On July 24, 2023, the Prague 5 Municipal Council approved a cooperation agreement between the municipality and the development company EKOSPOL a.s. The contract was subsequently signed on July 26, 2023 on behalf of Prague 5 by the then Mayor Jaroslav Pašmik. The contract contains in Article 3.1 paragraphs (iv) and (v) the obligation of the contracting parties to transfer to the Prague 5 Municipal District, free of charge, land owned by the investor, as defined in Annex No. 2 of the contract. In exchange for this, the Municipal District of Prague 5 withdrew the appeal against the building permit and thus enabled the investor to implement development construction.
But the fundamental error is that the Council of the Municipal District of Prague 5 does not have the authority to decide on the acquisition of real estate for the property of the municipal district. Thus, the investor’s obligation to transfer the land into her ownership free of charge did not in fact arise at all, because it is absolutely invalid (i.e. considered invalid by law). According to § 89 paragraph 2 letter e) Act No. 131/2000 Coll. of the capital city of Prague, as amended (hereinafter referred to as “ZHMP”), only the municipal district council, not the council, can decide on the acquisition and transfer of tangible immovable property. This authority cannot even be transferred to the council! The agreement in question in the contract with the company EKOSPOL as is nothing more than a contract on a future contract for the transfer of immovable property to the Municipal District of Prague 5. From the nature of the matter and according to the constant jurisprudence of the Supreme Court and the Constitutional Court, negotiations on the transfer or acquisition of immovable property, which must to approve the council, also includes the conclusion of a contract on a future contract. If the relevant contract is not approved by the authority of the municipal district, which is supposed to approve it, such an action is absolutely invalid. In other words, it does not bind the parties to anything.
Given that the contract with EKOSPOL as was not approved by the municipal council of Prague 5, EKOSPOL as is not at all obliged to transfer the land to the municipality. The municipal district of Prague 5 thus withdrew the appeal against the building permit in exchange for the non-existent obligation to transfer the land to it from the investor. Due to the fact that there was no obligation to conclude a contract on the transfer of land to the municipal district, even the municipal district, in the event that EKOSPOL as refuses to transfer the land to the municipal district, cannot claim a contractual fine of CZK 500,000 agreed in the contract, because EKOSPOL as in fact has no does not violate the obligation.
Thus, by approving the contract, the Council of the Municipal District of Prague 5 violated § 89 paragraph 2 letter e) ZHMP. Furthermore, it violated the Principles for Cooperation with Investors for the Purpose of Development of Public Infrastructure of the Prague 5 Municipal District, approved by the Prague 5 Municipal Council on April 17, 2018, according to which a cooperation agreement with an investor, if its object is the acquisition of real estate into the ownership of HMP (trusted by the municipal district ), is approved by the municipal council. Thus, the council did not respect the law or the resolution of the council, which is still valid.
Perhaps just to clarify, I refer to Article 3.1 paragraph (vi) containing the contractual penalty agreement. The total amount of the contractual fine for breach of the listed obligations of the investor amounts to CZK 500,000 and cannot be exceeded. In addition, there is no stipulation that, in addition to the contractual fine, the municipality may also demand compensation for damage caused by a breach of some obligation on the part of the investor. This means that if the investor violates any of his obligations under the contract, he will pay the Municipal District of Prague 5 the amount of CZK 500,000 and the matter ends for him. If the city district were to suffer a loss of e.g. CZK 1,000,000 due to the investor’s breach of duty, it is unlucky not to receive more than CZK 500,000.