22 / 132
ACQUISITION PROCESS:
KEY STAGES
Preliminary negotiations
Heads of Terms or Letter of Intent
• Used prior to entering into the transfer document, contain
basic economic terms of the transfer document and other
corresponding matters (e.g., exclusivity, confidentiality).
• Usually not a legally binding document, but the party could
be held liable for damages caused on the grounds of pre-
contractual liability if the party won’t negotiate in good faith.
Agreement on Future Agreement (pactum de contrahendo)
• One or both parties to the agreement obligated to enter into
an (future) agreement that is determined in at least a general
way, in an agreed period (otherwise until 1 year) and without
reasonable delay after receiving notification from the other
party.
• If the obligated party does not enter into a future agreement,
the conclusion of the agreement might be claimed by a court.
From the buyer’s side is usually carried out the due diligence
which shall reveal potential risks related to the acquisition of the
property.
Transfer of real property
Asset deal
• The owner of the real property and the investor conclude a
purchase contract under which the ownership right to the real
property is transferred to the investor.
• The investor becomes the new owner of the real property
upon the transaction’s entry in the Land Registry.
• The main advantage is the universality – the asset deal may
be used when the owner of the real property is a natural
person or if the owner of the real property is a company
(a legal entity).
• Since 1 January 2015 the so-called principle of material
publicity of the Land Registry is fully effective, under which
real property may be acquired from a non-owner under
certain circumstances whereas the New Civil Code regulates
mechanisms protecting the real owner of the real property.
Share deal
• The subject of the transaction is not the real property but the
company as the owner of the real property.
• The main advantage of acquiring real property via a share deal
is the avoidance of taxes, especially real property acquisition
taxes and VAT.
• The legal owner of the real property remains the same, and
the acquisition of the real property has almost no legal impact
on the contracts concluded with respect to the real property
(provided that the contracts do not include a ‘change of
control’ clause).
COMMERCIAL LEASES
Lease
• No strict formal requirements for an agreement on the lease
of business premises set by the New Civil Code.
Term and termination
• Definite or indefinite; if the parties do not regulate the lease
term contractually, the lease term is indefinite.
• If the parties agree on a lease term that is longer than 50
years, it is deemed that the lease term has been concluded for
an indefinite amount of time, whereas in the first 50 years the
lease can only be terminated on the basis of the agreed upon
reasons and in the agreed termination period.
• Lease agreements concluded for an indefinite period can be
terminated without stating a reason – the period of notice is
six months, unless the party has serious reason for which the
termination period may be three months; the parties are free
to agree on the reasons for the premature termination of the
lease agreement, or on another termination period.
• Lease for a definite term can be terminated under statutory
provisions, unless otherwise stipulated by the parties.
Rent
• The contracting parties are generally free to negotiate the rent
price and, therefore, any rent increase.
–– the rent increase is usually bound to some objective
criterion, such as the inflation rate or some kind of index
(e.g., the consumer price index).
• Usually, regulation of the tenant’s payments for auxiliary
services provided by the landlord according to the lease
agreement (e.g., electricity, cleaning).
• Types of rent:
–– fixed rent;
–– turn-over rent (increase of a rent in respect of the tenant’s
turnover).
• A security deposit (or a bank guarantee) amounting to three
to six months’ rent is common practice.
Sublease
• If the parties do not stipulate otherwise, the tenant is allowed
to sublease the premises only with the consent of the
landlord; the consent must be in writing.
Transfer of tenant’s business
• The tenant is entitled, with the landlord’s prior written
consent, to transfer the lease in connection with a transfer of
the business activities performed in the leased premises.
Change of ownership
• Generally, there is no right of a contracting party to terminate
the lease only because of a transfer of the ownership to a real
property.
• Lease to be distinguished from usufructuary lease (in Czech:
pacht) as a new legal institute introduced by the New Civil
Code.
22 Investors Guide to Europe 2015