What is Anuita?

Are you thinking of purchasing apartment owned by cooperative (“družstevní byt” in Czech)? In our previous post we described that there are two main legal forms of real estates’ ownership in the Czech Republic: private ownership marked on real estate websites as OV (‘osobní vlastnictví’ in Czech) and cooperative ownership marked as DV (‘družstevní vlastnictví’ in Czech). 

Apartments in cooperative ownership are certainly cheaper than those owned privately. However whole transaction is more complicated, especially if one is not familiar with nuances of cooperative ownership. 

To clearly set up your investment expectations we recommend you to firstly consider general pros and cons of investment purchase of an apartment in cooperative ownership. After that you should certainly ask whether apartment owned by cooperative has so called ‘anuita’. 

What is Anuita?

Meaning of ‘anuita’ basically comes from the investment term ‘annuity which can be defined as a series of equal payments at regular intervals to some institution. When used in relation to apartment in cooperative ownership (“družstevní byt”) term ‘anuita’ means series of payments which must be paid to cooperative after purchasing apartment in cooperative ownership. It is usually possible to pay out whole amount of anuita at once. In such a case anuita is basically part of purchase price of an apartment. 

Now short historical backround

Anuita exists only in cases where residential buildings originally owned by Czech municipalities were privatized to ownerships of special legal subjects – cooperatives (družství in Czech). However in some cases cooperatives did not manage to immediately pay out whole purchase price of the buildings during privatization processes which led to establishment of legal debt. This sort of collective debt of cooperative is called ‘anuita’ and it is divided between all members of particular cooperative who continually pay it in series of payments (annuities). 

And why anuita matters?

Because as long as anuita has not been fully paid out it is impossible to acquire real estate to private ownership. Practically it means that if you purchase apartment without paying out anuita you acquire only membership rights to use this apartment as a member of cooperative (you will not become owner of apartment). The apartment remains registered in the land register as a property owned by the cooperative in which you as a member have certain rights as well as obligations. One of these obligations will be to pay out the rest of anuita. Only after payment of whole anuita ownership of apartment can be transferred from cooperative to you. 

Another important aspect connected to transfer of cooperative ownership of apartment into private ownership is that it can be done only in case that the cooperative has already registered this particular apartment unit in land register as separate unit. In another words, if only building owned by cooperative was registered in land register but not particular apartment units located in that building, it is impossible to do legal transfer into private ownership.  

In practice first 2 questions of investor interested in purchasing apartment in cooperative ownership should be: 

• • Whether an apartment owned by cooperative is registered separately in land register or not?

  • Whether there exist an obligation to pay rest of anuita to cooperative?

If apartment has been registered as separate unit in land register and obligation to pay anuita exists it is possible to purchase it into private ownership by payment of whole anuita payment as part of purchase price. 

Summary

If you are interested in purchasing apartment owned by cooperative make sure you ask whether there exists anuita and if the answer is yes, than ask on amount of anuita which must be paid out to cooperative. In case anuita exists and you decide not to pay it immediately, you will not acquire apartment into private ownership before you pay out whole amount of anuita. You should be able to obtain information about anuita from the broker agent.

To get more information about the process of investment purchase of apartment in cooperative ownership feel free to contact us.