New legislation effective from 1 January 2014, namely Act No. 89/2012 Coll., the Civil Code (hereinafter “NCC“) has introduced significant changes to legislation on liability for damage. Some changes may pose potential risks in practice and cause complications in the interpretation and application of the law. This article aims to highlight the potential risks associated with the new legislation on liability for damage to real estate property.

1. New regulation on liability for damage to real estate property

This regulation is contained in a single provision, Section 2926 of the Civil Code and reads as follows:

“A person who, albeit lawfully, performs or provides work which causes damage to the immovable property of another or which prevents or substantially hinders the possession of such property shall provide compensation for the resulting damage.”

Basic conditions for liability for damage are, and have always been as follows:

• unlawful conduct;
• the occurrence of damage
• a causal link between the occurrence of damage and the offender’s unlawful conduct.

Without breach of obligation. However, it is clear from the above that new legislation on liability for damage to real estate property is unique in that its application does not require a breach of legal obligations. Legislators have even explicitly emphasised the legitimacy of executing work, which highlights the objective nature of the obligation to pay damages.

Simply put, you may be liable for the damage caused to real estate property without breaching any obligations and acting in accordance with the law, regulations and administrative acts.

Without the possibility of absolution. This fact is very alarming in itself, but the situation is even more serious when legislators have not addressed any liberating circumstances that would absolve the offender of the obligation to pay damages. Therefore this concerns objective absolute liability, i.e. without the possibility of absolution.

Interestingly, it should be noted that legislators give the operators of simple operations, as well as the operators of especially hazardous operations this option (see Section 2925 NCC). The liability for damage to real estate property, however, does not allow the possibility of absolution.

Execution of work. Carrying out work means the actual performance of work. This may consist of various activities, yet will probably mostly involve construction work on neighbouring real estate property. However, it can refer to any work that has an impact on another party’s real estate property (e.g. repair of an access road, crop dusting a neighbouring field, etc.). It doesn’t matter whether the offender’s activity is lawful or not.

2. Consequences of new legislation

What the above therefore implies can be demonstrated in the following examples:

A clear example arises in the case of damage to neighbouring real estate property as a result of renovation work, such as the impact of the arm of a crane into the roof of the building, or damage to grass areas due to the passage of heavy machinery. In these cases, the person (party) performing the work is quite clearly responsible for the damage. In the following examples, however, the case is not as clear.

A company is commissioned to complete connections to the sewer system in part of the city. It obtains all required building permits, consents and statements and begins work. As a result of performing this work, access will be blocked to garage parking spaces. The owners of these parking spaces then file a joint claim against the company for damages consisting of the need to hire other parking spaces and increased transportation costs for the duration of work (connection to the sewer system). It will be completely immaterial that the company had all necessary permits and that the work was announced in advance. According to the above provision, it will be liable for this damage, since it prevented the possession of real estate property, albeit by lawfully carrying out work.

Another example could be a situation where as a result of fertilising agricultural fields the number of visitors to a nearby amusement park falls. The operator can then sue the farmer for lost income suffered as a result of this work. Again, it is immaterial whether fertilisation was carried out in accordance with the law.

3. Conclusion

The new regulation on liability for damage to real estate property can therefore be summarised as being very strict, particularly for two reasons: (i) its application does not require a breach of legal obligation and (ii) it does not allow absolution of liability (absolute liability). This regulation then poses the risk of claims for damages, not only if actual damage occurs as a result of carrying out work, but even if there is only a restriction of access to real estate property.

In light of the foregoing, it is obvious that developers and construction companies in particular should take into account the above risks when accepting new contracts. It is a fact that very few of these entities are aware of the risks mentioned above. It is therefore recommended to have these risks assessed by a qualified legal expert, who will be able to propose solutions for their minimisation.

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