December 6, 2017 Legal requirements of Lease of Business Premises in the Czech Republic in the year 2018
The New Czech Civil Code regulates the lease of premises for business purposes, even in relation to lease agreements entered into prior to this date. Compared to general types of property leases, lease of business premises has several specific features. Landlords, property developers and their tenants who are leasing business premises in the Czech Republic should certainly be aware of them.
Requirements of a lease contract
The essential requirement of a lease contract is now simply an agreement concerning the object of the lease and the amount of rent. The purpose of the lease no longer needs to be specified in the contract. If, however, the object of the lease will not be used at least predominantly for the operation of business, then no specific conditions shall apply. Neither is it required to have the object of lease approved by the occupancy permit for the contract to be valid.
The regulation of leases in the Czech Civil Code is not mandatory. Parties therefore have the opportunity to manage their mutual rights and obligations according to their own specific requirements and needs. The lease contract does not need to be renegotiated and rewritten due to the adoption of the new legislation, although in practice the parties prefer this option to exclude application of certain newly introduced provisions of the Czech Civil Code.
Terminating a lease of business premises
Unless the contracting parties agree otherwise, the notice period for a lease with an indefinite term is six months, and three months for a fixed term lease. The notice on a fixed term contract must state the reason for terminating the lease, otherwise the notice is not valid.
Unless the parties set out other reasons, tenants are entitled to give notice on a fixed term lease before the lease expires, inter alia if (i) they have lost the capacity to carry out the activity for which the business premises were intended, (ii) the leased premises have ceased, for objective reasons, to be eligible for carrying out the activity for which they were intended, and the landlord does not provide the tenant with equivalent alternative premises, (iii) the landlord has grossly breached his obligations in respect of the tenant, and (v) the circumstances on the basis of which the parties concluded the lease agreement have changed to such an extent that it would be unreasonable to require the tenant to continue the lease.
The landlord is entitled to give notice on a fixed term lease contract, inter alia if: (i) the real estate in which the business premises are located is to be demolished or rebuilt in such a way that prevents the leased premises from being used any further, provided that the landlord did not and could not have predicted such situation when entering into the contract, or (ii) the tenant has grossly breached his obligations in respect of the landlord (e.g. the tenant is more than 1 month in delay with the payment of rent or services connected with use of the business premises), (iii) the tenant is convicted of an intentional criminal act committed against the landlord, a member of his family, or person who lives in the building in which the business premises are located, or against another person's property situated in such building, (iv) the business premises need to be vacated due to a reason of public interest protection, or (v) some other similarly serious reason exists.
The lease agreement passes over to the new owner in case of the sale of the premises. If the new owner had no reasonable cause to doubt that he was buying the premises free of any lease, he is entitled to terminate the lease within three months after he became or must have become aware that the premises are leased and who the tenant is.
Objections can be raised against a termnation notice. Objections must be made in writing and notified within one month of the relevant party having received the notice. If the notice is not withdrawn by the terminating party within one month from the delivery of the objections, the party who raised the objections may ask the court to examine the legitimacy of the notice within the period of another two months. If, however, the tenant vacates the business premises in accordance with the notice, then such notice shall be regarded valid and as having been accepted by him without objections.
In particular cases termination without the notice period is possible; by the landlord in cases of particularly serious breaches of the lease agreement by the tenant, by the tenant if the landlord fails to provide the tenant with sufficient protection against claims of a third party, who asserts the right of ownership or another right in a thing or claims that the premises be surrendered or vacated. Nevertheless, the breach has to be specified in the notice and a possibility to remedy the breach before the notice has to be given.
The tenant is entitled furnish, to the appropriate extent, the real estate in which the object of the lease is located with various types signage, provided the landlord has given his consent. The landlord may only withhold his consent for serious reasons. If the tenant requests the landlord in writing to be given such consent and the landlord does not respond within 1 month, it shall be taken that consent has been given. On the other hand, a failure to obtain the consent constitutes a gross breach of the lease agreement by the tenant.
Compensation for taking over a customer base
One entirely new legal mechanism is the payment of compensation for taking over a customer base, i.e. a group of customers who were regular clients of the tenant, provided that such base was created by the tenant himself. The tenant is entitled to compensation for the take-over of a customer base in cases where the lease is terminated by notice of the landlord and at the same time the customer base is taken over by the landlord or a new tenant. However, the tenant will not be entitled to compensation for the takeover of a customer base if the landlord gave a notice to the tenant for the reason of the tenant's gross breach of obligations.
For more information please contact:
JUDr. Mojmír Ježek, Ph.D.
rutland ježek, advokátní kancelář s.r.o.
t: +420 226 236 600
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