Act on unilaterally increasing apartment rent and other changes to legal regulation of apartment leases01/04/06 / cata_legal-tax-update

On March 14, 2006, Act No. 107/2006, Coll., on Unilateral Increase of Apartment Rent and on Amendment to Act No. 40/1964, Coll., the Civil Code, as amended (called the “Four Years Act”) was announced in the Collection of Laws becoming effective March 31, 2006. The regulation of increasing the rent is valid until December 31, 2010.

Pursuant to the so-called Four Years Act, owners may unilaterally increase the rent for certain apartments during the period of 2007 to 2010 for once a year up to the target value. The calculation method is set forth by law and the target value will be announced by the Ministry for Local Development in the Collection of Laws. The written announcement of the increase must be duly justified. The lessee may file an action in respect of invalidating the increase.

From March 31, 2006, this act also amended the legal regulation for apartment leases, in particular the leasing of apartments by the employer to its employees. The act introduced the possibility of agreeing on a deposit for the monthly rent and services up to three times the price thereof, but making it possible to draw on the deposit only under restricting conditions. The lessors will appreciate that the rent agreed for a definite period of time will not automatically renew pursuant to the new legal regulation, without the lessor having to file an action concerning removal of furniture. The court’s approval is not necessary for certain notices of termination of the lease, in particular due to gross violation of the lessee’s obligations. A sublease without the lessor’s consent is considered gross violation of obligations, as well as not providing information on the change of persons in the apartment. The conditions for passage of the apartment lease and provision of apartment substitutions after the termination notice are changed. Some of these changes however will not apply to leases arising prior to March 31, 2006.