Newsletter (not only) for brokers - Changing the designation of the community property, Purchase price discount for defects in the property, How to calculate the purchase price discount?
Authors of the newsletter: JUDr. Lukáš Slanina, Mgr. Robert Dürrer, ARROWS (office@arws.cz, +420 245 007 740)
New in the Land Registry: change of designation of the community of property
As of 1 January 2025, the designation of the community of property will change on the real estate register extracts. The existing abbreviation "SJM" (community property) is now replaced by the universal abbreviation "SJ" (community property).
This change is related to the amendment of the Civil Code, which introduces the institution of partnership as an equal union of two persons of the same sex. Partners will have the same rights as spouses, including the possibility of acquiring real estate as community property.
The abbreviation "SJ" will therefore be a uniform designation for the community of property of spouses and partners. As real estate agents, you should be prepared for this change so that you can interpret the Land Registry data accurately and without error.
Decision: Purchase price discount for defects in the property
A recent decision of the Supreme Court of the Czech Republic (Case No. 23 Cdo 201/2024) has brought clearer insight into the rules for determining the discount on the purchase price of real estate. The key message is that the amount of the discount on the purchase price ≠ the costs incurred to repair the defect.
The purpose of defective performance rights is not to compensate for the damage caused (for which other legal instruments are available), but to restore the balance between what the buyer paid for a property he considered to be faultless and what he actually received from the seller.
Helpful hints: How to calculate the discount on the purchase price?
So how do I calculate the discount on the purchase price? Usually, the so-called relative method of calculation can be used. The procedure is as follows:
- find out the market value of the property without defects (this may not correspond to the agreed purchase price).
- Find out the market value of the property with the defect.
- Calculate the ratio between these values.
- Apply this ratio to the agreed purchase price to obtain the amount of the discount.
Example: a property sold for CZK 5 000 000 had a market value of CZK 4 500 000 due to inadequate waterproofing. However, without this defect, its market value would have been CZK 6 000 000. The calculation of the discount would be as follows:
- Ratio: 4 500 000 ÷ 6 000 000 = 0,75
- Discount: 5 000 000 × (1 - 0,75) = CZK 1 250 000
- Resulting discount: CZK 1 250 000
This approach ensures fair compensation between the parties and takes into account the purchase price originally agreed between the parties. However, in some cases it may not be fully applicable. Therefore, the specific circumstances of the case should always be taken into account and the procedure adapted if necessary.