One area which has changed considerably with the amendment to Act No. 89/2012 Coll., Civil Code (“CC”) comprises property leases and the options for terminating such leases. The aim of this article is to describe certain important changes particularly notice to terminate the lease of an apartment and premises used for business purposes and also to highlight certain problems in relation to this.

I.Lease of an Apartment

1. Notice issued by the tenant to terminate the lease of an apartment

A tenant may issue notice to terminate a lease for an indefinite period, without stating the reason. Notice may be issued to terminate a contract for a definite period if the parties agree to this in the contract, or if there is a change in the circumstances that were relevant when the tenant and the lessor concluded the contract to the extent where the tenant cannot be reasonably expected to continue in the lease. This may occur, for example, if the tenant is obliged to serve a prison sentence or obtains work abroad.

2. Notice issued by the lessor to terminate the lease of an apartment

The lessor may only issue notice in cases defined by the law. The reasons for notice to terminate the lease of an apartment have been changed considerably in the CC.

The most common reason is a gross breach of obligations by the tenant. The problem with this provision is that it does not define the term “gross breach” and the lessor will therefore often be in considerable uncertainty concerning the reason for the notice. This problem may arise, for example, in a situation where the tenant is regularly late in paying the rent, but is not delayed by more than one month. Whether or not this constitutes a gross breach is entirely at the court’s discretion.

On the other hand, one problem potentially faced by tenants is notice issued on the grounds that the lessor needs to find a place to live for himself or a close relative. The lessor may state this as a reason basically at any time, meaning that the tenant is no longer certain of the duration of the lease. Section 2289 of the CC obliges the lessor to lease the apartment to the tenant again if it is not used for the declared purpose, although in practice it is hard to imagine that the tenant would be interested in moving back in. Moreover, the tenant essentially has no way of knowing how the apartment is subsequently used. Therefore, in practice there is the risk that this reason will be abused by lessors to terminate tenants’ leases.

One new reason for notice is if the tenant is convicted of a deliberate crime committed against the lessor or a member of his household, against a person living in the house or against another person’s property situated in the house.

The former reasons for notice which limited tenants’ free will, on the other hand, are not contained in the CC. One example of these reasons is notice issued because the tenant has multiple apartments or does not make sufficient use of the apartment.

Notice to terminate a lease with no notice period

One major new aspect of the amendment is notice to terminate a lease with no notice period, which may be issued by the lessor if the tenant commits a gross breach of obligations. Section 2291 of the CC then presents an exhaustive list of these breaches. These include failure to pay the rent and service costs for at least three months or irreparable damage to the apartment or building.

However, in these cases the lessor must first request that the tenant rectify the situation within a reasonable period of time. It is only if the tenant fails to do so that the lessor may issue notice, which specifically states which gross breach of obligations has been committed by the tenant. If this is not done, the notice will be considered invalid. Again, these relatively strict conditions could in practice make it more difficult for the lessor to make effective use of this institute. Even so, for the lessor this version of the law is more favourable than the previous wording. Previously, if a tenant failed to pay three instalments or rent, the lessor could give that tenant notice only with the consent of the court and also with a three-month notice period.

Abolition of substitute housing and consent of the court

The lessor will no longer have to provide substitute housing, i.e. find the tenant a substitute apartment or accommodation, if the lease is terminated on the basis of notice. According to the CC, the lessor is also not obliged to request that the court grant prior consent to the notice.

Particulars of notice
For notice to be valid it must include instruction’s on the tenant’s right to file objections to the notice and to petition for the legitimacy of the notice to be reviewed by a court.

However, one major point in the CC that is still unclear is what is meant by the right to file objections, as the CC does not treat objections for apartment leases at all (objections are only covered in the section on the lease of premises used for business purposes).

It is therefore not at all clear whether this means unilateral substantive action against the lessor, or whether objections are to be presented before the court in the petition to have the notice reviewed.
It is also unclear whether the filing of a petition with the court is conditional upon objections being filed against the lessor. This is therefore another problematic institute and it is important to strongly recommend that, for reasons of legal certainty, tenants always file objections as a unilateral substantive act directed against the lessor.

II. Lease of Premises Used for Business Purposes

Another important change is the transition from the legal definition “non-residential premises” to “premises used for business purposes”, which primarily affects business leases. This legislation is also burdened by shortcomings and constitutes the basis for potential disputes. For the purposes of this article, however, we are focusing solely on the legislation governing notice to terminate such leases.

1. Notice issued by the tenant to terminate a lease of premises used for business purposes

Tenants may issue notice to terminate a lease for a definite period before the expiry of the agreed term, provided that: (i) tenant ceases to be eligible to engage in business activities, (ii) the leased premises cease to be fit for the purposes of the tenancy, (iii) the lessor commits a gross breach of its obligations.

The notice period is three months and the tenant is obliged to give an adequate reason for issuing notice.

2. Notice issued by the lessor to terminate a lease of premises used for business purposes

The lessor has the right to issue notice to terminate a lease for a definite period if the property in which the premises are situated is to be demolished or converted in a manner that prevents further use of the premises.

The second reason is a gross breach of obligations on the part of the tenant. Like the tenant, the lessor must also specify the factual reason for the notice, otherwise the notice is invalid. The notice period is three months.

One major problem, however, is Section 2315 of the CC, which states that if a lease is terminated on the basis of notice issued by the lessor, the tenant has the right to claim compensation for the advantage gained by the lessor or the new tenant by taking over the customer base built up by the tenant issued with the notice. Here it is clear that determining the amount of compensation, as well as the legitimacy of claims (i.e. the building of the customer base by the previous tenant) will be a contentious issue and the cause of many disputes.

3. Notice from the lease of premises used for business purposes for an indefinite period

Both parties are entitled to issue notice to terminate a lease of premises used for business purposes for an indefinite period without stating the reason; while the notice period is six months. However, if one of the parties has a serious reason for issuing notice, the notice period is three months. In practice, problems can be expected here with the interpretation of the term “serious reason”, and so disputes can be expected to arise with this type of notice. The party issuing the notice will thus be in a position of legal uncertainty and will often consider opting for the safer variant with the option with the six-month notice period.

4. Defence against notice

The party issued with the notice has the right to file written objections against the notice, within one month of receiving the notice. Unlike the legislation governing the lease of an apartment, the law clearly states that if no objections are filed by the deadline, the right to have the notice reviewed by the court is forfeited.

If the party issuing the notice does not retract the notice within one month of receiving the objections, the party issued with the notice has the right to request, within two months of the expiry of the deadline for retracting the notice, that the legitimacy of the notice be reviewed by a court. If the tenant clears out the premises used for business purposes in accordance with the notice, the notice is considered valid and accepted by the tenant with no objection.

III. Conclusion

In the light of the above it may be said that the legislation governing notice to terminate the lease of immovable property, either apartments or premises used for business purposes, has undergone some considerable changes from the previous version. However, the new legislation contains a great many problematic provisions which could result in a considerable number of disputes. The parties to lease contracts will thus often be in a position of legal uncertainty concerning the termination of the lease through notice.

For more information, please contact our office’s partner, Mgr. Jiří Kučera, e-mail: jkucera@kuceralegal.cz ; tel.: +420604242241.