Legal practice knows many cases where a publicly available register of members of housing cooperatives would make life easier for both the lay and professional public. This post is dedicated to considerations of the reasons for and against such a solution.

The facts recorded in the commercial register for corporations are determined by § 120 of the Act. No. 89/2012 Coll., Civil Code, as amended (hereinafter referred to as "Civil Code") and also the subsequent § 48 of Act. No. 304/2013 Coll., on public registers of legal entities and natural persons, as amended (hereinafter referred to as "ZVR"). Data on the members of the cooperatives and the amount of their shares are not among the exhaustively listed recorded data. As the Public Records Act falls within the realm of public law, the principle of "whatever is not allowed is forbidden" will apply. Therefore, cooperatives are not entitled to demand the registration of their members in the public register, even if they themselves wanted to do so. Exceptions to the general rule are related to the possibility of registering a lien on a cooperative share in the commercial register, as well as prohibitions on encumbrance or alienation established as real rights [1] In order for registration in the public register to be feasible, it is logically necessary to register the share that is the subject of the given right and its owner. The High Court in Prague has already commented on the possibility of such registration [2]: "If a lien on a cooperative share is to be entered in the commercial register, the member of the cooperative whose share is pledged and the pledged cooperative share must be entered in the commercial register at the same time."

When would a public registry help?

In the Czech Republic, the transformation of housing ownership is still taking place, from public to private ownership. According to a very frequent scenario, municipal apartments or the entire house, in the first phase transferred to the ownership of newly established housing cooperatives for that purpose. Subsequently, the gradual transfer of the units to the ownership of the tenant - members of the housing cooperatives - will begin. This transitional (or, more precisely, legally, transfer) phase can take several years, depending on the financial possibilities of the members of the cooperative. All this time, "cooperative ownership" and "personal ownership" of units exist side by side in the same house. Until the transfer of the last unit, the housing association cannot be canceled or liquidated. Therefore, membership in the housing cooperative still lasts, even in relation to those persons who have already acquired the unit as their "personal ownership". The critical moment is the sale of the "personally owned" unit to another person. During this further transfer, the transfer of member rights and obligations to the cooperative share is regularly omitted. This leads to an undesirable phenomenon where a person who actually has nothing to do with the given house remains a member of the housing association. A member of the cooperative moves out and has no reason (according to his belief) to tell anyone his new address. The housing association will not be able to realistically deliver invitations to member meetings, and the whole situation may lead to the chronic impossibility of reaching a quorum at member meetings. If the members of cooperatives were registered in the public register, the change of their residence would be reflected in it thanks to the new information system even without the need to submit a proposal in this direction to the registry court.

It is worth considering whether this unsatisfactory situation could not be solved elegantly with the help of ustan. §1106 of the Civil Code, according to which: "Whoever acquires ownership rights also acquires the rights and obligations associated with the thing.". However, to what extent are membership rights and obligations in a housing cooperative linked to ownership of the unit? Not strong enough in my opinion. First of all, I consider it impossible to have some kind of "automatic" transfer of member rights and obligations in cooperatives. Such a procedure would contradict the legal requirements for the formalities of the transfer agreement. There may also be situations where it is expedient or directly necessary to maintain the membership of the original member even after the transfer of the unit to the "personal ownership" of the member of the cooperative and the subsequent transfer of the unit to the ownership of a third party. One member of the housing cooperative may be entitled to rent several apartments. The sale of one unit cannot automatically mean the transfer of membership rights and obligations in their entirety to the buyer. The rights and obligations associated with the membership of the original owner must still remain, as the content of these rights and obligations is not only the rental of an apartment, but also the general right to participate and influence the operation of the entire cooperative. A non-negligible amount can also be the share of the liquidation balance of the housing association.

In the current state of the legislation, I consider the parties' explicit agreement on the transfer of member rights and obligations to be still necessary.

Writing negative

The consequence of the possibly introduced obligation to register members of housing cooperatives in public registers will undoubtedly be an increase in the agenda of registry courts and an increase in costs for the transfer of rights and obligations in cooperatives due to the expected administrative fee. I don't see any other negatives.
It is up to everyone to consider whether they lean towards a minimal state or a more paternalistic state. Would it not be enough for the members of the housing cooperatives to be properly instructed about the consequences of the sale of the units, especially by the members of the board of directors of the cooperatives, or by the legal advisers securing the transfer contracts. Whether to take the path of public support for this area of ​​private life.

Source: epravo Magazine 2/2017

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

[1]  stop § 48 paragraph 1 letter f) and g) ZVR
[2]  Resolution of the High Court in Prague dated 25 February 2, no. stamp 2014 Cmo 14/354