Airbnb – the problematics of legal frame of “short-term rentals” and the possibilities of legal defence against their providers in the Czech Republic

Under what definition and legal regulation does a short-term rental fall under?

Generally it is possible to include the Airbnb service in the category of "short-term rental". The definition of a short-term rental can be found exclusively in the text of the Act No. 235/2004 Coll., on Value Added Tax, in connection with the provision on exceptions from tax exemption of lease of real estates. According to the Act on Value Added Tax, a short-term rental of a real estate is a rental of premise which includes building, buildings or units, alternatively together with indoor moveable facilities or supply of gas, electricity, heating, cooling or water that lasts continuously for up to 48 hours at maximum[2]. A long-term rental has to last for at least 48 hours - in that case the performance is exempt from value added tax without an entitlement to tax deduction.
Short-term rentals can however be put into other legal categories, under different acts and ordinances determining for example; fees for the accommodation capacity or assigning the providers with specific duties, while failure to perform them entails sanctions. The following text briefly summarizes them, as these are issues that Airbnb, its providers and everyone who is affected by the service, will have to deal with now or in the near future.

Duties of an Airbnb provider

Czech trade licence

Prior to discussing this, it is necessary to address the question of whether a short-term rental can be considered as performance of a trade within the Act No. 455/1991 Coll., on licensed trade (the Trade Licensing Act)[3]. Standard lease of houses, flats and non-residential premises do not fall within a licensed trade, however accommodation services (for instance hotels or guest houses) do. Including providing accommodation in flats or family houses (Government Decree No. 278/2008 Coll. furthermore states that "where accommodation is provided in residential buildings, houses or family recreation centres with a capacity of up to 10 beds (including extra beds), breakfast is provided for the guests"[4].), as stipulated by the Government Decree No. 278/2008 Coll., on the content of individual trades[5]. Airbnb would thus logically fall within the category of accommodation services.

Czech tax duties

Accommodation services are subject to fiscal and other statutory duties.[6] A provider is obliged to announce performance of a trade to the Trade License Office and to pay an administrative fee. Failure to do so constitutes an infraction and the offender faces a fine up to CZK 500,000[7]. In addition to income tax, a provider is also obliged to pay a fee for the accommodation capacity to the municipality in the amount up to CZK 6 for each bed provided by day[8] and at the same time to keep a registration book for these purposes[9], and to levy radio and television broadcasting fees, provided that he uses the receivers within the business activity[10].

According to the information provided by Ochranný svaz autorský (OSA, the protection union of authors) the Airbnb providers should - if they dispose of reproductive technical tools in their rented spaces - levy radio and television broadcasting fees, or more precisely apply to the OSA for a license to use copyrighted works.

Czech immigration law issues

Another matter concerned with the performance duties of a provider is contained within Act No. 326/1999 Coll., on the residence of foreign nationals in the territory of the Czech Republic[11]. For the purpose of the respective Act, a provider of accommodation is anyone who provides accommodation for pecuniary consideration or provides accommodation to more than five foreign nationals, if they are not considered as next of kin[12]. Every provider is obliged to report to the foreign police department that a foreign national (more precisely a citizen of a country outside the European Union) has been provided with accommodation within three working days after the provision of accommodation[13] and to maintain a guest register[14]. A provider who does not comply with the duties imposed by the law commits an administrative offence and faces a fine up to CZK 50,000 or alternatively up to CZK 5,000 in the case that the offence is heard in an administrative hearing on a citation[15].

Can another legal classification be considered?

On the other hand, it can be argued that Airbnb falls under the category of lease. As such it cannot be included within performance of trade with regards to section 3 subsection 3 letter ah) of the Trade Licensing Act, which explicitly excludes lease of houses, flats and non-residential premises from the category of trades[16]. Simultaneously, duties concerning tax levies and suchlike would be different.

Furthermore, there may arise a situation when a tenant runs the Airbnb service in a leased house, flat or even a room without consent from the lessor (lessor´s consent is necessary when a tenant does not permanently live in the place[17]) or in spite of his explicit prohibition as stipulated in the lease agreement. This constitutes a gross violation of tenant´s duties[18] and as a consequence a lessor can withdraw from the contract.

Disturbing neighbors, pollution of shared premises or decrease in value of real estate

Providing short-term rentals, especially in buildings consisting of individual flats, may not be convenient for neighbors. For example, if an individual owns a property in an affluent district in Prague, he most likely does not wish that anyone can access the building and in addition to this he may be disturbed by the loud antics of his short-term neighbors.

Further problems can also be created when guests do not behave appropriately in such shared premises or cause damage to the property.

Decrease in security of the building, noise, pollution and damages of shared premises or shared facilities - broken elevator, locks, entrance door, even flooding or thefts, violation of fire regulations, failure to report accommodation of foreign nationals to the foreign police etc.: are all issues that can arise whilst running the Airbnb service. The most burdensome impact however, is a decrease in value of real estate where the provision of short-term rentals take place.

How to redistribute collective costs and fees?

On the contrary, the Unit Owners Association (Společenství vlastníků jednotek - SVJ) often has to address, how to allocate service costs per person, if an owner of a residential unit runs the Airbnb service.

A new civil code, the Act No. 89/2012 Coll., stipulates that approval of the type of services and the amount of advance payments for these services, as well as the method of billing each unit for these services lies within the scope of competence of assembly of the SVJ[19]. The aforementioned is affirmed by the Act No. 67/2013 Coll., regulating certain matters related to provision of performance connected to use of flats and non-residential areas in a building of flats, which stipulates that the method of billing of service costs is determined by the SVJ[20].

If however the SVJ does not stipulate any rule, then service costs are allocated in a different manner. In the case of water supplies and drainage of sewage water, the costs are counted proportionately according to measured figures on subsidiary water meters or according to determinant numbers of annual water needs. Whereas costs for other services - operation of an elevator, lighting, cleaning of shared premises etc. - are distributed according to the number of persons decisive for billing[21], while decisive persons are a tenant or an owner of a flat and all persons who are assumed to live in the unit for a period of time longer than two months during relevant accounting period[22].

Guests using Airbnb mostly do not spend more than two months in the unit, which could cause problems with allocating fees per person in a house of flats[23]. Nevertheless, as statute grants the SVJ discretionary powers on cost distribution, as mentioned above, in practice the fees can be collected for a precise number of people who live in a flat or a house or who are accommodated there.

Possibilities of legal defence

If the provider of an Airbnb accommodation cannot regulate the behavior of his guests, there are adequate legal steps which can be taken by those affected by the nuisance.
It ultimately always depends on the type of ownership an Airbnb provider holds his house or flat unit in. If there is private ownership, an owner can dispose of his flat according to his consideration, provided that he adheres to maintaining hygienic norms and does not disturb others of course. A cooperative accommodation however constitutes a certain obstacle for possibilities of short-term rentals - cooperative association can determine in their statutes that consent to a sublease, or short-term rental will not be given[24].

As for owners of units, the Civil Code regulates that the person who has acquired the right of ownership to a unit has to announce it - including his address and number of persons who will use the flat as a household - to the other owners of units through the person responsible for administering the building no later than one month from the date he learned or could have learned that he became an owner[25]. Furthermore, it is the owner´s duty to notify without undue delay the person responsible for administering the building about a change in the number of persons who use the flat as a household and who live there for a total period of at least three months in one calendar year[26].

Guests accommodated via Airbnb however cannot be considered persons who use the flat as a household and in most cases they do not spend enough time there to fulfill the period of time of at least three months, thus the owner´s notification duty does not apply to them according to the above mentioned provision. In this case therefore, the options as to how to react to short-term neighbors and providers of their accommodation are limited to dealing with violations of hygienic norms, disturbance of peace and quiet at night or damaging shared premises or alternatively settlement of disputes concerning allocating service costs as mentioned above, violations of statutes of the SVJ, interference with the right of ownership et cetera. As it results from the law, a unit owner is obliged to follow the rules for building administration and for use of shared premises as well as to ensure compliance with these rules by all persons who the unit owner enabled access to the building or the flat[27].

In the view of the fact that running the Airbnb service can entail many factual and legal issues, it is more than necessary to guarantee a clear legal regulation for these types of short-term rentals as soon as possible. Until that happens, Airbnb will continue to remain in an uncertain legal vacuum.

We provide legal consultations to the SVJ representatives or neighbors who are disturbed by the Airbnb service run in the building as well as to unit owners whose SVJ does not act in the case of disputes amongst the unit owners. We are able to provide Czech legal advice and take legal action on any other issue which can arise in connection with Airbnb.

For more information, please contact:

JUDr. Mojmír Ježek, Ph.D.
Managing partner

ECOVIS ježek, advokátní kancelář s.r.o.
Betlémské nám. 6
110 00 Prague 1
e-mail: mojmir.jezek@ecovislegal.cz
www.ecovislegal.cz/en

About ECOVIS ježek advokátní kancelář s.r.o.
The Czech law office in Prague ECOVIS ježek practices mainly in the area of Czech commercial law, Czech real estate law, representation at Czech courts, administrative bodies and arbitration courts, as well as Czech finance and banking law, and provides full-fledged advice in all areas, making it a suitable alternative for clients of international law offices. The international dimension of the Czech legal services provided is ensured through past experience and through co-operation with leading legal offices in most European countries, the US, and other jurisdictions. The Czech lawyers of the ECOVIS ježek team have many years of experience from leading international law offices and tax companies, in providing legal advice to multinational corporations, large Czech companies, but also to medium-sized companies and individual clients. For more information, go to www.ecovislegal.cz/en.

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