.

In such cases, ARROWS, a Prague-based law firm, acts as legal counsel and an experienced negotiator. We help the parties find an economically rational compromise and prepare complete contractual documentation that safely transfers ownership rights. ARROWS, a Prague-based law firm, acts as an impartial negotiator and prepares secure settlement agreements and share buyout agreements.

Court-ordered termination and settlement of co-ownership

If an agreement is not possible, the only option is to file a claim for termination and settlement of co-ownership with the competent Czech court. When deciding, the court is strictly bound by the three-tier statutory order of methods for settling the property.

First, the court examines whether a physical division of the building is possible, typically into separate residential units. If that is not realistically possible, the court will award the building to one of the co-owners for adequate compensation, the amount of which is determined by an expert valuation. When the property is awarded to one co-owner, the amount of adequate compensation is determined based on the current market value of the entire property.

Only if the building cannot be divided and none of the co-owners wants it or has the funds to pay out the others will the court order a sale by auction. This option is usually the least advantageous for both sides due to high costs.

The attorneys of ARROWS, a Prague-based law firm, represent clients throughout the entire court proceedings and work closely with court-appointed experts. Our task is to secure the most suitable method of settlement for the client and protect their financial interests. The attorneys of ARROWS, a Prague-based law firm, will guide you through the entire court process and ensure an objective expert valuation of your share.

Speculative shares and protection of bona fide co-owners

Speculative purchases of co-ownership shares are an increasingly common phenomenon on the Czech real estate market. Speculators buy minority shares with the aim of putting pressure on the other co-owners and forcing them into an unfavorable buyout.

Although the case law of the Supreme Court of the Czech Republic allows a defense against abuse of rights, the mere purchase of a share for profit is not unlawful. A defense requires detailed knowledge of case law and a properly chosen litigation strategy before the court. Effective legal defense against speculative owners requires a swift response and precise application of current court decision-making practice.

ARROWS, a Prague-based law firm, helps owners withstand these speculative pressures and proposes effective procedural steps. Our attorneys in Prague will help you use statutory legal instruments to protect your assets and will negotiate a buyout of the share on objective terms.

Questions related to co-ownership

1. Can the court refuse to terminate co-ownership if I request it?
The court may dismiss a claim for termination of co-ownership only in entirely exceptional and justified cases where termination is sought at an inappropriate time or would cause obvious and unjust harm to the other co-owners. Even in such situations, however, the court may only temporarily postpone termination of co-ownership (for a maximum of two years, with the possibility of repetition if statutory conditions are met), not permanently prohibit it. It is therefore essential to formulate the procedural defense correctly, with which the attorneys of ARROWS, a Prague-based law firm, can assist you.

2. How is the amount of compensation determined if the court takes my share and awards the building to another co-owner?
The compensation corresponds to the value equivalent of your share determined from the market price of the entire property, without applying any minority discount. This value is determined by the court based on an expert report prepared by a certified real estate valuation expert. In court proceedings, the quality of the expert report and the proper formulation of objections to it are crucial—ARROWS, a Prague-based law firm, will fully arrange and oversee both for you.

3. How long does court settlement of co-ownership typically take?
Court proceedings on termination and settlement of co-ownership are among the most complex civil disputes and in practice most often take between two and five years, depending on the number of parties, the complexity of the technical assessment, and the number of appeals filed. Throughout the proceedings, dealing with the building may be practically paralyzed, which reduces its profitability. The attorneys of ARROWS, a Prague-based law firm, therefore always prioritize analyzing with clients the possibilities of an amicable out-of-court settlement.

Cross-border and complex structures: funds, banks, long-term management

Apartment buildings are in most cases financed by bank loans, which require security in the form of a mortgage over the property. In the case of fractional co-ownership, the consent of all co-owners is absolutely necessary to encumber the entire building with a mortgage.

Without unanimous consent, the bank will not provide a loan secured by the entire building, which may block the planned renovation or refinancing. It is therefore necessary to precisely time and coordinate the signing of the loan and mortgage agreements with the filing in the Czech Real Estate Cadastre. Timely coordination of mortgage agreements and filings in the Czech Real Estate Cadastre is the key to successful drawdown of bank financing.

A mortgage lien is created only upon its registration in the Czech Real Estate Cadastre based on a final decision of the Cadastral Office. Any delay in this process may jeopardize the smooth release of funds or the entire transfer of ownership.

ARROWS advokátní kancelář prepares detailed schedules for these transactions and ensures complete contractual documentation, including attorney escrow services. Our experience with financing banks guarantees a smooth course of the entire transaction. ARROWS advokátní kancelář provides a complete transactional service, including attorney escrow services and negotiations with financing banks.

International investors and differing expectations

Foreign investors often come with expectations regarding corporate governance and property management based on their home legal systems. However, these expectations may clash with the specifics of Czech legislation and the protection of minority co-owners.

When structuring international investments, it is therefore recommended to use holding structures (SPVs), shareholders’ agreements (Shareholders' Agreements) or joint venture agreements. These instruments make it possible to set flexible decision-making mechanisms fully in line with Czech law. Holding structures and Shareholders' Agreements allow foreign investors to safely set decision-making rules in the Czech Republic.

ARROWS advokátní kancelář, thanks to its active involvement in the international ARROWS International network, understands these differences and helps bridge them. Our Prague-based attorneys efficiently structure cross-border transactions and ensure international investors’ full compliance with the Czech legal system.

Long-term management of apartment buildings and external legal support

Managing an apartment building is a continuous process requiring attention in legal, technical and economic areas. It includes regular updates of lease agreements, dealing with non-paying tenants and debt recovery, communication with suppliers, and service charge settlements.

Increasing management demands and frequent legislative changes make long-term legal oversight an essential part of successful real estate business. Any omission in updating agreements or handling disputes with tenants may result in financial loss. Regular legal audits of lease relationships and management processes are the best prevention against a loss of the property’s profitability.

ARROWS advokátní kancelář offers owners and managers of apartment buildings long-term external legal advice in the form of ongoing legal support. Thanks to professional liability insurance coverage of up to CZK 400,000,000, we provide clients with maximum certainty for their investments.

Final summary

Co-ownership of an apartment building may seem like a simple concept at first glance, but the reality is often much more complex. Once renovations, financing, tax optimisation or inheritance come into play, it becomes clear that the general statutory framework is not sufficient for the smooth operation of the building.

For property owners, investors and family owners alike, it is essential to have strong legal protection in the form of co-ownership agreements and use agreements. Any omission in this area may lead to costly and protracted disputes that will paralyse the operation of the entire building. A precisely set contractual structure is the only reliable tool to protect the value of the property against internal disputes.

The attorneys of ARROWS advokátní kancelář have long specialised in resolving complex co-ownership relationships in apartment buildings. Our specialists combine real estate, tax and litigation know-how to ensure a smooth course of transactions and ongoing management for you.

If you do not want to risk legal mistakes, unnecessary financial losses or protracted disputes in relation to your apartment building, do not rely on oral agreements. Entrust the setup or resolution of your co-ownership arrangements to the experienced attorneys of ARROWS advokátní kancelář and contact us at consultation@arws.cz.

We are ARROWS advokátní kancelář, an entity registered with the Czech Bar Association, and for maximum client security we are insured for professional liability with a limit of CZK 400,000,000. For application to your specific situation, contact us at consultation@arws.cz. We accept no liability for any damages arising from the independent use of the information without prior individual legal consultation.

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