In legal practice, it is increasingly possible to encounter the rental of an apartment by a legal entity. Incorrect understanding of this contractual relationship can have very negative consequences, especially for the owner of the apartment. In this post, I will try to outline the basic considerations when formulating a specific contract.

The Supreme Court already decided in 2006 that a legal entity cannot enter into an apartment rental agreement [1], and this is because the legal entity does not need housing. Although this decision is received by the legal community with mixed feelings, it has not yet been overruled by the judiciary. In the aforementioned decision, the Supreme Court evaluated the lease agreement for an apartment concluded with a legal entity as invalid within the meaning of the Ustan. § 39 of the Act No. 40/1964 Coll., Civil Code as amended until 31/12/2013. However, in the current legislation, it is true that legal actions should be viewed as valid rather than invalid [2]. According to the subsequent provision of § 575 of the Act No. 89/2012 Coll., Civil Code, as amended (hereinafter referred to as the "Civil Code"), it can be concluded that even if a legal entity concludes a contract that corresponds in content and form to an apartment rental agreement, it will be assessed as a rental agreement, i.e. be – general in the sense of ustan. § 2201 of the Civil Code, or on the lease of premises used for business according to the statutes. § 2307 of the Civil Code, depending on what other purpose the legal entity will use the apartment for. This assessment is particularly important from the point of view of the validity of the parties' agreement in connection with the dispositive nature and force of the provisions of individual contract types. According to the general provisions, it is necessary to proceed in cases where the purpose of the lease is not to run a business activity, e.g. it can be used as an office apartment or to provide temporary accommodation for employees (in cases where they have permanent residence in another municipality). It would not be a space where a legal entity carries out its business activity, even if it were an apartment tied to business activity. The intention with which a legal entity rents an apartment is reflected not only in the interpretation of the lease relationship between the owner and the legal entity, but also in other contractual relationships associated with the apartment. It is necessary to know this intention at the outset, so that it is possible to properly protect the interests of the apartment owner in particular, who may be the most vulnerable link in the chain of legal relations for the reasons stated below.

A legal entity can primarily use the apartment as its headquarters, have offices in it. This use brings the least possible legal risks, perhaps the fact that, from the point of view of the Building Act, the building can only be used for the purpose defined in the approval decision [3]. If the apartment does not meet the building technical requirements imposed on office premises, it is not possible to use it in this way.

More diverse and less clear is the second set of ways of using the apartment, which will include all situations where the apartment is given for use - leased to a third party, thus creating a secondary legal relationship. In these situations, it is already necessary to think about the position of the apartment owner, because he will not have any contractual relationship with that third party. Most often, it will be a commercial rental of an apartment to another person. This concept is used in the mistaken belief that if the owner rents the apartment to a legal entity, it can enter into a sublease agreement with another natural person. The essence of these subleases is obvious and serves to ensure that the apartment owners do not have to respect the mandatory rights of the tenants, which are not enshrined in the sublease, in particular the limitation of reasons for terminating the contract. In such cases, it is a circumvention of the law that does not enjoy legal protection. The relationship between the legal entity and the final natural person will be considered as an apartment lease. However, the protection of the tenant - a natural person may conflict with the interests of the apartment owner. The contractual relationship between the owner of the apartment and the legal entity can be terminated much more easily than the relationship between the legal entity and the end tenant. In the extreme case, it can happen that the tenant properly pays the rent, not to the owner, but to a legal entity, and the latter does not pay the owner anything. On the part of the legal entity, this is of course unjust enrichment, the owner can only hope that the legal entity will issue it without the need for legal proceedings. It is therefore possible to recommend a sufficient contractual security instrument on the part of the owner, e.g. a financial guarantee similar to the security according to the bylaws. § 2254 of the Civil Code. Another option is to agree on the possibility of assigning the rental agreement in accordance with the ustan. § 1895 of the Civil Code concluded between a legal entity and the end tenant for the owner of the apartment in case of termination of the contract between the owner and the legal entity. Here, however, the cooperation of the end tenant is necessary, without whose consent the contract cannot be transferred.

The situation will be similar in cases where the apartment is to be used as an office. Again, it will be a tenancy relationship between a legal entity and the final physical person - an employee, albeit moderated by ustan. § 2297 an. ObčZ. Finally, the apartment can be used by a legal entity for the purpose of temporary accommodation of its employees. Here, the contractual relationship between the legal entity and the user of the apartment is governed by the provisions of § 2326 of the Civil Code. The risks for the apartment owner are practically the same as in the case of a classic apartment rental.
Therefore, if the owner wants to rent his apartment to a legal entity, we can only recommend maximum prudence when choosing a contractual partner. This is because he can easily get into a problematic situation, from which only a long and expensive journey will lead.

Source: epravo

The team of the Vych & Partners, s.r.o. law office

[1] Judgment of the Supreme Court of the Czech Republic dated 26 October 10 file no. stamp 2006 Cdo 26/1973
[2] See ustan. § 574 of the Act No. 89/2012 Coll., Civil Code, as amended
[3] See ustan. 126 of the Act No. 183/2006 Coll., Building Act, as amended