Cooperative vs. Personal Ownership of Flats in the Czech Republic

Post date: Jul 17, 2015 5:53:52 AM

Cooperative vs. Personal Ownership of Flats in the Czech Republic

If you decide to buy a flat in the Czech Republic, one of the most important criteria you must consider is the type of ownership. Czech law distinguishes between two forms of flat ownership – cooperative and personal. The following will provide an explanation of the most important differences.

1. Differences in ownership

Personal ownership: As the owner of a flat your ownership is registered in the Cadastral Register. Once a year you must pay a property tax on the flat. You can use the flat as you wish – for residential purposes, rental purposes, sales purposes, or as security for a mortgage from the bank. You won’t have to pay the rent but you will have to participate in the management costs for the building and the land. Aside from being the owner of the flat you will also become a co-owner of the common areas of the building and you will be obliged to participate in their maintenance. The actual sum paid for this purpose will be based on your share in the building's common areas.

Cooperative ownership: In this case you will not become the owner of the flat, rather you will be considered the lessee. However, you will become a member of a legal entity - a cooperative - which will be the owner of the flat and your landlord. You may use the flat (for residential purposes) or sell it. If you want to lease the flat you will have to receive the permission of the cooperative. If you need a bank mortgage you will generally need another property to use as security. You will have to pay the cooperative for your use of the flat. The fee is set by the cooperative meeting.

2. Differences in decision making

Personal ownership: The highest instance of the association of flat owners is the owners meeting. Decisions are made by vote. The number of votes to which you are entitled depends on your share in the building's common areas. Put simply, the owner of a four-room flat has a “larger“ vote than the owner of a one-room flat.

Cooperative ownership: In the case of cooperative flats, the highest instance is the cooperative meeting. Each member is entitled to one vote.

3. Differences in flat maintenance

Personal ownership: You will be responsible for the cost of all repairs to your flat. If you decide to renovate the flat you won’t need anyone's permission.

Cooperative ownership: Minor repairs and costs for regular maintenance are covered by you. Everything else is covered by the cooperative. In order to perform renovations you will have to receive the permission of the cooperative even if you are willing to cover all costs.

4. Differences in the sale of flats

Personal ownership: You can sell the flat whenever you wish without receiving anyone's permission. You must arrange for a purchase contract and apply for the ownership change in the Cadastral Register. If you are the buyer, before you sign the purchase contract you should verify in the Cadastral Register whether the seller is indeed the owner of the flat and also whether there are any pledges or easements on the flat. The seller is obliged to pay the tax on transfer of real estate property.

Cooperative ownership: You cannot sell the flat because it is the possession of the cooperative, but you can transfer your cooperative membership rights and obligations connected to the flat against payment. This transfer does not require the co-operative’s consent. The advantage in this case is that you don’t have to pay any tax on the transfer.

We nearly always recommend buying property with personal ownership. In our opinion, the advantages are greater than those of owning a property through a cooperative. If you wish to purchase a property in the Czech Republic we would be glad to assist you. Contact us here.