How to Purchase a Co-operative Flat

An overview and purchase procedure for "co-operative flats"
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Written by Richard Gürlich
of GÜRLICH & Co.

HOW TO PURCHASE A CO-OPERATIVE FLAT?

Our previous articles were focused namely on the acquisition of buildings and flats owned by particular individuals or companies and registered in the Cadastral Register. The bases for such transactions are:

  • check of the property in the Cadastral Register
  • conclusion of a purchase contract concerning the real property
  • filing the petition for registration of the purchase contract into the Cadastral Register
  • successful completion of the transfer by registration of the buyer´s ownership title to the real property in the Cadastral Register

If you have a look into some advertisements concerning purchase of real-properties you can also find offers for so called “co-operative flats”. Do you really know what is being offered? If you continue reading this article you will find the answer.

Of course you can find a “standard flat” corresponding to the description in our previous articles which is owned by a co-operative. In such a case the co-operative is registered as its owner in the Cadastral Register and standard purchase contract is concluded and filed with relevant Cadastral Office. But such flats are not qualified as the “co-operative flats” and are not concerned in this article.

The basic description of the “co-operative flat” in the terms of this article includes the following:

  • the “co-operative flat” is owned by a co-operative; usually the co-operative owns the whole building
  • it does not have to be registered as a separate unit in the Cadastral Register
  • it must be always approved by the building office for usage as a flat
  • you enter into a contract on transfer of membership in a co-operative instead of a purchase contract to “acquire” a “co-operative flat”
  • the contract on transfer of membership in a co-operative does not have to be registered in the Cadastral Register and no petition is necessary
  • you do not become the owner of the flat, the co-operative remains the owner and you are just a member of the co-operative
  • lease of the “co-operative flat” in question is connected with your membership in the co-operative, i.e. standard lease contract between you and the co-operative should be executed
  • in case you need a mortgage credit from a bank generally you need another real property which will serve as a bailment for the bank

Based on the above mentioned you can see that the biggest difference is, compared with let´s say “standard flats”, that you do not become the owner of the “co-operative flat”, you are just the lessee, and on the other hand you become a member of a legal person – a co-operative – which remains the owner of the flat and becomes your landlord. Different contracts must be executed and also the dealings with the bank are a bit different in case you need a mortgage credit.

Before you decide for a co-operative flat, taken into account the above mentioned, you should also require some information concerning the co-operative itself. As we have mentioned, the co-operative is a type of a legal person, has its organizational structure, its statutory and administrative body, its assets (including the flats one of which you are interested in) and possibly also some liabilities. You should make sure that the financial situation of the co-operative is good, that there is no risk that the co-operative will loose its assets (including the flat you are interested in) and that the operation of the co-operative itself will not cost you unreasonable amount of money. From this point of view the situation is similar to a purchase of a business share in a company.

In relation to the check of the financial situation of the co-operative you should also check the wording of its current statutes and rights and obligation arising out of them for you. Once you become the member of the co-operative you have to adhere to its statutes which will be binding for you. First of all you should check whether the statutes of the co-operative enable the transfer of shares in the co-operative and under which conditions.

Since the purchase price of the share in a co-operative usually corresponds to the market price of the flat (although the co-operative may have the registered capital of only several tenth of Czech Crowns and  the contribution of the member who is willing to transfer his share to you might be let´s say five thousand Czech Crowns) the contract on transfer of membership in a co-operative should include provisions based on which the co-operative will be obliged to transfer the ownership title to the “co-operative-flat” to you for free under agreed conditions. 

Since the acquisition of the “co-operative flat” requires a bit different approach to the case compared with the purchase of “standard flats” and no article can include complete and always directly applicable information it would be a pleasure for us to help you. We are ready to cover all possible risks and provide you with related necessary services connected with the acquisition of a “co-operative flat”.


Tip: Visit Expats.cz Real Estate for 1000s of the latest properties for rent and sale in Prague & the Czech Republic!

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