Využití práva stavby v developerských projektech

What is the right of build and why should it interest every developer and investor?

A structure built on the basis of this right does not become part of the land, but is part of the right of build. This mechanism temporarily breaks one of the fundamental principles of civil law – superficies solo cedit (the building is part of the land).

However, this breakthrough is always limited in time, to a maximum of 99 years. It is precisely this temporary nature that is a key factor requiring precise contractual treatment, especially for the purposes of bank financing and future settlement.

Unlike a lease or tenancy, which are mere obligatory (contractual) relationships, the right of build, as a real right (right in rem), provides a much higher degree of legal certainty. Under Czech legislation, your project is thus protected against risks associated with, for example, a change in the landowner or unilateral termination, which is absolutely essential for investments in the hundreds of millions of Czech crowns.

Strategic advantages: How the right of build maximizes return on investment and opens up new opportunities

Using the right of build is not just a legal loophole, but a well-thought-out business decision that can fundamentally improve the economics of your project and open doors to new investment opportunities.

Cash flow optimization: Invest in bricks, not in dirt

The main and most obvious advantage is that you do not have to tie up huge capital in purchasing expensive land. You can allocate these funds directly to the construction itself, higher quality materials, marketing, or the concurrent development of other projects. This significantly reduces the overall need for external financing and optimizes your cash flow.

Access to exclusive locations: Build where you cannot buy

Many attractive plots of land in city centers or strategic locations are owned by entities that do not want to or cannot sell them. Typically, these are municipalities, regions, churches, or various foundations that want to keep the land as a long-term asset for future generations.

The right of build is an ideal tool for them to economically exploit the land without losing control over it. For you as a developer, this opens the way to implementing projects in locations that would otherwise be completely inaccessible.

At ARROWS, our Prague-based legal team has extensive experience in advising the public sector, with over 51 municipalities and regions in our portfolio, and we can effectively moderate negotiations between a developer and a public institution.

Certainty that a lease or tenancy cannot offer: Comparison of alternatives

The choice between the right of build and a long-term lease is not just a legal detail – it is a strategic decision about the level of risk and bankability of the entire project. While a lease agreement can be terminated under certain circumstances, especially upon a change of landowner, the right of build, as a real right registered in the Land Register, "survives" any changes and provides you with almost absolute certainty for the entire agreed duration. This stability is key not only for you but also for the financing bank.

Agreement on the Establishment of the Right of Build: Firm Foundations for Your Project

The success of a project based on the right of build stands and falls on the quality of the contractual documentation. Indeed, the statutory regulation under Czech legislation is relatively brief and incomplete, while case law clarifying disputed issues is only just emerging. Relying on general statutory provisions means leaving key aspects of your investment to chance and the risk of future litigation.

Key essentials that must not be missing

A precisely drafted contract must take into account all phases of the project's life cycle. Absolutely crucial points that need to be regulated in detail include:

• Precise specification of the building: Not only its purpose (e.g., apartment building, logistics center), but also maximum dimensions, structural and technical design, and a binding completion deadline.

• Duration: The contract must contain the exact date of termination of the right of build, which will be registered in the Land Register.

• Building charge: Detailed regulation of the amount, maturity, and, above all, a clearly defined and legally compliant indexation mechanism (e.g., linked to the inflation rate published by the Czech Statistical Office - ČSÚ).

• Settlement upon termination: This is one of the most important points. The statutory regulation, which grants the builder compensation equal to half the value of the building, is often very disadvantageous for the developer. The contract should contain a clear mechanism for determining compensation, ideally at market value.

• Pre-emptive right: The law gives both parties a mutual pre-emptive right (the builder to the land, the owner to the right of build). This right can be contractually modified or even completely excluded, which is often desirable for project flexibility.

• Owner's consent: The contract may stipulate that for certain actions, such as encumbering or selling the right of build, the developer will need the prior consent of the landowner. It is necessary to set these conditions reasonably so that they do not block bank financing or a future exit.

Our Prague-based legal team specializes in real estate law and has extensive experience in preparing complex contractual documentation for development projects. We will prepare a tailor-made agreement on the establishment of the right of build for you, which will protect your investment and minimize future risks.

The biggest pitfalls and how to turn them into an advantage: Financing, disputes, and tax optimization

The right of build carries specific risks, which, however, can be effectively managed and prevented with expert legal assistance. Let us name them openly and show you the way to manage them.

The problem of bank financing: How to convince the bank?

Banks in the Czech Republic still perceive the right of build as a less standard and riskier collateral than the land itself. This is mainly due to its temporary nature and the legal uncertainty associated with the value of the security after the agreed period has expired. This can lead to the bank demanding a higher interest rate, additional collateral, or refusing to finance the project altogether.

A crucial strategic recommendation is: Always pre-negotiate financing with the bank BEFORE signing the final agreement on the establishment of the right of build. This will prevent a situation where you are contractually bound to pay the building charge but do not obtain the funds for construction.

The following table summarizes the most common risks and shows how we at ARROWS can specifically help you with them.

International inspiration and cross-border potential

The right of build is not just a Czech specialty. In countries like Germany and Austria, its equivalent, known as Erbbaurecht, has a tradition of more than a century and is a completely common and proven tool in real estate development. It is used there not only by cities and churches, but also by large corporations for the effective management of their real estate portfolios.

This foreign practice clearly proves that it is a viable and profitable model. The duration typically ranges between 60 and 99 years, and the charge (Erbbauzins) is usually 3–6% of the market value of the land per year. For the Czech market, this means that developers who master this tool first can gain a significant competitive advantage.

Thanks to our ARROWS International network, built over ten years, we handle projects with an international element on a daily basis. Whether you are negotiating with a foreign investor, a landowner, or looking for inspiration in proven foreign models, we are ready to provide you with expert support.

Final Summary

The right of build represents a strategic tool for informed developers and investors to optimize capital, gain access to exclusive land, and ensure higher legal certainty compared to a standard lease. However, its successful utilization stands and falls on the quality of the contractual documentation and proactive risk management, especially in the area of financing.

Do not be discouraged by its apparent complexity. At ARROWS, our Prague-based legal team has extensive experience in this area and is ready to guide you through the entire process – from the initial analysis through negotiations with the landowner and the bank to the successful implementation of the project. Our experience from long-term cooperation with more than 150 joint-stock companies and 250 LLCs (s.r.o.) allows us to provide services quickly and with high quality.

In addition, we pride ourselves on connecting our clients. If you have an interesting investment idea or are looking for a partner for your business, we would be happy to hear from you. Contact us at consultation@arws.cz to arrange a non-binding consultation where we can discuss the potential of the right of build for your specific plans.