: Ending Co-Ownership of Apartment Buildings: Legal, Practical and Tax Steps

10.6.2026 | ARROWS law firm

Co-ownership of an apartment building offers investors attractive opportunities. This article provides a comprehensive overview of how to effectively terminate co-ownership relationships, consolidate ownership interests, or divide the building into individual units. Find out which specific legal steps, practical strategies, and tax aspects will reliably protect your capital and maximize the overall return on the property.

The photograph shows experts consulting on the dissolution of co-ownership of an apartment building.

Article contents

Why investors are interested in co-ownership of apartment buildings
Legal framework for settling co-ownership of apartment buildings
Division of a building into units as a special type of physical division
Typical investor scenarios and strategies of legal specialists
An investor joining an already existing SVJ
Court settlement of co-ownership of apartment buildings
Sale of an apartment building at a public auction
Division of a building into units from a legal and investment perspective

Why investors are interested in co-ownership of apartment buildings

Co-ownership of real estate means that a building is owned by multiple persons. Each co-owner holds an ideal share in the property as a whole, not in a specific apartment or floor. The share is recorded in the Czech Cadastral Register (Land Registry) and expresses the extent of participation in the rights and obligations relating to the entire building.

From an investment perspective, co-ownership represents both an opportunity and a risk, because it allows access to attractive properties, but at the same time brings the risk of future conflicts and the blocking of investment plans. Co-ownership of apartment buildings most often arises through inheritance, settlement of the spouses’ community property, or gradual acquisition of shares. An investor therefore often enters into existing relationships where there is no clear agreement on the use and management of the building.

The absence of clear common rules increases the risk of disputes and blocked decisions during renovations, which speculators may exploit to pressure other owners. Under Czech law, each co-owner has a right to the whole property, limited only by the same right of the others. No one can be forced to remain in co-ownership, and anyone may request its termination and settlement at any time.

An investor can actively initiate the entire settlement process if the co-ownership structure has become an obstacle to implementing their investment strategy. For an investor, it is essential to understand precisely which legal regime the building falls under and what specific settlement options are available.

For an investor, settling co-ownership is often a necessary step to increase the value of the property. This can be achieved by dividing the building into units, consolidating shares, or selling the entire property. Without a properly managed legal process, there is a risk of years-long court disputes with an uncertain outcome, which may block financing for the entire project.

If the settlement becomes contentious, it may be appropriate to involve a commercial and litigation disputes team that can set a procedural strategy and work with evidentiary risks.

Legal framework for settling co-ownership of apartment buildings

The Civil Code (Act No. 89/2012 Coll.) regulates co-ownership shares so that the subject of the co-ownership right is the property as a whole. Each co-owner has an ownership right to the property limited only by the same right of the others. A share does not define a specific physical part of the building, but merely expresses the extent of participation in rights and obligations.

Ownership of a unit is inseparably linked to a co-ownership share in the common parts of the building and the land, and these units legally arise only upon registration of the owner’s declaration in the Czech Cadastral Register. For an investor, it is essential to understand the combination of these regimes. For buildings without defined units, a suitable strategy is often to first settle the co-ownership shares in the entire building and only then divide the building into separate units and subsequently monetise them.

A practical description of how the court process for terminating and settling co-ownership works and what impact it may have on further dealings with the property is also summarised in the follow-up article Termination of co-ownership of real estate by the court: How the proceedings work and what impacts they have.

The principle that no one may be forced to remain in co-ownership

The key rule for settlement is that no one can be forced to remain in co-ownership. Everyone has the right to request separation from co-ownership if the property can be divided, or to request its complete termination if physical division is not possible.

Upon a motion, the court may postpone the decision on termination of co-ownership for up to two years; however, for an investor this is an effective tool to resolve the ownership situation even without the consent of the others. For apartment buildings, Czech law prefers an agreement between co-owners over a court decision. An agreement of all parties allows the procedure to be set flexibly—for example, awarding the building to the investor for compensation, dividing it into units, or arranging easements.

When negotiating a settlement agreement, the parties typically also address contractual security for payments, deadlines, and cooperation, which is supported by our contracts and negotiations practice.

Three statutory ways to settle co-ownership

The Civil Code sets out three basic ways to settle co-ownership in a strictly defined order. The court must respect this order as binding. These are physical division of the property, awarding it to one or more co-owners for compensation, or sale by auction.

For apartment buildings, physically dividing the building is usually technically and economically unfeasible, with the only exception potentially being the legal division of the building into separate residential units. If division of the property is not possible, the next option is awarding the building to one or more co-owners for reasonable compensation. In such a case, the court will determine the usual market value of the property based on an expert valuation report.

For valuation and the subsequent settlement, it can also be useful to understand transfer and taxation options in family relationships, discussed in the article Gifting an apartment or a house within the family: a lawyer advises what to watch out for and how to prevent legal and tax issues.

For an investor, awarding the building for compensation is the most advantageous option because it allows them to obtain the entire building into exclusive ownership sooner than with a sale at auction. If neither division nor awarding is possible, the court will order a sale by auction and distribution of the proceeds. New rules for public auctions (Act No. 250/2023 Coll.) have modernised procedures for monetising assets, which requires thorough preparation of the participation conditions.

Division of a building into units as a special type of physical division

Dividing a building into residential units is a common tool in investment practice for increasing a property’s value. The process requires surveying the units, defining the common parts, and preparing the owner’s declaration, which is filed in the Cadastral Register of Real Estate.

The owner’s declaration must include details of the building, a precise description of each unit, the definition of the common parts, and the determination of the size of co-ownership shares based on floor area. The units legally come into existence only upon registration of the declaration in the Cadastral Register of Real Estate. The document must be in writing with officially certified signatures and must meet all statutory requirements.

Dividing a building into units is an important part of an investor’s exit strategy. It enables the subsequent sale of individual apartments to end users or their individual encumbrance with a mortgage lien for financing purposes. In these cases, ARROWS legal specialists prepare the owner’s declaration and the articles of association of the unit owners’ association (SVJ) so that the entire process corresponds to the client’s planned investment objectives.

Specifics of the rights and obligations of co-owners of an apartment building

Co-owners have the right to use the building and share in its proceeds, but they must also contribute to maintenance and repair costs in proportion to the size of their shares. If someone uses the building beyond the scope of their share, the others are entitled to financial compensation.

Financial compensation for using a property beyond the scope of one’s share is claimed on the grounds of unjust enrichment and corresponds to the usual market rent. Decision-making on the administration of the common property is governed by the size of the shares. A simple majority of votes is sufficient for decisions on ordinary administration. For significant matters, such as major reconstructions, a two-thirds majority is required.

To establish a mortgage lien or an easement, the consent of all co-owners is required, except for loans intended for necessary repairs of the common parts. Unclear relationships often lead to deadlocks where a minority owner refuses to contribute to repairs or blocks the lease of vacant premises. Such conduct can significantly devalue the entire investment.

When resolving these deadlocks, ARROWS uses a combination of contractual and procedural tools, including enforcement of contributions or filing an action for settlement of co-ownership (office@arws.cz).

Typical investor scenarios and strategies of legal specialists

Each real estate project has its specifics and requires a different legal approach. In practice, investors most often encounter four typical scenarios that require fast and strategic decision-making.

An investor buys a share in an apartment building with broken-down relationships

A common scenario is the acquisition of a share in a building where the owners have not communicated for a long time, the building is deteriorating, and management is not functioning. The investor often buys such a share at a discount reflecting the riskiness of the situation. After entry, however, they face blocked decision-making.

A thorough legal due diligence review verifies entries in the Cadastral Register of Real Estate, the existence of mortgage liens, easements, and any ongoing enforcement and insolvency proceedings. In parallel, we analyze the actual use of the building, the validity of lease agreements, and determine whether any co-owner is using premises beyond the scope of their share to the detriment of the other owners.

An agreement on the administration of the common property defines usage rights to individual parts of the building, the key for allocating operating costs, and the mechanism for future decision-making. The agreement may also include contractual pre-emption rights or a commitment to postpone termination of co-ownership for the duration of the investment project, which protects the investor against unexpected steps by the others.

If an agreement is not possible, ARROWS specialists prepare an action for settlement with the aim of securing a majority position for the client, strengthening their negotiating leverage (office@arws.cz).

An investor faces a speculator who bought a minority share

After the abolition of the general statutory pre-emption right of co-owners as of 1 July 2020, a model of speculative purchases of minority shares developed on the market. Speculators seek out co-owners in distress, buy their share, and then exert pressure on the others with the aim of a quick profit. Such pressure is often accompanied by lawsuits or by paralyzing the operation of the building, and in these cases the legal analysis focuses on abuse of rights and conduct contrary to good morals.

Case law of Czech courts provides a defence against vexatious exercise of rights. Courts may take speculative conduct into account when deciding on the method of settlement and refuse to award the property to such a party. As part of defensive steps, ARROWS specialists carry out an audit of the counterparty’s financial claims and conduct negotiations to prevent a disadvantageous sale of the property at auction (office@arws.cz).

Consolidation of shares and preparation for dividing a building into units

In development projects, an investor often gradually buys out shares in order to achieve full ownership, renovate the building, and divide it into units. Timely setup of the legal architecture of the entire process is key to the project’s success.

ARROWS attorneys supplement transfer agreements with cooperation undertakings and powers of attorney, enabling the investor to technically prepare the unit-division project even before completing all acquisitions (office@arws.cz). In cooperation with tax advisors, we address the tax aspects of the acquisition. We assess compliance with time tests for income tax exemptions, VAT issues related to construction works, and the setup of tax depreciation for the building and subsequently defined units.

An investor enters an already existing SVJ

If an investor purchases units in a building with a functioning owners’ association (SVJ), they face a different legal dynamic. Management and decision-making are governed by the rules on condominium co-ownership under Czech law and by the SVJ’s bylaws, where voting power is based on the size of ownership shares.

ARROWS attorneys carry out a detailed review of the SVJ bylaws and help investors push through changes to the rules for short-term rentals or adjust voting quorums at the meeting of owners (office@arws.cz). If certain owners breach the common rules or are in arrears with contributions to the building’s management, we ensure swift and effective recovery of these receivables and legal steps to promptly remedy the undesirable situation.

Court settlement of co-ownership of apartment buildings

If all attempts at an out-of-court agreement fail, there is no alternative but to proceed with a court solution. The entire process requires meticulous preparation and knowledge of procedural rules.

When court proceedings make sense for an investor

Court proceedings for the settlement of co-ownership involve both time and financial costs. Proceedings before the court of first instance typically take 18 to 36 months. In the event of an appeal, the overall duration of the dispute may extend to 3 to 5 years. Court proceedings are a rational choice in situations where out-of-court negotiations have failed, the building is deteriorating due to the co-owners’ inaction, or it is necessary to deal with uncontactable persons subject to enforcement proceedings.

The main advantage of a court solution is its binding nature. Once the judgment becomes final, it replaces the parties’ expression of will. If the court decides to award the building to our client, the investor obtains full ownership without the need for cooperation from the opposing party.

How to structure an action for termination and settlement of co-ownership

The action is filed with the district court (okresní soud) in whose jurisdiction the apartment building is located. The action must be brought against all other co-owners of the building, because without the presence of all parties in the proceedings, the court cannot decide the case.

The statement of claim must precisely specify the requested method of settlement and provide detailed reasons why the other statutory methods are unsuitable in the given case. Since the court is not bound by the parties’ proposal as to the specific method, it is crucial to argue in detail in the action why we propose awarding the property to the claimant and for what reasons other methods are not appropriate.

Within a single set of proceedings, it is possible to seek a broader settlement that will judicially resolve mutual claims and investments made by the co-owners into the shared property. This mainly concerns investments our client has made in necessary repairs to the building beyond their share, and, conversely, claims for unjust enrichment against those who overuse the building.

Taking of evidence and expert opinions

The key piece of evidence in court proceedings is an expert opinion in the field of economics, commissioned by the court to determine the usual price of the building. This price then forms the basis for determining the amount of the financial settlement compensation for the other parties.

A material decrease in value is considered in court practice to be a situation where the sum of the values of the newly created parts of the building would be more than fifteen percent lower than the market value of the entire building.

ARROWS legal specialists actively cooperate with experts in these cases, prepare supporting documents, and, in the event of an incorrect methodological approach, arrange counter-expert opinions (office@arws.cz).

Awarding an apartment building to one or more investors

When deciding to which of the co-owners the apartment building will be awarded into exclusive ownership, the court assesses the size of the shares, the existing manner of use of the property, care for the building, and the ability to pay reasonable compensation.

Funds to pay the compensation must be realistically available already during the court proceedings, and a mere assertion of future loan financing is not sufficient for the courts. ARROWS attorneys help clients prepare irrevocable evidence of solvency in time, such as bank commitments or account statements, for the smooth conduct of court proceedings (office@arws.cz).

Sale of an apartment building at a public auction

If neither division of the building nor awarding it to one of the co-owners is possible, the court will order the sale of the property at a public auction. The new Public Auctions Act has simplified the entire process and strengthened the importance of electronic auctions.

A court-ordered auction sale poses a risk for an investor of losing control over the final price, but it can also be an opportunity to acquire the entire property on favourable terms. ARROWS attorneys accompany clients throughout the auction process, supervise the auctioneer’s procedure, and minimise the risks associated with challenges to its validity (office@arws.cz).

Costs of proceedings and their allocation among co-owners

A significant shift in decisions on the costs of proceedings in disputes over the settlement of co-ownership is the opinion of the Plenum of the Constitutional Court dated 21 November 2023, file no. Pl. ÚS-st. 59/23. It confirmed that the basic rule is that none of the participants is entitled to reimbursement of the costs of proceedings.

Co-ownership disputes differ from ordinary actions because all participants benefit from the termination of co-ownership, and therefore the investor usually bears their own representation costs. ARROWS attorneys take this case law into account in detail when calculating the cost-effectiveness of a dispute and help clients assert claims for reimbursement of costs in cases of vexatious conduct by the opposing party (office@arws.cz).

Potential issues	How ARROWS helps (office@arws.cz)
Underestimating the length and costs of proceedings: The investor initiates litigation without a realistic estimate of the time and financial impact.	Our Prague-based attorneys at ARROWS will walk you through possible scenarios, estimate the length of the proceedings and the costs, including expert opinions. Contact us at office@arws.cz.
Improperly drafted statement of claim and evidence proposals: The court overlooks partial claims (investments, unjust enrichment).	We will prepare the statement of claim so that it covers both the partition and settlement of co-ownership itself and related claims.
Unfavourable expert opinion: Undervaluation of the property or investments, affecting the amount of compensation.	We will help formulate the instructions for the expert, challenge defective opinions and propose review opinions.
Awarding the house to another co-owner: The court does not sufficiently take your interest into account.	We build the argumentation around your genuine interest in the house, prior investments, the size of your share, and your ability to finance the settlement.
Unexpected decision on costs of proceedings: No reimbursement of costs or only partial reimbursement.	We will explain the current case law of the Constitutional Court on costs of proceedings and propose a procedural strategy.

Apartment co-ownership, division of a building into units, and working with the SVJ

Dividing a building into units and subsequent management through the association of unit owners (SVJ) are key phases in implementing an investment plan.

Division of a building into units from a legal and investment perspective

Dividing an apartment building into units is a key legal step for the implementation of development projects. By registering the owner's declaration in the Real Estate Cadastre, ownership of the building is transformed into separate ownership rights to individual apartments.

When preparing the owner's declaration, ARROWS attorneys place emphasis on precise definition of the common parts of the building, thereby preventing future disputes and complications when selling apartments (office@arws.cz).

We also integrate into the owner's declaration rules for building management and contributions to management, which reliably protect the investor’s interests during the period when they hold a majority of the units in the building and are preparing their sale.

The impact of dividing a building into units on the settlement of co-ownership

Dividing a building into units is a highly effective out-of-court method of settlement. Co-owners may agree that, instead of a financial settlement, they will legally divide the building and allocate individual units into exclusive ownership by agreement.

This approach is often tax- and economically optimal because it makes it possible to avoid the need to have substantial cash available to pay out the other co-owners. In such cases, ARROWS attorneys act as transaction advisers, preparing the complete set of agreements and ensuring a smooth registration process with the Cadastral Office (office@arws.cz).

Management of the building through the SVJ and the impact on the investor

With the establishment of the SVJ, building management moves into the condominium co-ownership regime. For an investor, it is essential to have control over the SVJ bylaws, which define voting quorums for key decisions and set rules for the use of common parts.

Under the Czech Civil Code, the unit owner is liable for the conduct of all persons whom they allowed to enter the building, which also applies to damage caused by short-term tenants.

To eliminate these risks, ARROWS specialists prepare specific lease agreements with high contractual penalties, security deposits, and clearly defined tenant obligations (office@arws.cz).

Tax and financial aspects of the settlement of co-ownership

Every property transaction entails tax obligations that can significantly affect the overall profitability of an investment project.

Real estate tax and tax obligations after acquiring a share

Upon acquiring a share, the new co-owner becomes obliged to file a real estate tax return. Co-owners may file either jointly through a common representative, or each may file separately for their share.

Including the property in business assets makes it possible to claim costs associated with maintenance, repairs, depreciation, and loan interest for effective optimisation of the tax base.

Taxation of rental income and choice of expenses

Rental income for individuals constitutes either rental income or business income if the rental is provided with accommodation services. For taxation purposes, the investor may claim expenses either in the actual amount or as a percentage of income.

For apartment buildings with high repair costs, it is more advantageous to claim expenses in the actual amount, with which ARROWS tax specialists assist investors by setting the correct depreciation methodology (office@arws.cz).

Taxation upon the sale of a share or the entire building

When an individual sells a co-ownership interest or an entire house, the income is subject to personal income tax unless the conditions for an exemption are met. For real estate acquired after 1 January 2021, the sale proceeds are exempt if the period between acquisition and sale exceeds 10 years.

In a real estate sale that is not tax-exempt, any compensation paid to the other co-owners becomes part of the building’s acquisition cost, thereby reducing the future tax base.

Tax planning when settling co-ownership

Tax planning is an essential part of every transaction, as different settlement methods generate different tax consequences. In an out-of-court agreement, a tax liability may arise for the party receiving the payout, which must be assessed in advance.

ARROWS attorneys and tax advisors prepare a comprehensive assessment of the transaction for investors, and we propose an optimal timetable of steps to maximize the use of tax exemptions (office@arws.cz).

Conflict prevention and long-term structuring of relationships between co-owners

Preventing disputes is always more effective and less costly than resolving them later in court. Solid contractual foundations provide investors with the necessary certainty.

Why prevention is key in co-ownership of apartment buildings

Disputes between co-owners often have a destructive impact on the value of the property. They paralyze the ability to carry out renovations, hinder obtaining bank financing, and deter creditworthy tenants. Preventing disputes is orders of magnitude cheaper than subsequent court proceedings.

ARROWS attorneys recommend not entering into co-ownership relationships without a written agreement that regulates management aspects in detail and defines clear exit scenarios (office@arws.cz).

Key elements of co-ownership agreements for apartment buildings

A high-quality co-ownership agreement should include a precise definition of usage rights to apartments and common areas, an investment approval mechanism, rules for creating a repair fund, and a key for allocating rental income. Recording the co-owners’ agreement in the Czech Real Estate Cadastre ensures its full legal effect also vis-à-vis all future buyers and legal successors.

Mediation and out-of-court dispute resolution

If a deadlock arises in the relationship, we recommend using mediation before filing a lawsuit. Mediation is a voluntary and confidential out-of-court process led by a registered mediator, aimed at helping the parties find a mutually acceptable solution.

ARROWS attorneys support clients throughout the mediation process and help formulate the final agreements so that they are legally binding, enforceable, and tax-efficient (office@arws.cz).

Long-term external legal counsel for investors

For investors with a larger real estate portfolio, it is crucial to have stable legal support that knows the history of the properties and the investor’s long-term intentions in detail. This includes contract reviews, debt recovery, and representation before authorities.

To maximize the security of client transactions, ARROWS maintains professional liability insurance with an above-standard indemnity limit of CZK 400,000,000.

Final summary

Settling co-ownership in apartment buildings is a complex discipline requiring in-depth knowledge of law, tax legislation, and the real estate market. In practice, it may take the form of an agreement, division into units, or court proceedings with an auction.

By combining real estate attorneys, tax advisors, and litigation specialists, ARROWS ensures comprehensive protection of your investments throughout the entire settlement process. We will be happy to discuss your specific situation and propose an optimal legal and tax strategy—contact us at office@arws.cz.

FAQ

1. How long does court settlement of co-ownership of an apartment building usually take?
Proceedings before the court of first instance typically take 18 to 36 months. If one party appeals, the dispute may extend to 3 to 5 years. For this reason, legal specialists always first explore the options of an out-of-court settlement or a structured buyout of ownership interests, which saves the investor both time and capital. We will prepare a detailed time and cost analysis of your case at office@arws.cz.

2. Do I have to demonstrably attempt an out-of-court agreement before filing a lawsuit to settle co-ownership?
The law does not expressly impose this as a procedural condition for the admissibility of the claim, but in terms of success in the dispute and decisions on costs, documenting an attempt to resolve the matter amicably is crucial. A pre-action notice with a specific settlement offer puts the claimant in the position of an honest co-owner and weakens the other party’s procedural defense. ARROWS specialists can help you formulate the pre-action steps—write to us at office@arws.cz.

3. What is my realistic chance that the court will award the house to me as the majority co-owner?
A majority share is an important criterion, but not the only one. The court also assesses how the house has been used to date, who has taken care of its maintenance, who has invested in it, and whether the applicant actually has the financial means to pay out the other co-owners. ARROWS attorneys will work with you to analyze all of these criteria and help you prepare persuasive evidence for court proceedings—contact us at office@arws.cz.

4. Is there still any statutory pre-emption right of co-owners when selling a share?
The general statutory pre-emption right of co-owners has been abolished. An exception applies where the co-ownership arose through acquisition upon death or another legal event that the co-owners could not influence. In such a case, the co-owners have a pre-emption right for a period of 6 months from the date the co-ownership was created. In investment practice, we recommend agreeing the pre-emption right contractually and registering it in the Cadastral Register of Real Estate as an in rem right. To prepare the contractual documentation, contact us at office@arws.cz.

5. What are the main tax implications of settling co-ownership for an investor?
The main tax risks relate to personal income tax (in particular, monitoring the ten-year time test for exemption of income upon a subsequent sale, correctly determining the acquisition price of the property after paying out the co-owners, and applying tax depreciation) and the proper filing of the real estate tax return. Ignoring the tax aspects may lead to significant financial losses. Our specialists will provide a tax assessment of your plan—contact us at office@arws.cz.

6. What is the advantage of long-term cooperation with one Prague-based law firm for real estate portfolios?
Continuity is key in real estate projects. A legal team that knows the history of acquisitions, the course of negotiations with co-owners, the wording of the HOA (SVJ) bylaws, and the tax structure of your portfolio can respond immediately, prevent disputes, and effectively plan future exits or restructurings. ARROWS advokátní kancelář provides comprehensive, long-term legal and tax advisory services with professional liability coverage up to CZK 400,000,000. To set up long-term cooperation, contact us at office@arws.cz.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue as of 2026. Although we strive for maximum accuracy, laws and their interpretation evolve over time. We are ARROWS Law Firm, a member of the Czech Bar Association (our supervisory authority), and for the maximum security of our clients, we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS Law Firm directly (office@arws.cz). We are not liable for any damages arising from the independent use of the information in this article without prior individual legal consultation.

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