In the Czech Republic construction law is made up of several main bodies of law:
Various statutes and subordinate legislation (eg orders, ministerial and other types of regulation).
Subordinate legislation – ministerial decrees:
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The following permissions are required before the building or engineering contractor can start work:
The siting of structures or facilities, alterations to structures or facilities, or changes in their impact on the use of the surrounding area, alterations in the use of an area and the protection of significant interests in an area are all only possible on the basis of planning permission or planning consent. By issuing planning permission, the building authority approves the proposal and sets the conditions for the use and protection of the area, the conditions for the further preparation and development of the proposal and, in particular, the detailed design of the structure.
The planning permission should be in accordance with the zoning plan of the municipality. High uniform standards in the creation of the zoning plans were implemented and also for evidencing geographical information in connection with the digitalization of the planning and authorization procedures of the buildings.
Planning permission may be altered in certain cases by planning consent, a regulatory plan or a public law contract.
Instead of planning permission, the building authority will issue planning consent, subject to the following conditions:
Planning consent, however, cannot be issued if the project is subject to a fact-finding procedure or if an opinion regarding an assessment of the environmental impact of the project in accordance with the Environmental Impact Assessment Act has been issued for the project.
Planning consent will be issued only in cases listed in the Building Act. Additionally, an application for planning consent with all necessary attachments needs to be submitted.
The building authority will set the conditions for the development of the structure and, if necessary, for its use. Alternatively, the services of an authorized inspector may be used or a public law contract may be concluded.
As a result of the recodification of public building law, Act. No. 283/2021, the New Building Act, has been issued with effect from 1 July 2023, which unifies the above permitting processes and replaces them with a single building permit.
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The main regulations relating to health and safety on construction sites are the following:
Legislation also regulates the conditions (relating to health and safety) for employees that work in the premises after the completion of construction.
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The environment is protected in particular by:
Water quality is protected by water related Acts and Regulations which control issues such as pollution, surface water, groundwater and discharge to sewers.
Air quality is protected in particular by the Air Protection Act, which came into effect on 1 September 2012.
These issues are governed by the Waste Act, as amended.
The Czech Republic has been bound by the 1991 Convention on the assessment of environmental impact since 2001. In the Czech Republic, this field is regulated mainly by the relevant statute, namely, the Environmental Impact Assessment Act.
For a certain group of projects, specifieed by law, such as industrial plants, there is a special process of authorization required. This authorization process, based generally on the principle of best available techniques, is set by European regulation and governed by the Integrated Pollution Prevention Act.
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Infrastructure issues are an integral part of the entire process. When the general rules on regional planning for a particular area are set the possible projections for infrastructure development are reflected. Proposals for the construction of infrastructure (sewers, water, roads, etc) are part of the construction project. The requirements of the transport department and of other authorities and relevant departments are reflected in planning permission and all of these conditions are contained in the building permission.
The Infrastructure Act facilitates permits of strategical infrastructure such as motorways, pipelines, electricity systems, anti-flooding water etc. An amendment to the Infrastructure Act was passed in 2021 to reduce the lead time for strategical transport infrastructure.
As regards financing, in the case of communications (ie roads), the investor usually bears all costs where the road is located on land in the ownership of the investor. However, responsibility for roads is often, by agreement with the municipality, delegated to the municipality to ensure proper maintenance. In the case of sewers, ducts etc, all are paid for by the private entity or by agreement between all relevant persons who are connected to the infrastructure.
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These are the following basic requirements which must be included in a contract:
Basic provisions which are not essential (ie not mandatory) include the time for completion.
No written form of contract is required.
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Industry forms of agreement are expressly permitted by section 1751 of the Civil Code and the following forms of contract are used:
Publications:
Publications:
The Council of Czech Construction Companies operates under the auspices of the Ministry of Industry and Trade. It was created by an association of construction businesses in the Czech Republic, ČKAIT, and the union of very small, small and medium-sized employers in construction)
In 2007, the Ministry for Regional Developmentissued general commercial conditions for building works.
The Czech Agency for Standardization (ČAS) has created standard Fidic-based work contracts and other documents.
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The main parties involved in a construction contract are:
This is typically the land owner or developer.
A contractor is engaged by the client/employer to carry out and complete the works. This contractor will usually engage sub-contractors to carry out and complete separate parts of the works. Contractors design all or part of the works depending on the procurement method or contract.
The team of professional consultants.
This is the term used for the bank or other institution or party (for example a government or charitable organisation in the case of urban regeneration, infrastructure or a cultural or sport-related project) which provides finance to the employer for the development.
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Usually, the building contractor itself is responsible for the construction (the works). The Civil Code states that if the construction is being undertaken on the instructions of a client, the contractor bears the risk of damage to or destruction of the works, up to the point of handover, except to the extent the damage is caused by factors outside the contractor's control. Design issues are separate from the building contractor's obligations as the relationship with design consultants is created separately. If the building contractor also provides the design, his responsibility does relate to this area.
Liability for damage in the field of civil law is based on the principle of strict liability, subject to what are called 'grounds for release'. In this area, the injured party must prove that the damage has been caused by a breach of duty by a responsible person. The responsible person cannot be absolved of responsibility as the issue of responsibility is not the main factor, but the responsible person may absolve himself of liability if he proves that the infringement was caused by one of these 'grounds for release'.
Where absolute strict liability applies the responsible person cannot avoid liability; even evidence of force majeure cannot be relied upon. An example of such absolute strict liability is a contractual penalty. Under the Civil Code, the circumstances which preclude strict liability do not affect an obligation to pay a contractual penalty. It should be noted that the parties to a contract may agree to exclude this rule.
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The PPP market in the Czech Republic is promising but not yet very well developed. Only a small number of projects have actually been implemented or are even set for implementation. Currently, the proposed private-public implementation of the D3 motorway is very promising and the development of a sports complex has been successfully completed in Červený Kameň. Another recent project has been the revitalisation of Prague's main railway station and a few other railway stations in the Czech Republic. The positive factor in the otherwise adverse domestic PPP climate is the interest of the banks. Banks are in favour of the PPP concept because project funding is provided by the State, thereby minimising the risk for the credit institutions.
The main reason that the Czech Republic is a little behind in PPP projects when compared to other EU countries is that there is no political will and a lack of political continuity. Progress in the development of PPP projects is being supported by new legislation.
It should also be noted that interest in PPP projects increased sharply in the context of the economic crisis and consequent spending cuts, especially in highway construction.
The use of PPP in the Czech Republic is not widespread but can nonetheless be found in a broad range of sectors including:
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Yes, this is possible.
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Employers are generally insured against liability for damage caused to the employee by an industrial accident or occupational disease. Other types of insurance are not compulsory but, commercially, they may enhance the position of a contractor in comparison with uninsured competitors. Contractors are often insured against damage caused to another person in connection with their actions or relationship (general liability) and damage caused by a defective product or defective executed work. Insurance was also often required for candidates for public contracts. After the amendment effective as of April 2012, a candidate is required to submit only a statutory declaration as to its economic and financial capacity to fulfil the public contract.
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Financiers (the banks and other institutions providing finance for the development) usually require a form of security relating to all of the material contracts to which the borrower is a party. In the case of construction projects the most common security is in the form of a mortgage over the relevant construction works. Further common types of security are: pledge of a group of assets, a pledge or assignment of receivables from contracts such as bank guarantees, insurance policies, leases and other project contracts etc.
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All payment issues depend on the agreement between the parties. However, in the case of larger projects, gradual financing in the form of advances in connection with the completion of individual sections of the works is normally applied. The final payment is usually transferred after the handover of the building or very often held as a security in the form of a deposit which is paid after the lapse of the warranty period.
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A fixed time and date may be agreed in the contract but, if not, the time for completion would be the appropriate time given the nature of the relevant work. In certain situations a party is entitled to withdraw from the contract but usually there are specific penalties provided for in the contract which deal with this issue. The entitled party can also claim compensation for damage if it suffers damage due to the delay.
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There are specific provisions which deal with these questions. In general, we can divide them into two groups: there can be changes on the part of the client and changes on the part of the contractor. The client is usually entitled to request variations to the project. This gives the contractor the right to claim reasonable increased expenses and additional time for completion. If there are changes on the contractor's part due to the contractor’s default such as errors, delays, defects etc, then, in most cases, the client is not obliged to provide additional payments or time. The contractor is liable for any damage and delays it causes to the project. Unavoidable events, however may suspend a contractor’s liability.
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A completed structure, or a part of a structure, which is capable of separate occupation or use may be put to use subject to notice being given to the building authority or a final inspection approval (this depends on the type of construction). A developer must ensure that, before the structure is brought into use, all tests and measurements prescribed by special regulations (relating to mechanical and electrical issues) have been satisfactorily carried out.
The building authority assesses whether the building has been constructed in accordance with all issued documents and permissions and whether it complies with all statutory requirements. The building authority also ascertains that the completed structure or its use will not endanger public health and safety, the health and safety of wildlife or the environment.
Where notice is to be given (smaller projects), the building authority prohibits occupation and use of the structure if it ascertains, at a final inspection, that the requirements of health and safety and environmental regulations mentioned above have not been satisfied, or that the general requirements of construction regulations have not been met.
A structure with characteristics that cannot be altered by future users (for example hospitals, schools, residential blocks of flats, commercial buildings) may be occupied and used only once the final inspection approval has been issued. The developer will apply to the relevant building authority for this approval. At the final inspection the building authority will, in particular, check whether the structure has been constructed in accordance with all the requirements mentioned above. However, the building authority does not check whether all the conditions of the contract have been met; the authority focuses only on the basic standards required by the regulations.
There are two different aspects to the completion of works: one is the administrative perspective and the other is the contractual context. From the building authority’s perspective, the work is finished when it meets the standards set by the relevant regulations whilst, from the contractual point of view, the work is finished when all the contractual terms and conditions are fulfilled.
At the request of the developer, the building authority may issue a time-limited permit for the use of a structure prior to completion, so long as this has no material impact on the usability of the structure and does not endanger health and safety or pose an environmental risk.
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Under the Czech Civil Code, there are different limitation periods which apply to different types of cause of action. The general limitation period for a normal contract claim is three years, but parties may agree to extend or shorten it. The minimum period is one year and the maximum is fifteen years. No regard is taken of the agreements which disadvantage the weaker of the parties to the contract.
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With regard to the developer’s liability to the end users of the building, liability issues are usually dealt with in the contract. The developer is normally liable for damage or loss occurring during a stipulated period after the completion of the works. Restrictions on or exclusion of such liability is limited by the protective provisions of the Civil Code.
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In a typical development project, there is no contractual relationship between the architect, designer, consultant, contractor or other such parties and the end user. Thus, they have no liability to third parties (end users).
However, the Civil Code also provides that liability can be imposed for latent defects in the project documentation or performance. Moreover, as well as the contractor, subcontractors, suppliers of project documentation and supervisors of the construction are jointly and severally liable, to the extent they are at fault, where the defect was caused by their failure to perform.
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Third parties are not in a contractual relationship with the original designers and contractors. Therefore generally there is no protection that can be afforded to these persons, although a relationship between the designers and contractors involved in the project and the third party (eg purchasers, tenants and banks) may arise under the express provisions of the contract concluded between the parties to the project.
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These are reviewed in the administrative courts. These disputes commence at regional level and an action appealing against a decision must be filed within two months of the original notification of the decision. An appeal against the decision of a regional court (cassation) must be filed within two weeks of delivery of decision. The admissibility of such a complaint is limited to certain grounds stipulated by law. It should also be noted that, in an appeal, the complainant must be represented by a lawyer. Complaints are subject to the jurisdiction of the Supreme Administrative Court.
These are dealt with by the civil courts of justice. There are no specialized courts for construction disputes in the Czech Republic. The competent court of first instance is the district court. Any appeals against decisions of the district courts are dealt with by the regional courts. A review of a decision of the regional court is dealt with by the Supreme Court.
Czech law also provides, in certain cases, the opportunity for extraordinary appeal, dealt with by the Supreme Court.
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The most important arbitration institution in the Czech Republic is the Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic. A dispute can only be brought before the Arbitration Court if there is a written arbitration agreement (or arbitration clause) to that effect. Arbitration proceedings before the Arbitration Court are usually conducted in accordance with its rules.
The advantages of arbitration are the following:
One of the disadvantages of the arbitration is unpredictability of the award.
An arbitration award is an enforceable right to initiate execution proceedings where the liable party fails to respect the tribunal's decision.
Arbitration agreements (or arbitration clauses) are binding to the extent that once the court, where the defendant has raised the argument, has found that the case should be dealt with in proceedings before arbitrators, it cannot decide the matter and therefore terminates the proceedings. However, the dispute will be heard if the parties declare that they do not wish to insist on arbitration proceedings. The court will hear the matter if the case cannot be subject to an arbitration agreement under the laws of the Czech Republic or, in the case of an invalid or void arbitration agreement, or if the arbitrators go beyond the powers granted to them by the contract, or if the tribunal refuses to deal with the case. Arbitration may be excluded where consumers are involved as party to the dispute.
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Alternative Dispute Resolution procedures are based on a principle of voluntary submission. The law does not require ADR as a mandatory first step. Other types of ADR (determination by an expert, mediation or conciliation) are used where there are long-lasting and established relations between the parties.
Mediation is an activity in which a neutral third party, the mediator, guides and regulates a structured discussion to facilitate consensus being reached on a disputed issue. Mediation in the Czech Republic occurs sporadically and is mostly carried out by non-judicial mediators. As of 1 September 2012 Act No. 202/2012 Coll., the Mediation Act, came into effect. This Act establishes a new category of registered mediators who are required to pass special mediation exams. A list of registered mediators is maintained by the Ministry of Justice. Nevertheless, non-registered mediators can still carry on their activities beyond the scope of the new legislation.
An independent expert can be appointed at the beginning of the existence of a contractual relationship (his position is incorporated into the contract to cover the eventuality of ongoing problems arising). The services of experts are used in the types of disputes where technical problems predominate. It can also be used in combination with other types of proceedings.
ADR procedures are not widely used in construction contracts governed by Czech law.
Czech law also provides for the office of financial arbiter, dealing typically with disputes between payment service providers and users of payment services, which can involve construction projects.
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Are any terms and conditions imposed or implied by law or mandatory in contracts for the design or carrying out of building works?
These are the following basic requirements which must be included in a contract:
Basic provisions which are not essential (ie not mandatory) include the time for completion.
No written form of contract is required.
Last modified 22 Mar 2024