In this article, we will discuss why it is good for both parties to a condo purchase agreement, i.e. the one who buys the condo unit and the one who sells it, to balance the dues paid to the unit owners’ association (UOA) for the management of the building.
The buyer is now in the “shoes” of the seller in terms of rights and obligations towards the SVJ when transferring a residential unit. Ignoring this problem brings considerable risks to both parties of the purchase contract.
House management contributions can be essentially twofold:
1.payments for the day-to-day running of the house (house insurance, hallway lighting, lifts, refuse collection, etc.),
2.payments to the ‘repair fund ‘ (funds earmarked for repairs and renovation of the house).
In particular, contributions to the so-called repair fund can be a significant amount for those HOA’s that save for major repairs. The average amount of the contribution to the repair fund is about CZK 15-20, but the situation changes significantly with the technical condition of the building and the plan for further investments. It can therefore range from around ten crowns per m2 of floor space per house to 60 crowns per m2 for old houses that require more extensive investment. The specific amount of the contribution for the management of the house and the land is decided by the unit owners’ association at a membership meeting. It can also decide on a change.
As a rule, each unit owner contributes to the management of the house and land in an amount corresponding to his/her share of the common parts of the house. However, the statutes may determine the principle of contribution differently.
Contributions may have both a positive balance (e.g. the seller has “saved” one hundred thousand for the repair fund) and a negative balance (the seller owes the HOA for the payment of these contributions).
The fund is then used to pay anything that does not appear in the annual bill. This may include:
It is extremely important for both the seller and the buyer to come to an agreement regarding the settlement of the house management allowances. It is best to do this directly in the purchase agreement. The HOA itself will not be of much help in this, because according to the new Civil Code it is not obliged to settle the contributions in any way when selling the flat.
Apositive balance of contributions – the seller has “saved up” in the repair fund – may result in a higher purchase price for the apartment. If the seller has saved e.g. 200,000 in the repair fund, he may want to pay this amount from the buyer and increase e.g. the purchase price for the apartment. However, it is again important that the seller settles this amount directly with the buyer, because the HOA is not obliged to reimburse the seller for what he has already paid into the repair fund. Knowing the positive balance is important for the seller.
Thenegative balance of contributions – the seller’s debts to the HOA (typically the seller owes for contributions to the repair fund) – is again important to settle in the purchase agreement, as they will pass to the buyer with the transfer of the unit. However, the seller himself is also at risk, because the seller is liable for his debts to the HOA! If the buyer does not pay the SVJ the debts on the contributions left by the seller, the SVJ can recover these debts directly from the seller. Knowledge of the negative balance is therefore important for both parties, but should be of particular interest to the buyer.
We provide a complete package of legal services related to real estate sales and purchases, including reservation contracts and escrow services. We will also help you with all tax and land registry issues. Our work is fast and accurate, ensuring a worry-free transaction. You’re also welcome to pay after services are provided.
Tip: Every homeowner has certainly encountered a contribution to the repair fund. How to determine how much the individual owners should contribute, what all can be paid from the fund and how to understand it from the accounting point of view? We will look at all this in a separate article.
We present a simple and practical procedure on how to make sure that debts on SVJ contributions are not swept under the carpet and do not surprise anyone unpleasantly later on.
1. find out if the seller owes SVJ contributions
Ask the seller to get a certificate from the HOA stating how much the seller owes in dues, or a certificate stating that the seller owes nothing. The HOA must issue such a certificate to the seller. If you fail to do this and do not get the certificate from the HOA, it is your responsibility and any debts owed by the seller will be passed on to you!
2. adjust the purchase price for the apartment
If you have found out that the seller owes the HOA dues, start negotiating to reduce the purchase price as you will have to pay this debt for the seller, which will affect the total amount you pay for the apartment.
It is very important for the seller to have it specifically addressed in the purchase contract that the debt on the buyer’s dues is paid through a reduction in the purchase price, which will preclude the buyer from healing on the seller for the same reason in the future. Also, such a provision will give the buyer the ability to recover the amount of that debt from the buyer in the future if the HOA takes advantage of the language of the statute and pursues the debt against the seller as guarantor.
If the seller has saved a substantial amount in the repair fund, this is nothing more than funds for the future appreciation of the apartment, which the seller can sell to the buyer together with the apartment. Therefore, try to increase the purchase price of the apartment by this amount.
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Tip: The Civil Code primarily protects the weaker party to the contract. In the case of a lease agreement, it considers the tenant as such, and thus restricts the landlord in many respects. Some provisions of the Civil Code can be derogated from contractually, but some cannot be “circumvented”. So what are the rights and obligations in rental housing? What is advantageous for the landlord and what is advantageous for the tenant and what should not be missing in the lease agreement? This is the focus of a separate article.
We provide a complete package of legal services related to real estate sales and purchases, including reservation contracts and escrow services. We will also help you with all tax and land registry issues. Our work is fast and accurate, ensuring a worry-free transaction. You’re also welcome to pay after services are provided.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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