Chapters of the article
What does a right of first refusal generally mean?
Pre-emption is the right of the pre-emptionist to demand a preferential offer to buy the property on the same terms as the seller would sell the property to another interested party. To give a practical example – if, for example, two friends owned a house together and one had a contractual right of first refusal, then the other would not be allowed to sell their share “just because”. He would first have to offer his share to his friend on the same terms as he would offer it to a third party.
In earlier times, the right of pre-emption was automatic for co-owners, but this changed after 2020. Now, this entitlement to co-owners arises by operation of law if the co-ownership occurred as part of an inheritance and the share of one of the heirs is offered for sale within six months of the heir acquiring it (in addition, the pre-emption right does not apply if the share is offered to close relatives). In other cases, the pre-emption right must be secured by contract or it must be a specific situation described in the law.
Preemption or other unusual arrangements?
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Pre-emptive right of tenants of the apartment
As mentioned above, the Civil Code also provides for certain specific situations in which the right of pre-emption is also applicable, without the need to establish it contractually. One such situation is the right of pre-emption of the tenant of the apartment. However, it is exercised under very specific conditions:
- the tenant of the apartment unit is a natural person (the right does not apply to legal persons),
- the apartment unit was created by dividing the ownership right to the whole building into ownership rights to individual units,
- the right of pre-emption appliesonly to the first transfer of the unit after the division of the building into units.
The above also applies to the lease of non-residential space if it was leased in connection with a flat in the same building where the above conditions occur. The right of pre-emption shall lapse if the tenant does not accept the offer within six months of its effectiveness.
The tenant’s right of pre-emption shall be activated at the moment of conclusion of the purchase contract regarding the newly created unit between the owner of the building and the foreign interested party. At such time, the building owner is obliged to offer the unit in writing to the tenant of the unit on identical terms and at the same purchase price.
As we have already stated, the tenant has six months from the effective date of the offer to exercise the right. During this period, he may accept the offer and pay the owner the stipulated purchase price. Otherwise, the right will lapse. However, if he accepts the offer, then the owner’s offer to the third party (the Civil Code refers to the third party as the “purchaser”) is extinguished. If he has even paid the purchase price to the owner, the latter must return it. The position of the ‘purchaser’ is therefore very uncertain and, in theory, he may not know for six months whether the purchase will take place or not. The offer is therefore not worthwhile for anyone who needs an apartment for immediate and permanent living.
Tip: Uncertainty in a given situation can be removed contractually, for example, if the tenant waives its pre-emption right in writing. However, do not embark on such legal modifications without consulting an attorney, as a mistake in the documentation could lead to future complications and years of litigation over the right to purchase or own the apartment.
Pre-emption right of the land owner
The Civil Code also seeks to address situations that have occurred so far where the owner of the land and the owner of the building on it are two different persons. The previous Civil Code allowed for such a regime, which gave rise to many uncertainties and legal disputes, for example in access to the property, use of the land around the house, etc.
The new Civil Code therefore introduced the principle of “superficies solo cedit”, i.e. the surface gives way to the land. This means in practice that buildings are not a separate thing. This therefore applies to land and buildings where the owner of the building and the land is the same person. However, where historically the situation described above has arisen where there are two persons, a further provision comes in to help resolve this unclear situation. It provides that the owner of land on which there is a building which is not historically part of the land and has another owner has a right of first refusal in respect of that building. The reverse is also true. The owner of such a building then has a pre-emption right to the land.
The above provision of the Civil Code is aimed at eliminating these confusing situations and at integrating ownership by one person where it makes sense.
Example:
Imagine a situation where more than one person owns land under such a regime, for example, Mr. Peter and Mr. Paul. Mrs. Eva, who owns the building, would have to offer the building to both Mr. Peter and Mr. Pavel under the pre-emption right if it were sold. However, if Mr. Petr was not interested in the building, Mr. Pavel could buy the whole building himself, still under the pre-emption right. Therefore, even if Mr Peter is not interested, Mrs Eva may not sell the building to a stranger.
The right of pre-emption in the above-mentioned form also belongs to a legal person, or perhaps to the state, which can exercise it through the State Land Office (formerly known as the Land Fund). This occurs similarly in a situation where the state owns a certain piece of land on which a foreign building is located.
Tip: The previous practice when selling a co-ownership share included the obligation to offer the co-ownership share in priority. This has not been the case for several years. What has been the historical development of this legal regulation of pre-emption rights and what rights are now left to co-owners? This is the subject of our separate article.
Contractual pre-emption right
In addition to the statutory provisions, a pre-emption right may also arise by legal agreement between two parties.However, if it is negotiated as a so-called obligatory one, it is not registered in the Land Register. The buyer of the property then has basically no chance to find out from publicly available sources whether such a right has been established or not.
If the pre-emption right is established as a so-called right in rem, then it is registered in the Land Registry.
Both of these options should be checked before any purchase of real estate. In the case of a debenture right, a clause should be included in the purchase contract in which the owner excludes the existence of a pre-emption right and this guarantee is insured by a contractual penalty.
