Is a tenant of leased business premises obliged to pay a contractual penalty to a landlord in case tenant breaches obligation to vacate the premises (and continues to use premises) and at the same time the tenant (unsuccessfully) contests the termination notice with a lawsuit under Section 2314 (3) of the Czech Civil Code? Does the filing of the lawsuit release the tenant from the obligation to pay the contractual penalty? These questions were addressed by the Supreme Court of the Czech Republic in judgment file ref. 26 Cdo 2241/2024, dated 22 April 2025.
Under Section 2314 (3) of the Czech Civil Code a tenant can raised objections against a termination notice. Objections must be made in writing and communicated within one month of having received the notice. If the notice is not withdrawn by the terminating party within one month from the delivery of the objections, the party who raised the objections may ask the court to examine the legitimacy of the termination notice within the period of another two months. If, however, the tenant vacates the business premises in accordance with the termination notice, then such notice shall be regarded valid and as having been accepted by the tenant without objections.
The Supreme Court of the Czech Republic ruled that if a termination notice was given lawfully (i.e., it is justified), then even if the tenant formally challenges it with a lawsuit under Section 2314 of the Civil Code (examination of the legitimacy of the notice), the lease terminates upon the expiration of the notice period (agreed upon in lease agreement or set forth in the Czech Civil Code), regardless of the existence or non-existence of court proceedings in which the tenant seeks review of legitimacy of the termination notice. The court's decision on the legitimacy (or lack of thereof) of the notice is only a declaratory decision.
If the court finds in proceedings under Section 2314 (3) of the Civil Code that the notice was given to a tenant lawfully (in other words, the tenant is unsuccessful in its lawsuit challenging the notice's legitimacy), the lease terminates upon expiration of the notice period and thus the tenant's right to use the leased premises also terminates (at the same time), and therefore tenant has the obligation to vacate them. If this obligation is secured by the parties' agreement (namely in a lease agreement) with a contractual penalty, the tenant is obligated to pay such penalty for the entire period during which is in default of its obligation to vacate premises. The fact that tenant (unsuccessfully) contested the termination notice with a lawsuit under Section 2314 (3) of the Civil Code does not release tenant from the obligation to pay the agreed contractual penalty.
It can therefore be concluded that if the lease has terminated upon expiration of the notice period, after its expiration a tenant has the obligation to vacate the premises and if continues to use them, tenant does so without any legal basis; this legal impact is not affected by the fact that a tenant contests the termination notice with a court lawsuit under Section 2314 (3) of the Czech Civil Code and seeks review of its legitimacy. The mere fact that, under Section 2314 (3) of the Civil Code, the court cannot compel the tenant to vacate the premises in question during the court proceedings, does not create any "new" right for the tenant to use the premises, nor does it extinguish tenants obligation to vacate the premises. However, the extraordinary circumstances of using the premises during the duration of court proceedings for review of the termination notice's legitimacy can be (under certain circumstances) taken into account in possible moderation of the amount of the contractual penalty to be paid by the tenant (in another court proceedings).