Black construction by the tenant – part II.

Part Two – private law consequences of a black building by a tenant

All buildings, alterations or landscaping carried out without or in violation of the relevant decision of the building authority are considered to be black buildings. Regardless of the nature and size of the property, the construction may also be carried out by a person other than the owner, for example a tenant.

The aim of today’s post is to focus on the private law aspect of the black building implemented by the tenant resulting from the rules of the Civil Code, namely:

1. the landlord’s option to terminate the lease upon the implementation of a black building;
2. the tenant’s obligation to return the property to its original condition at the end of the tenancy;
3. the right of the lessee to demand financial compensation from the lessor for the implementation of the black construction, which led to the appreciation of the subject of the lease.

Lack of a building permit as the only reason for the landlord to terminate the lease?

Let us imagine a situation in which the building authority has initiated proceedings for the removal of a black building implemented by a tenant, or has already decided on the matter and the building is to be removed. From the landlord’s point of view, it may seem obvious that in such a case he can terminate the tenancy with the tenant at the same time.

It is important to note, however, that only the tenant’s private law obligations under the lease are relevant for the assessment of the possibility of terminating the lease. Although a single act of the tenant may be both an administrative offence and a breach of the obligations under the lease, the landlord is not entitled to terminate the lease with the tenant solely on the grounds of a breach of the Building Act without specifying the specific breach of the tenant’s private law obligations. It follows from the case law of the Supreme Court of the Czech Republic [1] that the landlord’s attitude towards the black building, the effect of the building on the use of the property by other tenants (e.g. the existence of excessive noise or dirt), the use of the property in accordance with the lease agreement, or special arrangements of the parties in the case of the lease of premises used for business purposes (see below) will be relevant for the assessment of the tenant’s performance of his obligations under the lease.

Different status of a tenant of a flat and premises used for business
From the point of view of the possibility of termination of the lease relationship after the implementation of a black building by the tenant, it is essential whether it is a lease of a flat or premises used for business.

The different position resulting from the protection of the tenant as the weaker party to the contract is reflected in the fact that while in the case of a lease of premises used for business purposes, the parties may negotiate the grounds for termination at their own will, the lease of an apartment may be terminated only for enumerated statutory reasons, which include a gross breach of the obligations arising from the lease.

Can the tenant claim financial compensation for the appreciation of the property even in the case of alterations to the property carried out in breach of building regulations?
If the statutory conditions are met, the tenant may claim compensation from the landlord at the end of the lease for the appreciation of the subject of the lease as a result of the construction changes.

Again, only the circumstances arising out of the tenancy relationship will be relevant to the assessment of the validity of the tenant’s claim, namely whether

i) the landlord has given his consent to the construction changes,
(ii) the parties have not excluded the compensation in the lease agreement; and
(iii) there has been an actual appreciation of the leased property.

Under certain circumstances, it is possible for the tenant to successfully claim financial compensation from the landlord for the construction of a black building.

If we disregard the possibility of compensation for damages incurred by the landlord as a result of the decision of the building authority in connection with the black building, the above case will generally concern building modifications where their non-compliance with the building regulations has not been discovered or their additional authorisation has been granted in connection with the procedure for the removal of the black building.

Tenant’s obligation to remove building alterations made without the landlord’s consent

• If the landlord has not granted consent to carry out construction changes, the tenant is obliged to restore the subject of the lease to its original form at the end of the lease at his own expense.
• It does not matter whether the tenant also acted in violation of the Building Act or under what circumstances the lease was terminated.

Importance of the landlord’s consent to the construction – a change in the landlord’s personality is not an obstacle

• The emergence of the described private legal consequences of the black building affects primarily the attitude of the landlord, which is thus crucial for the tenant.

• The landlord’s consent to make changes to the subject of the lease must be distinguished from the consent that the tenant provides in the context of the procedure for additional building permits (see the previous post – Black building implemented by the tenant I.). Although it is possible for a single document to be both the consent documented in the procedure for the additional building permit and a condition for the legal consequences defined in this post, the legal requirements are slightly different.

• In contrast to the consent provided in the context of the procedure for the additional building permit , it is not necessary for the private law consequences to arise that the tenant must also obtain the consent of the new landlord in the event of a transfer of ownership of the leased property.

• Another significant difference is that the landlord’s consent under the Civil Code does not always have to include the specific construction changes to be made. Although a higher level of specificity can always be recommended in order to avoid any possible interpretative ambiguities, it is in principle sufficient for the private law consequences of the tenant’s implementation of a black building to arise, as described above, if the consent is granted generally, i.e. for all changes made to the property.

• However, the tenant cannot rely on the landlord’s general consent in all circumstances, especially when defending against the landlord’s termination of the lease. For example, if a tenant implements a black building that poses a safety risk to other tenants, the tenant will likely be in breach of the tenant’s obligations under the lease regardless of the landlord’s general consent to the building alterations, given the other circumstances.

In case you are facing similar problems or have not found the right answers, the M2A Partners team is here to help. Do not hesitate to contact us.

This article is for informational purposes only and does not constitute legal advice for any particular case.

[1] E.g. judgments of the Supreme Court of the Czech Republic of 15 July 2010, Case No. 26 Cdo 2313/2009, of 22 April 2004, Case No. 26 Cdo 85/2004 or of 4 March 2005, Case No. 26 Cdo 291/2004.