For those who are unfamiliar with construction law in the Czech Republic, it should be noted from the outset, that builders have an obligation to obtain an official permit for the location of the construction (the “Zoning Decision”) and an official permit for the construction of the building (the “Building Decision”). There are very limited situations where construction of a building will be authorised based on a simpler form of decision making and it is rare that a building will be authorised without obtaining an official permit.

In the Czech Republic, it is quite a lengthy and complicated process to obtain an official permit to construct a building. In some circumstances, it is virtually impossible to obtain an official permit where the regulations and restrictions completely prohibit the establishment of certain types of construction in specific areas. Therefore, it is not unusual for builders to begin construction without obtaining official permits and in many cases, buildings are constructed in violation of permits that are issued at a later date. In such circumstances, the building authorities have an obligation to initiate proceedings to order the removal of the illegal building and to inform the builder of the options available to apply for any additional building permits that would legalise the construction. Where the builder files for the obtainment of an additional permit, the building authority will be required to halt the proceedings until they make a decision on the additional permit application. The building authorities will base their decision on whether to grant an additional permit based on the public interest in the removal of the illegal building. Although the builders of these illegal buildings are risking a fine by the building authority and the possibility of an order to remove the building, in practice, a high percentage of buildings are authorised following the granting of an additional permit where there is no public interest in the removal of the building. However, it is known that prominent individuals in the Czech Republic have abused this process by bribing the building officials for an additional permit. Therefore, reform is needed in construction law in the Czech Republic to eradicate the practice of building these illegal constructions.

The new Czech Building Act No. 283/2021 Coll. (the “Act”), which replaced the previously existing Czech Building Act No. 183/2006 Coll., provides that builders must prove that they acted in good faith when constructing a building to apply for an additional permit for that building (Section 256 of the new Building Act).

According to the explanatory notes of the Act, a builder will be found to be acting in good faith where the builder was issued a building permit by the respective building authority, the permit became legally valid, the builder subsequently initiated the construction, and the permit was then revoked at a later date in the review proceedings. Builders will also be found to be acting in good faith in cases where the building authority issued information (preliminary information, informal communication, etc.) stating that the construction did not require a permit and it is later discovered that this information was untrue, and a permit was in fact required. This situation can occur where the building authority incorrectly makes an assessment of the submission (mistake by an official) or from an insufficient submission where it lacked all the essential information, and the building authority did not seek further information or request that the builder completes the submission correctly and thus the submission is assessed incorrectly (i.e. the building authority acted negligently in misleading the builder). The Explanatory notes of the Act also provide that in cases where the builder has made a submission to the relevant planning authority and the planning authority authorises a permit for that building or allows for the building to be constructed without a permit based on the submission and subsequently the builder constructs a building that is different than the submission, the builder will not be acting in good faith. It is further stipulated that in these circumstances no exemption from the building regulations may be granted. It is therefore necessary for the builder to ensure that the building being constructed corresponds with the details of the building in planning submission.

The Act is due to be implemented on 1 July 2023. According to the transitional provisions of the Act, any proceedings and procedures initiated before that date should already be completed under the new Act. The draft legislation that was referred to the Czech Parliament, provided that all building constructions that had been constructed but had not been validly authorised prior to 30 June 2023 are to be assessed under the previous legislation, i.e. without the requirement to establish good faith and the possibility of granting an exemption from the construction requirements. This provision has since been withdrawn from the legislation after consideration by Parliament of the draft law. However, Parliaments reasoning for the removal of the provision remains unclear.

There are currently three possible interpretations of the Act that could transpire for buildings that have been constructed invalidly without authorisation of the relevant building authority by 30 June 2023:

1. The first interpretation would be that it will not be possible for the relevant building authority to either validly permit such building constructions nor will it be possible for them to order their removal.
2. The second interpretation would be that such building constructions will only be permitted under the requirements of the new law (i.e. only if the builder was acting in good faith and any exemptions from the construction requirements will not be allowed).
3. The third possible interpretation would be a general prohibition of retroactivity of the laws. It will be possible to permit such building constructions but without the requirement of good faith and with the possibility of granting an exception to the construction requirements.

Only future case law in the Czech Administrative Courts will show which interpretation of the Act will ultimately prevail. The amendment to the new building act however has modified the acts effectiveness from the 1 July 2023 for permits regarding “reserved buildings” while permits concerning all other buildings would come into action on 1 July 2024.

The recent judgment of the Czech Supreme Administrative Court No. 6As 108/2019-39 of 26 March 2021, concerned a building that was constructed without a permit.  Prior to this judgment, buildings were often constructed without a permit and the relevant authorities might not have taken any action or initiated proceedings for the removal of illegal buildings due to the laziness of the relevant official or due to corruption. In many cases, owners of neighbouring properties were forced to watch as illegal buildings were constructed next to their properties as their complaints to the building authority to initiate proceedings for removal of the buildings went ignored. However, this practice has been put to an end by the above-mentioned judgment. Proceedings for the removal of an illegal building constructed under the previous legislation as well the new Act were initiated by the building authority ex officio, i.e. of its own motion. In this landmark judgment, the Czech Supreme Administrative Court held for the first time that a person who claims to be affected in his/her material right by the factual inaction of a building authority which has not itself initiated proceedings for the removal of an illegal building construction in contravention of the Act may defend him/her-self against such factual inaction of the building authority as an administrative body by bringing an action before the respective administrative court for protection against unlawful interference. If the administrative court upholds such an action, it shall determine that the failure to initiate the proceedings ex officio constitutes unlawful interference and at the same time shall order the building authority to initiate proceedings for the removal of the illegal building construction in accordance with the Act. Thus, any owner of a property adjacent to an illegal building construction can now bring an action before the administrative court and through an administrative action, can obtain an injunction or an order for removal of the building.

What are the implications for building investors and building owners from the above change of law and new legislation in the Czech Republic?

It is prudent for building investors and owners to carry out an internal audit of their building permits as soon as possible to ensure that the building is validly constructed. If they find that the building has been constructed invalidly (i.e., without authorisation from the relevant authority, without a valid permit or in contradiction with a valid permit) we would advise the building investors or owners try to obtain an additional building permit as soon as possible. If the Act is interpreted strictly, they may have less than a year to obtain an additional building permit or to remove the illegal “reserved buildings” after 1 July 2023 and all illegal buildings by the 1 July 2024. Following the above-mentioned judgment of the Supreme Administrative Court, it will no longer be feasible for individuals to simply relying on “good relations” or bribes with the building authority as the owners of neighbouring properties can prevent the construction of a building without a permit or enforce an order for removal of the black building.