While real estate in the country is still going strong, according to BPV Braun Partners Partner Miroslav Dudek, bankruptcy disputes and the financial problems of tenants from industries hit by COVID-19 restrictions are on the rise in the Czech Republic.
Dudek says that the overall political atmosphere has calmed down recently. "The new government appointed by the president is about to start its activities, accordingly, we are curious about what to expect," he begins. "In particular, one of the pressing issues is the huge increase of public debt. At the moment, we are wondering whether the government will stick to its promise to not raise taxes and which measures they will use for taming the public debt."
"One of the major legislative updates in the real estate sector would be a new Construction Act, changing the structure of the building authorities and implementing some additional tools, the purpose of which is to streamline the permitting process," he says. In addition, Dudek highlights the legislative changes in the energy sector and the first effects of the Green Deal.
According to Dudek, there is an increased amount of money pumped back into the economy. "Investment funds, as well as private investors, have been trying to invest their money into real estate projects, as it is not convenient to simply leave money in their bank accounts," he notes.
From an economic perspective, Dudek points out that real estate has been one of the most active areas for the law firm. "We have been quite busy recently, as there are several transactions to be finalized by the end of this year or early in January. For instance, one of our clients is considering extending its shops in the Czech Republic and intends to acquire the plots for development. Even though the number of transactions has decreased recently, we still have a significant amount of work, considering the pandemic situation."
"In the past year, we have seen a rise in the number of bankruptcy matters and disputes," he adds. "Many companies and landlords in the travel, hospitality, and food sector went bankrupt, with disastrous sector-wide effects. This is mainly the result of a devastating decrease in tourists in the city of Prague," he notes. However, Dudek also points out that many landlords and tenants tend to compromise, even when the conditions are unfavorable to them. "They tend to invest in their relationships, lasting over the years and offering concessions and discounts, as well as adjustments in payment calendars, in particular as the state is willing to pay additional support. In that regard, parties are taking into account the extraordinary situation caused as a result of the pandemic," he concludes.