Can an Overlooked Co-owner Claim Unjust Enrichment from the User of the Property?

Owning a property in co-ownership brings certain specificities, especially regarding the management of the property and the consent of the co-owners when using it. It often happens that one of the co-owners leases the property to a third party without the consent of the other co-owners. In such cases, the so-called overlooked co-owner may lose the opportunity to use the property and, thus, part of the financial benefit to which they are entitled. What rights does this overlooked co-owner have? And can this overlooked co-owner assert these rights only against the other co-owner who allowed the property to be used by a third party without the necessary consent of the overlooked co-owner, or can they assert them directly against the user of the property?

Use without the Co-owner’s Consent and Unjust Enrichment

The law and case law establish that a co-owner who uses a property beyond the extent of their co-ownership share acquires financial benefit at the expense of the other co-owners, for which they are obliged to compensate the other co-owners. This obligation does not arise for the co-owner using the property beyond their share if they can prove the existence of an agreement with the other co-owners allowing free use.

However, in practice, a situation may arise where a co-owner of a property, without the necessary consent of the other co-owners, allows a third party to use the property. Is the co-owner, who did not consent to the property being used by a third party, entitled to claim compensation from this third party as well?

Good Faith of the User and Its Impact

The key factor in determining whether the overlooked co-owner can claim unjust enrichment not only from the other co-owners but also from the user of the property is the issue of the user's good faith. If the user of the property acted in good faith, believing that the person who leased the property had the right and consent of the other co-owners, they are legally protected. In this case, the overlooked co-owner may seek compensation only from the co-owner who unlawfully managed the entire property.

However, if the user knew or should have known that the co-owner had no right to lease the property without the consent of the other co-owners, they are also liable for unjust enrichment and can be directly sued by the overlooked co-owner (see, for example, the judgment of the Supreme Court dated June 23, 2021, file number 28 Cdo 1519/2021).

Case Law and the Protection of Co-owners under the Former Civil Code

It should be noted that the previous case law of the Supreme Court of the Czech Republic under the former Civil Code reached a different conclusion, namely, that the responsibility for unjust enrichment rested solely on the co-owner who unlawfully allowed the property to be used by a third party. The third party bore no liability.

Conclusion

According to the current legal framework and the case law of the Supreme Court, the overlooked co-owner has the right to claim unjust enrichment not only from the co-owner who unlawfully allowed the property to be used by a third party but also directly from the third party if they were not acting in good faith. This approach strengthens the protection of co-owners and ensures that no one benefits at the expense of the property owners without a legitimate reason.

Do you need expert advice on matters related to co-ownership? For instance, do you co-own a property and wish to terminate and settle the co-ownership? Don’t hesitate to contact us.