In this article you will learn everything important about the proper billing of services and the due date of overpayment or underpayment according to Act No. 67/2013 Coll., including current changes in legislation or conclusions of the decision-making practice of the highest courts.
Current legislation
Act No. 67/2013 Coll., the Act regulating certain issues related to the provision of benefits associated with the use of flats and non-residential premises in a house with flats, as amended (hereinafter referred to as „Services Act“), contains key provision of Section 7, which specifies the details of the billing of services, including the determination of due dates for overpayments and underpayments.
According to Section 7(1) of the Services Act the service provider is obliged to prepare and deliver a bill to each service recipient no later than four months after the end of the billing period. According to Section 7(2) of the Services Act the service provider must state in a proper billing the actual cost of the services broken down by the services provided with all the necessary particulars, including the total amount of the monthly advances received for the services, so that the amount of any differences in the billing is clear and auditable in terms of the methods and rules agreed for billing.
Following receipt of the bill, a financial settlement will be made in accordance with Section 7(3) of the Services Act. The beneficiary will either be required to pay the underpayment or be found to have overpaid. The length of the period for settlement depends on the agreement of the parties. Alternatively, Section 7(3) of the Services Act provides for a due date of no later than 4 months from the date of receipt of the bill.
Penalties for default under the Services Act
According to Section 13(1) of the Services Act, if a service provider fails to fulfil any of its obligations under the Services Act, in particular if the service provider fails to deliver a bill on time, the service provider is obliged to pay a fine to the tenant, unless it would be unfair to require the fulfilment of the obligations within the time limit or the failure to meet the time limit was caused by the tenant's fault. If the amount of the fine has not been agreed, the amount of the fine is CZK 50 for each day of delay, pursuant to Section 13(2) of the Services Act.
In order for the above-mentioned obligation under Section 7(1) of the Services Act to be considered fulfilled, the delivered billing must be proper, i.e. it must contain the elements specified in Section 7 of the Services Act, or in the contract between the provider and the recipient and the relevant legislation. For more information on the default penalty under the Services Act, please see our general article at the following link: Penalty for delay with provision of final settlement of service charges (utilities) or in our more detailed article with relevant case law at this link: Reduction and extinction of entitlement to the late billing penalty.
Amendment to the Services Act
Amendment to the Services Act by Act No. 424/2022 Coll. effective from 1 January 2023 (hereinafter referred to as "Amendment") has made a significant change to Section 7(3) of the Services Act, explicitly stating that billing defects do not affect the due date of the overpayment and the due date of the underpayment is not affected by billing defects that do not affect the calculated amount of the underpayment. Thus, the Amendment has brought about major changes in the area of regularity of billing and payment of overpayments or underpayments which are contrary to the existing decisional practice of the High Courts, which will be discussed later in this article.
The Explanatory Memorandum to this amendment, which is an annex to the already approved draft law in the House of Commons press 199/0 (hereinafter referred to as "Explanatory Memorandum") states the following:
"This change is proposed in connection with Decree No.376/2021 Coll., which amended Decree No.269/2015 Coll., because the scope of information that the service provider must provide in the billing, which does not relate to the arrears for services, has been significantly expanded. It is not reasonable, for example, that the failure to include a website where it is possible to find out about energy efficiency improvement options should result in the arrears not becoming payable. Any failure to do so is subject to a sufficient penalty under section 13 of the Act. It is also expressly provided that defects in the billing shall not affect the due date of the overpayment. A service provider cannot be allowed to refuse to reimburse an overpayment of service deposits to a recipient of services on the basis of defects in the billing when the billing is prepared by the service provider (or by a third party)."
The defects which, according to the Explanatory Memorandum, affect the calculated amount of the arrears are:
- misstatement of the floor area of the service recipient's dwelling or miscalculation of the countable floor area resulting in an incorrectly calculated amount of underpayment;
- erroneous readings on meters (either heat or water meters) leading to an incorrectly calculated amount of underpayment;
- the introduction and use of erroneous coefficients for the recalculation of meter readings leading to an incorrectly calculated amount of underpayment;
- misstating the amount of heating or hot water costs for the entire billing unit to be allocated to the recipients of the services, resulting in an incorrectly calculated amount of underpayment;
- incorrect calculation of the average amount of the consumption component of heating costs per 1 m² of chargeable floor area in the billing unit (e.g. by omitting data from one of the service recipients), which leads to incorrect determination of the limit values and thus incorrect determination of the amount of the consumption component of costs for service recipients who deviated from the limit values, which naturally leads to incorrect allocation of heating costs in the entire billing unit and thus to an incorrectly calculated amount of the arrears;
- simple mathematical errors in the calculation leading to an incorrectly calculated amount of underpayment.
On the other hand, defects which, according to the Explanatory Report, do not affect the calculated amount of the arrears are e.g:
- the wrong apartment number;
- misspelling of the name of the recipient of the services (typically in cases where women's surnames have changed due to marriage or divorce during the accounting period);
- failure to provide information on the mix of energy sources used and the associated annual greenhouse gas emissions per billing unit for the most recent calendar year in cases specified in the implementing decree;
- a description of the individual taxes, charges and other similar monetary benefits which are included in the price of heat energy supplied to the service provider from district heating systems and which are directly related to the quantity of heat energy supplied, where provided for in the implementing decree;
- a comparison in graphical form of the square meter readings on the meters installed pursuant to the Metrology Act or on the equipment installed for the allocation of heating costs at the service recipient for the current billing period and for the same period of the previous year, adjusted to take account of the climatic conditions during those periods in accordance with the procedure set out in Annex 4 to the Implementing Decree;
- contact details for the public of at least one energy consultation and information centre located in the higher territorial self-government unit in which the billing unit is located.
Current decision-making practice of the highest courts of the Czech Republic
The existing decision-making practice of the highest courts, in particular the Supreme Court of the Czech Republic, has played a key role in shaping the interpretation of the proper billing of services and the due date of overpayments or underpayments. Below is a summary of the key decisions together with selected citations.
Judgment of the Supreme Court of 15 October 2018, Case No. 26 Cdo 312/2018: "In the latter decision, the Supreme Court also held that if the billing is not factually correct (proper), the lessor (service provider) has not fulfilled its obligation to bill the lessee (service recipient) for the actual amount of the costs and advances for individual services, that this obligation continues and the action for its imposition on the landlord - logically speaking - cannot be dismissed on the grounds that it has already been fulfilled (extinguished by its fulfilment), and that in proceedings for the determination of the obligation to bill for the services provided with the lease (therefore) the court also examines (is obliged to examine) the question whether the billing of services, which the defendant (landlord) made known to the plaintiff (tenant) before the commencement of the proceedings or during the proceedings, was proper (i.e. in accordance with the lease agreement and the legislation governing it)."
Judgment of the Supreme Court of 22 May 2019, Case No. 26 Cdo 2338/2018: „The Supreme Court has formulated and justified the conclusion that a bill of charges for services rendered in connection with the use of flats can be discussed and the bill can only give rise to the payment of arrears arising from the bill if it contains all the prescribed particulars and if it states the price of the service rendered in the correct amount. A bill lacking any of the prescribed particulars or bearing a price in an incorrect amount is not a proper bill and is not capable of causing an underpayment arising from the bill to become payable (even in part). In order for this to happen, the lessor would have to issue a new full bill bearing a price in the correct amount."
Judgment of the Supreme Court of 26 April 2022, Case No. 26 Cdo 3141/2021: "The condition for the payment of the arrears for services is the fact that the billing was properly made (i.e. In the case of a billing of service charges, the billing was made in accordance with the regulations governing it and the tenant was informed of it (see Supreme Court judgments of 26 November 2003, Case No. 21 Cdo 803/2002, 17 April 2018, Case No. 26 Cdo 5417/2016). Therefore, a bill for payments for services rendered in connection with the use of an apartment may be discussed and the bill may give rise to the payment of the arrears resulting from the bill only if it contains all the prescribed particulars and if it states the price of the service rendered in the correct amount."
Judgment of the Supreme Court of 18 October 2022, Case No. 26 Cdo 2181/2022: "In proceedings for the payment of an underpayment (overpayment), the court therefore examines whether the billing for services was properly made and became due. The court examines whether the billing of services is proper (and the claim therefore justified) regardless of whether the recipient of the services has objected to it (cf. Section 8(2) of Act No. 67/2013 Coll.), since even the absence of objections cannot make up for any inaccuracies in the billing."
Judgment of the Supreme Court of 17 January 2024, Case No. 26 Cdo 731/2023: "In judicial practice (...) there is no doubt that if the subject of a dispute is an underpayment (overpayment) resulting from the billing of services or the fulfilment of the service provider's obligation to bill, the court must consider whether the billing made by the service provider is proper (i.e. only if the service billing contains all the prescribed elements and correctly states the cost of the service provided can the billing trigger the payment of the underpayment (overpayment) arising from that billing and the service provider fulfil its obligation to bill the actual costs and advances for each service for each billing period.'. The Court of Appeal then went on to elaborate in that judgment that:"If the court is to conclude whether the underpayment or overpayment arising from the billing of services is due or whether the service provider has complied with its obligation to bill, it must consider whether the billing is proper. However, it shall, of its own motion, examine in particular whether the service provider has included in the bill all the particulars prescribed by law and whether the bill is sufficiently comprehensible, that is to say, whether the recipient of the services has been able to check the correctness of the details of his consumption and of the method of allocation of the bill, and shall therefore ascertain only such details as are apparent without more from the bill."
Summary of the conclusions of this settled case law:
- If the billing is not factually correct, i.e. proper, the service provider has not fulfilled its obligation to bill the service recipient for the actual costs and advances of each service and this obligation continues.
- It is a condition for the repayment of arrears and overpayments for services that the billing has been duly done and the tenant has been made aware of it.
Comparison of the current legislation and previous conclusions of the decision-making practice of the highest courts of the Czech Republic
The existing decision-making practice of the highest courts of the Czech Republic has clearly established that proper billing is a condition for the payment of arrears and overpayments. The amendment, however, has brought new challenges by providing that defects in billing which do not affect the calculated amount of arrears do not affect their due date, which is contrary to the above-mentioned decisions of the Supreme Court of the Czech Republic.
The existing decision-making practice of the Supreme Court of the Czech Republic has required that the billing be proper, which means its factual correctness and compliance with all the statutory requirements in order to trigger the payment of any overpayments or underpayments. However, the current wording of the law allows that even in the presence of certain defects, the due date may be maintained if these defects do not affect the calculated amount of the underpayment, but in the case of overpayments, no defects affect the due date.
The current legislation will require a fundamental change in the approach of the courts to the issues of billing and payment of overpayments and underpayments. The courts will have to reconsider their previous conclusions concerning the condition of the regularity of billing for the payment of underpayments and overpayments. They will have to accept that certain defects in the bills are not a bar to repayment. The courts will have to distinguish between defects which affect the amount of the arrears and those which do not. This will require a more detailed analysis of each individual case.
Conclusion
The legislation contained in section 7(3) of the Services Act can lead to stronger protection of the rights of service recipients if it is properly implemented and if the courts are rigorous in determining whether service providers use formal errors to their advantage. Despite formal defects, courts should place greater emphasis on the material accuracy of billing and the actual amount of underpayments and overpayments.
At the same time, however, there is a risk that the new legislation will make court decisions unpredictable, as it will be up to the competent court to decide what defects affect the calculation of arrears. At the same time, overpayments may lead to situations where the amount of the overpayment is miscalculated but becomes payable. Beneficiaries of services may thus find themselves in the disadvantageous situation of having to accept an incorrectly calculated overpayment and then having to seek correction through the objection process or in court proceedings, which may be difficult and time-consuming, but there will be less incentive to do so.
Although the amendment came into force last year, disputes in this area have still not reached the stage where they are resolved in the country's highest courts. Once the issue is resolved in the country's top courts under the current version of the law, it will be interesting to see how the top courts deal with these changes and whether there will be further interpretation of this provision through case law. We will keep an eye on these developments and will keep you updated in this article.
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