Municipality wrongfully extorts a quarter of a million from residents

Chapters of the article

• Contracting involuntarily and under duress
• Vagueness and nullity of a contract
• Contract illegality according to former mayor
• How to recover money?

The law firm Dostupný advokát was contacted by Mr Antonín (the name is fictitious, but his identity is known to the law firm), who purchased a plot of land in the village of Horoměřice with the intention of building a family house there. To his surprise, however, a significant item was added to his budget for the construction of the house, which he had not originally counted on. The municipality had conditioned the start of the construction of the house on a contribution of CZK 250 000 to the municipality.

The municipality referred to a council resolution from September 2019, according to which all municipal approvals for the construction of houses are conditional on the payment of a contribution of CZK 4 000 per m2 of living floor area in the case of apartments or houses with more than one housing unit. In the case of the construction of a house with one dwelling unit, the construction is subject to a flat fee of CZK 250 000. The fee is enforced on the basis of an “Infrastructure Funding Agreement” which the municipality makes the landowners sign.

Entering into contracts involuntarily and under duress

Our law firm is aware of several cases where landowners have been forced to pay hundreds of thousands of dollars in this way. However, according to attorneys who specialize in real estate and construction law, such extortion is illegal for several reasons. First of all, the agreement in question is contrary to good morals. For the landowner, its conclusion is not a voluntary affair, as would be expected in a private law contract. On the contrary, they are clearly entering into it under duress. The basic motivation for concluding the contract is the fear that they will not be granted planning permission and will therefore have nowhere to live. The fact that the building permit is conditional on the signing of the contract has been repeatedly confirmed by information on the municipality’s official notice board, so it is not an unjustified fear.

Moreover, in a situation where some of the landowners were using a mortgage for the construction and there was therefore limited time to draw it down, there was no room for discussion with the municipality or the possibility of an appeal in the construction procedure or an administrative action. Because of the time pressure, paying several hundred thousand crowns was the only possible course of action for the owners at that moment. As we have already mentioned, the owners of other plots of land in Horoměřice, who were also forced to sign similar contracts, were also confronted with the same message about making construction conditional on signing the contract. This was therefore not an isolated situation.

The landowners had another compelling reason for signing the contract. If they wanted a water and sewerage connection for their future properties, then they had to have a signed contract in hand. On this account, the Water Company also confirmed that they would only establish the connections after the municipality’s approval was documented. However, such conditioning is contrary to the Water Supply and Sewerage Act, according to which the owner of the water supply or sewerage system is obliged to allow the connection if the land or building to be connected is located within the municipality with a water supply or sewerage system and meets the legal conditions. However, the conclusion of a contract is not one of them.

Vagueness and nullity of the contract

According to legal theory, legal acts should be certain and intelligible. In this respect, too, the contract in question is defective, since, although it is intended to ensure ‘the functioning of adequate technical and transport infrastructure in the municipality of Horoměřice’, it is not clear to any of the parties what exactly they mean by this phrase. The contract can therefore be regarded as a so-called nullity, i.e. essentially non-existent.

Other municipalities are also engaging in similar practices and exacting contributions from new landowners, and it can therefore be generally assumed that the legal assessment of such contracts will be the same.

Illegality of the contract according to the former mayor

However, the illegality of the procedure found above in our client’s case is further supported by the fact that his contract was not signed by the mayor of the municipality, who would have been legally entitled to conclude the contract. The biggest paradox of the whole situation is that the former mayor himself allegedly considered the conclusion of the contract to be unlawful.

How to recover the money?

If the landowners were forced to sign a similar contract and paid their municipality a considerable amount of money on the basis of it, they can recover it. However, they should be aware of the limitation period, which is three years for unjust enrichment. Once that period has expired, the money cannot be recovered. Given the complexity of the cases and the necessary knowledge of legal theory, and given the strong position of the defendant, which is the municipality, it is undoubtedly worth using a lawyer.
What is particularly unfortunate about this whole issue is that municipalities are individually seeking their own legal methods to charge their new residents. However, these often turn out to be illegal. The whole issue would therefore deserve a solution at the level of law, which would remove the ambiguity.