CO-OWNERSHIP INTERESTS IN REAL ESTATE AS A FORM OF INVESTMENT

Rising inflation has brought increased demand for forms of investment that protect funds from depreciation. In the traditionally (financially) conservative environment of the Czech Republic, investments in real estate are still one of the most widespread in this respect, including through the purchase of co-ownership shares in real estate, which at first glance may not be of any investment interest. The article discusses two legal routes that can be chosen to further monetise a newly acquired co-ownership interest.

Given that the new co-owner does not usually share the subject property with the other co-owners, then they, if they do, do so in the vast majority of cases over and above their co-ownership shares. The further procedure then depends on whether or not there is a legal reason for the use of the immovable property by the other co-owners beyond their co-ownership share.

If there is a legal ground for the use of the immovable by the other co-owners beyond their co-ownership share, this means that there is, for example, a decision of the co-owners (or a court decision, etc.), on the basis of which one (or more) of the co-owners is entitled to use the immovable to an extent smaller or larger than their co-ownership share. Thus, for example, a situation where the other co-owners have agreed that the new co-owner will use the thing to a lesser extent than his/her co-ownership share, or another co-owner(s) to a greater extent than his/her/their co-ownership share.

In such a situation, the new co-owner (as a limited co-owner) is entitled to compensation for the limitation of his/her co-ownership right which results from the mere fact that he/she can use (or benefit from) the thing only to a lesser extent. The right to compensation arises from Article 11(4) of the Charter of Fundamental Rights and Freedoms, as well as from the guarantee of the right of the co-owner to share in the rights and obligations of the common property to the extent of the co-ownership share pursuant to Section 1126 of Act No 89/2012 Coll., Civil Code.

However, significantly more frequent are cases where there is no legal reason for the use of the property by other co-owners beyond their co-ownership share, i.e. there is no agreement of the co-owners or court decision, etc., which would justify the use of the property beyond the co-ownership shares. In such a situation, the new co-owner is entitled to claim unjust enrichment against the other co-owners who use the common immovable property beyond their co-ownership shares, since, as stated above, there is no legal basis for such action.

The standard procedure is then to send a pre-litigation demand to the other co-owners for the recovery of the unjust enrichment, which also includes a quantification of such enrichment. Depending on the response of the other co-owners, either an amicable solution can be negotiated (e.g. regular monthly payments of a certain amount, purchase of the co-owners' shares or a favourable sale of the new co-owner's share) or the claim can be pursued in court (action for unjust enrichment).