When reviewing older rental agreements, it is always necessary to assess whether the particular contract is, based on its actual content and type, a lease or a usufructuary lease.

Generally speaking, legal relationships created before the effective date of Act No. 89/2012 Coll., the Civil Code, as amended (the new Civil Code, referred to here as the “Civil Code”), i.e. before January 1, 2014, come under the earlier law, Act No. 40/1964 Coll., the Civil Code (referred to here as the “Old Civil Code”). However, under Art. 3074 para. 1 of the Civil Code, leasing became subject to the (new) Civil Code when the law took effect even if the lease arrangements arose beforehand. Only the creation of the lease and the rights and duties arising before the Civil Code came into force are bound by the earlier regulation (the Old Civil Code). The sole exceptions concern the leasing of moveable items and usufructuary leases. The issue of whether a concluded contract is (due to its actual content or its type) a lease or a usufructuary lease has a dramatic impact on which law applies. If the agreement is (due to its content or type) a usufructuary lease (as understood in the Civil Code), then the contract is subject to the previous law (the Old Civil Code) and not to the new rules in the Civil Code. On the other hand, if the contract is (based on its content or type) a conventional lease, the new Civil Code will apply to the executed agreement. 

The Old Civil Code did not distinguish between leases and usufructuary leases and only regulated leasing in general, a concept which included the relationships understood as leasing and usufructuary leasing in the current framework. What was termed “leasing” under the previous law has now been split into two independent legal categories, leasing and usufructuary leasing in the (new) Civil Code. Until the end of 1950, usufructuary leases were regulated by Act No. 946/1811 Coll., the General Civil Code. For the 64 years afterwards, the legal concept of usufructurary leasing was not used in the territory of the current Czech Republic. The Civil Code reintroduces the usufructuary lease concept into Czech law and, with effect from January 1, 2014, establishes a distinction between “leasing” (leasing an item for its use) and “usufructuary leasing” (leasing an item for its use and cultivation). Usufructuary leases represent a new type of agreement. Usufructuary leasing is a special type of leasing. Leases fall under Arts. 2201- 2331 of the Civil Code. Usufructuary leases are governed by Arts. 2332 - 2357 of the Civil Code, with the general provisions on leasing applying as appropriate. Only usufructuary leases involving agriculture and factories/facilities are dealt with separately in the Civil Code.

The difference between leases and usufructuary leases is one of the most complicated to analyse. Given the lack of any modern case law, it is impossible to predict the reasoning of future courts. There is a fine line between usufructuary leasing and leasing, and this line will be drawn by the case law of higher courts. For help, we may look to the case law of the First  Republic, especially cases decided by the Czechoslovak Supreme Court and the Czechoslovak Supreme Administrative Court. However, even this jurisprudence is complicated and contradictory in many respects. Naturally, we can also take into account the rich German case law, which reflects long-term experience with usufructuary leasing. While the border between leasing and usufructuary leasing is not clear, the literature refers to three helpful criteria (business purpose, independent toil and effort and portion of the profits). Nevertheless, these standards cannot be applied absolutely, and each case needs to be assessed separately. 

The creation of a lease, including the issue of whether an executed contract is valid or invalid, will continue to be assessed under the Old Civil Code rules. The principle holds that a declaration of intent can only produce legal consequences (create a valid duty) if at the time that it was made, it was associated with these consequences by law. When it comes to assessing the validity of a legal act, the Civil Code is significantly more lenient than previous regulations. The legislature did not, however, opt to apply a “general pardon” to earlier illegal acts, and so the validity of executed contracts must be judged based on stricter criteria. When assessing whether an executed contract is valid, the basic principles under Arts. 1 - 14 of the Civil Code must also apply.

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