Insufficient legislation threatens cooperative housing, the participants of the expert seminar in the Chamber agreed. 95% of cooperative members are not satisfied with the current situation

Commercial presentation Issued by: 03/27/2024, 12:55 p.m

Prague, March 27, 2024 (PROTEXT) – The legislation on cooperative housing is insufficient and needs to be changed, agreed the participants of the expert seminar in the Chamber of Deputies entitled “Opportunities and challenges of cooperative housing in the Czech Republic”. The event was held under the auspices of the Committee for Public Administration and regional development The Union of Czech and Moravian Housing Cooperatives (SČMBD) presented an analysis developed in cooperation with the Center for Economic and Market Analysis (CETA), which provided an important overview of current trends and the future of cooperative housing policy in the country.

“Cooperative housing is a neglected part of the housing market. However, the current situation poses a number of obstacles for cooperatives, which we wanted to draw attention to in the seminar. I am pleased that this professional debate took place on the floor of the Chamber of Deputies, and I believe that we will start looking for ways to solve current problems.” stated Jiří Havránek, Chairman of the Subcommittee for Housing Policy and Construction.

SČMBD together with CETA prepared an analysis of the current situation of cooperative housing in the Czech Republic and the conclusions of the investigation were presented at the seminar. “The study responds to obstacles and shortcomings in the current legislation, which complain about the reliable functioning and balanced management of housing cooperatives. The conclusions of the study, based on the synthesis of relevant information and experiences of SČMBD members, represent practical recommendations for central and municipal authorities, the implementation of which can revive the waning demand for cooperative housing. Housing cooperatives have the potential to play a very important role in shaping the future of the housing market in the Czech Republic,” said at the beginning of the seminar the chairman of SČMBD Jan Vyslužij.

Michael Fanta from the Center for Economic and Market Analysis presented the main findings of the study: “Inadequate legislation appears to be the fundamental problem of co-operative housing, this statement was stated by 95% of respondents to the questionnaire survey. As concrete examples, they cited, for example, the position of housing cooperatives as a creditor in insolvency or execution proceedings, the question of determining the settlement share or the termination of membership in the case of the debt relief process of a housing cooperative member.

The problem of the current situation is the position of the housing cooperative as a creditor in the recovery of claims for members (86.9% of respondents agree). In the current situation, housing cooperatives are economically bound by the debts of their members. On the other hand, teams are also troubled by situations from the opposite position. A problem for housing cooperatives is also the position of the cooperative as a debtor when paying the settlement share in connection with the termination of membership without a legal successor. More than 91% of respondents agreed with this statement.

“Non-payers owe member organizations millions of crowns for a long time. The share of bad debts, i.e. those whose repayment is no longer expected, continues to rise. It is more than 50 percent. This is gradually caused primarily by legislative changes that enable the debt relief of problematic owners and debtors.” Kateřina Horáková from the legislative and legal department of the SČMBD pointed out the problems and presented practical solutions based on the analysis that would help the current situation of cooperative housing.

Proposed solutions based on the SČMBD analysis:

• Adjustment of the position of the housing cooperative as a creditor in the process of recovering claims incurred by current or former members. If the debtor has an obligation not only to the cooperative, but also to another creditor, it is desirable to adapt the order of creditors in the settlement of the debt. In other words – to ensure the priority status of housing cooperatives, as they provide their members with one of the basic human needs – housing. Financial losses resulting from the often meager return of the amount owed significantly complicate the stability of the cooperative’s management, which affects the quality of services provided by all other members.
• Modification of the mechanism that determines the amount of the settlement share in connection with the termination of membership without a legal successor. It is desirable to legislatively adjust the methodology for determining the value of the settlement share, taking into account all obligations and claims for the member of the cooperative, including costs related to the termination of his membership and vacating the apartment. In many situations, the cooperative is now forced to pay outgoing members a settlement share that exceeds the book value of the original deposit many times over, which again significantly complicates the management of the cooperative. The valuation of the current value of the cooperative share makes sense to be linked, for example, to the development of inflation, but not to the market value of the given property.
• Legislative regulation of eviction and clearing of a housing unit. If a valid decision terminates membership in the cooperative (or if the reviewing court confirms the correctness of the cancellation of membership), it is necessary that the subsequent eviction and eviction of the apartment be automatically related to this first decision, within a limited time (e.g. within three months). In a number of situations, it is currently necessary to resolve the clearing of the apartment again in court, which is administratively, financially and time-consuming.
• Direct or indirect public sector support towards housing cooperatives. It is not appropriate to approach housing cooperatives in the same way as ordinary commercial companies, as they are not established for the purpose of doing business and making a profit. It does not necessarily have to be direct financial support through grants, subsidies or the establishment of a special fund. Suitable support for the development of housing cooperatives is, for example, preferential loans for cooperative construction or the creation of suitable credit products for those interested in membership in a cooperative. There is also a simplification of the administrative process of permitting and approving construction projects, offering municipal land at reduced prices for cooperative projects, or reducing property tax for cooperative apartments.

The key information input for the analysis is a questionnaire survey, in which a total of 61 members of the SČMBD, owning more than 267,000 apartments and 10,000 houses, actively participated.

Union of Czech and Moravian housing cooperatives is an interest association of housing cooperatives or associations of unit owners with jurisdiction throughout the Czech Republic. It provides its members with professional methodological assistance and represents them in negotiations with the government, the Parliament of the Czech Republic and other state and non-state bodies and organizations. Currently, members of the association own or manage approximately 632,000 residential and non-residential units, which is 18% of all apartments in the Czech Republic. In addition to the management of their own apartments and houses, the member cooperatives perform administration for approximately 15,800 thousand associations of unit owners. Through its members, the union is thus the largest organized administrator of apartment buildings in the Czech Republic. www.scmbd.cz