The previous practice for the sale of a co-ownership share included the obligation to offer the co-ownership share. This has not been the case for several years. What is the current practice and legislation regarding pre-emption rights? And what rights are left to the co-owners?
A pre-emption right is the right of a pre-emptionist (co-owner) to demand that the property be offered for purchase on the same terms as the seller would sell the property to another interested party. To give a practical example – for example, if three brothers jointly own their grandmother’s house and one of them would like to sell his share, with the institution of pre-emption he would not be allowed to do so just like that. He would first have to offer his share on equal terms to the other brothers. The right of pre-emption therefore meant protection for the co-owners, but also a restriction on the co-owner’s disposition.
The above example of the use of the right of pre-emption by three brothers is now history. It was abolished in this form in 2020 and there are no indications that it will return to the legal system in the near future. in the past, it was required that the pre-emptor (co-owner) receive an offer before the purchase contract was concluded.
In practice, the legislation has caused various problems. The law stipulated that “theseller’s obligation to offer the thing to the pre-buyer for purchase is fulfilled by concluding a contract with the buyer.” This meant that the co-owner could only exercise the pre-emption right at the moment when the seller concluded a purchase or other contract with the buyer. From that point on, the 3 month period for exercise began to run.
At that moment, the seller had to give or send by registered mail a letter to the co-owners inviting them to exercise the pre-emption right, enclosing a copy of the concluded purchase or other contract. Acceptance of this offer was not precisely defined. Nevertheless, it was clear whether the pre-emption right had been exercised. Within 3 months of delivery, the co-owner must pay the purchase price in the manner specified in the contract. However, in addition to this, the offer should also be made in writing. Simply put, if the co-owner received the invitation to exercise his pre-emption right in an envelope, he also found the purchase contract there. Accordingly, he transferred the purchase price and at the same time replied to the letter stating that he accepted the offer.
If the owner did not make an offer to exercise the pre-emption right, the pre-emption purchaser (co-owner) still had the right to claim a share in the immovable property directly from the purchaser. He could do so within the general limitation period of 3 years.
The content of the purchase or other contract can be ascertained by consulting the collection of documents of the competent cadastral office, where a copy can be made directly.
This means that if the seller has bypassed the co-owner, the latter could have actively exercised the pre-emption right within the 3-year period anyway and obtained a share in the property.
The right of pre-emption therefore brought administrative burdens, complicated the transfer of the share in the immovable property and in a way also affected the purchase price, as the whole process of selling the property was prolonged and in many cases brought considerable uncertainty. It was often unclear whether the address for the notice to the co-owner was up-to-date, there were other problems with delivery and sometimes the co-owners outright threw sticks at each other.
Themost frequent problem was the transfer of “additional” real estate in the apartment building – garage parking, basement cubicles or front gardens. In large apartment buildings, the seller had to make an offer to several tens or even hundreds of co-owners of the non-residential unit. This put not only the seller in an uncomfortable situation, but also the buyer, who after completing all the necessary formalities lived for 3 months in uncertainty whether the transaction would turn out as he expected.
Often, the transfer took place with the help of two purchase contracts, where the residential unit was separated from the non-residential unit. Ownership of the apartment thus passed to the buyer immediately and then awaited the development of the situation regarding the share.
Right of pre-emption and many other formalities
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In 2018, the Constitutional Court dealt with the case of the pre-emption of a garage. The court basically said that the exercise of pre-emption rights within a large garage is chicanery and does not enjoy legal protection. In such cases, it is therefore possible to simply sell the share with little risk of someone challenging the new owner. The amendment to the Civil Code in 2020 responded to this as well, limiting this right altogether.
The right of pre-emption of co-owners of real estate was abolished with effect from 1 July 2020. Therefore, if you find a buyer for your quarter of the land, you can submit a petition for registration to the relevant cadastral office as soon as the purchase contract is concluded. You will avoid 3 months of uncertainty as to whether one of the co-owners will not exercise their pre-emption right.
This amendment has once again accelerated the transfer of residential units and related shares in other premises. Even so, there is no exception to the pre-emption right.
If you are still not sure how to conveniently and without legal complications arrange the transfer of an apartment, you will find our article on the transfer of an apartment useful, in which we have analysed everything essential.
Thus, the right of pre-emption is not revoked in cases where the co-owners could not influence their rights and obligations from the outset. Let us explain this with a concrete example. If, for example, you have acquired a co-ownership share in the context of inheritance proceedings and wish to transfer it to a third party, you must first offer the share to the co-owners. However, this again does not apply if you want to transfer the share to a spouse, sibling or other close person. After 6 months, however, the pre-emption right expires and you can dispose of the share as you wish.
The second exception is the separate regulation of the statutory pre-emption right in favour of the owner of a plot of land to another’s building on that plot of land and at the same time the pre-emption right of the owner of a building built on another’s land to that plot of land. In fact, the 2014 Civil Code restored the Roman principle of superficies solo cedit(the surface gives way to the land in the sense of: the building is part of the land). This means that henceforth the land and the house should be one immovable thing. By exercising the right of pre-emption, it will thus be possible to achieve a single owner. Today, the land still often belongs to someone other than the house on it. This right of pre-emption is therefore intended to help gradual integration.
As we have already mentioned above, the amendment has simplified in particular the transfer of residential units, the ownership of which is associated with a co-ownership share in another non-residential unit or land. On the other hand, the right of pre-emption was intended to prevent the fragmentation of ownership rights to real estate, as a smaller number of co-owners makes it easier to agree on the management of the property. Similarly, it brought peace of mind in cases where siblings or family members inherited the house. If one of them ran into financial problems, for example, or wanted to get rid of the share for whatever reason, he or she could not sell it to a third party without their consent, virtually without their knowledge.
In practice, we have encountered several cases where a co-owner deliberately sold his share (for example to a developer) with the intention of making things difficult for all the other co-owners. Even with the limitation of pre-emption rights, these cases have a solution that can save you many future complications. In such cases, we recommend setting up a contractual pre-emption right and having it registered in the Land Registry.
If you decide to do so, be sure to clearly define how and for how long the co-owners are obliged to offer their shares to each other.
We have discussed a slightly different situation that may arise in one of our previous articles on the transfer of a cooperative share.
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