Legal right of pre-emption of a co-owner

The statutory right of pre-emption of co-owners is enshrined in Section 140 of the Civil Code (Act No. 40/1964 Coll., hereinafter referred to as the “Civil Code”). If one of the co-owners wants to sell his co-ownership share in the property, he must offer this co-ownership share for sale to all other co-owners before transferring it to another person. This statutory right of pre-emption does not apply if the co-owner transfers his share to a close person. The definition of a close person is found in the provisions of Section 116 of the Civil Code.

According to Section 140 of the Civil Code, " If a co-ownership share is transferred, the co-owners have a pre-emptive right, unless it is a transfer to a close person (Sections 116, 117). If the co-owners do not agree on the exercise of the pre-emptive right, they have the right to redeem the share in proportion to the size of the shares."

A co-owner who wants to transfer his co-ownership share to another person, but not to a close person, must offer this co-ownership share for purchase to the other co-owners. If it concerns real estate, the offer must be in writing. Since the provision of Section 140 of the Civil Code does not regulate the manner in which the offer is to be made, the provisions on the contractual right of pre-emption shall apply to the statutory right of pre-emption. This is an analogy of law (analogy of law), i.e. a legal provision is applied that is found in the same law and regulates a similar matter. Therefore, the provisions on the contractual right of pre-emption in a purchase contract pursuant to Sections 602 to 606 of the Civil Code shall apply to the offer to purchase a co-ownership share.

According to Section 605 of the Civil Code, "If no time is agreed upon for the sale to take place, the entitled person must pay for the immovable property within eight days, and for the immovable property within two months after the offer. If this period elapses in vain, the right of pre-emption shall lapse. The offer shall be made by announcing all the conditions; if it concerns immovable property, the offer must be in writing."

If a co-owner fails to fulfill the obligation to make an offer to the other co-owners and transfers the co-ownership share to another person, there are legal consequences associated with this, namely that the affected co-owner (who should have been given the offer and was not) may exercise specific claims against the violating co-owner (who did not make the offer and transferred the share).

First of all, the affected co-owner may invoke the invalidity of such a transfer to another person. According to the first sentence of Section 40a of the Civil Code, "If the reason for the invalidity of a legal act is pursuant to the provisions of Sections 49a, 140, Section 145(1), Section 479, Section 589 and Section 701(1), the legal act shall be deemed valid unless the person affected by such act pleads that the legal act is invalid."

The "appeal" of the invalidity of a legal act can be made in various ways, it does not have to be in court proceedings, but also outside the proceedings. This "appeal" of invalidity can also be made orally, but in order to be able to prove in court proceedings that the appeal occurred, it is appropriate to make it in writing and deliver it in such a way that the affected co-owner can prove the delivery of the appeal. Thus, the shipment with the appeal of the invalidity of the transfer contract must be sent either with a delivery receipt or delivered in the presence of witnesses. The appeal of invalidity must be made against all participants in the transfer contract (including in relation to the acquirer of the thing), not only against the violating co-owner. When such an appeal of invalidity is delivered to all participants in the legal act, the invalidity of this legal act occurs by this delivery, the contract ceases - from a relatively invalid contract it becomes absolutely invalid.

In addition to the right to invoke invalidity, the affected co-owner can also resolve the situation in another way. The legal regulation under Section 603, paragraph 3 of the Civil Code, which regulates the contractual right of pre-emption, will again be used.

According to Section 603, Paragraph 3 of the Civil Code, "If the right of pre-emption has been violated, the entitled party may either demand that the acquirer offer the thing for sale, or the right of pre-emption shall remain intact."

Another way is the right to demand the transfer of the co-ownership share from the acquirer under the same conditions as the violating co-owner transferred it to him. This claim can also be asserted through a lawsuit to replace the expression of the will of the acquirer - that is, the court will essentially "conclude" a purchase contract for the acquirer, where the seller will be the acquirer of the share and the buyer will be the affected co-owner.

The first two claims of a co-owner, i.e. the right to invoke the invalidity of the transfer act and the right to demand the replacement of the expression of the acquirer's will , expire upon the expiration of the limitation period of 3 years. However, the beginning of the running of these periods is determined differently. When invoking the invalidity of a legal act, the period begins to run upon the conclusion of the contract, when replacing the expression of the will, the period begins to run on the day the transferee's ownership right is entered into the real estate cadastre. At the same time, if the co-owner makes a choice of the law that he wants to exercise, he can no longer change it. If he invokes invalidity, the contract expires and therefore he can no longer demand the transfer of the co-ownership share into his ownership. If he demands the replacement of the expression of the will, he cannot demand the invalidity of the contract, because one right excludes the other and does not exist side by side.

The last way the affected co-owner can proceed is to do nothing, i.e. not act. His right of pre-emption remains preserved also against the acquirer of the co-ownership share and therefore he can wait to see if this acquirer, if he wants to resell the co-ownership share, offers this share to him for sale. Until then, he and the acquirer will be in a normal co-ownership relationship. He can do so, for example, if the new co-owner suits him as a person and at the same time is not interested in acquiring the share. This right consisting in preserving the right of pre-emption is not subject to limitation; the limitation period for claims (e.g. to invoke invalidity or to replace the expression of will) would only start to run again with the transfer of the co-ownership share to the next acquirer. Thus, if this acquirer (against whom the affected co-owner retains the right) also wanted to transfer the co-ownership share later and violated the right of pre-emption by not executing the offer, the affected co-owner has the same rights as in the previous transfer, namely:

a) the right to appeal the invalidity of the transfer act,

b) the right to demand the replacement of the expression of the will of the acquirer and to obtain, with the consent of the court, a co-ownership share under the same conditions as the acquirer obtained it,

c) do nothing and therefore retain the right of pre-emption against the acquirer (new co-owner).