Issues connected to joint property of spouses („SJM“) in the Czech Republic
The new Czech civil code differentiates between three regimes of joint property of spouses
1. Joint property of spouses in general
The new Czech civil code, Act No. 89/2012 Coll., Civil Code (the „Civil Code“) which came into effect on January 1, 2014 differentiates between three regimes of joint property of spouses (in Czech „společné jmění manželů“, therefore commonly known as „SJM“), namely statutory, contractual and a regime based on decision of a court.
This article focuses especially on situations where the spouses do not regulate their property matters by an agreement, so the statutory regime is applied.
After the recodification the main rules regarding the joint property of spouses remain still the same – the joint property of spouses consist of all the assets acquired by one of the spouses or by them together during the whole duration of the marriage. However, there are now more exceptions to this rule. The joint property of spouses does not involve any of the following:
property intended for a personal use of one of the spouses (e.g. clothes, sports equipment etc.),
gifts and inherited property acquired by one of the spouses, unless the donor or the testator states otherwise (e.g. a car given by parents to just one of the spouses belongs just to her or him),
compensation for non-material harm (e.g. financial compensation for damage to health),
property acquired by a legal act related to his or hers exclusive property (e.g. if one of the spouses sells a car which belongs exclusively to her or him, the money received for such sale of car belongs exclusively to her or him),
compensation for damage, destruction or loss of the exclusive property of one of the spouses (e.g. insurance company provides a compensation for a damage caused on the car owned exclusively by one of the spouses).
The joint property of spouses includes profits from the exclusive property of one of the spouses (i.e. property which does not belong to the joint property of spouses) as well. Thus, for example if one of the spouses becomes a shareholder in a company before the marriage, the paid out dividend will become a part of the joint property of spouses. The same applies to the remuneration or profit from leasing of for example a flat owned by just one of the spouses. It means that the rent paid up to the one of the spouses as a landlord of such flat (which is his exclusive property) belongs to the joint property of spouses.
2. Debts and joint property of spouses
The Civil Code and related laws revised in connection with the adoption of the Civil Code brought substantial changes to the scope of property of spouses which can be affected by an enforcement of debts.
The Civil Code states that the debts assumed during the existence of the marriage are part of the joint property of spouses. It means that this is applicable only to the debts arisen from contracts (e.g. a loan); the debts governed by public law (e.g. tax debt) or the debts arisen from violation of law (e.g. a duty to compensate somebody for harm caused to her or him) are not included in the joint property of spouses.
For example, if Mr. A buys a TV on hire purchase and on the way home has an accident and damages a neighbour's fence, both the spouses are liable for paying the instalments for the TV but only Mr. A for the compensation for the damaged fence.
During the existence of the marriage both spouses are liable for the debts incurred by one of them or by both of them, unless one of the following exceptions applies. First of all, debts related solely to the exclusive property of one of the spouses create a part of the joint property of spouses only if the debts do not exceed the profits of the property. For example, Ms. A inherited a flat from her parents. She leased the flat and earned CZK 500,000. The flat had to be reconstructed after a couple of years and the final costs for such reconstruction were in the amount of CZK 700.000. The joint property of spouses comprises only the debt up to CZK 500.000, the remaining amount of CZK 200.000 has to be paid off only by Ms. A.
Secondly, the joint property of spouses does not include debts assumed by one of the spouses without consent of the other, unless the debt arises within the ordinary course of taking care of the family and its needs. When deciding what is and what is not usual in the ordinary course of providing for the family and its needs, the judge will always look at the particular financial situation of the family and the amount of the debt.
Regardless of the above mentioned, the latest amendment of Act No. 99/1963 Coll., the Civil Procedure Code, crucially influenced the position of spouses during the enforcement of debts. It expressly states that the spouses are both bound jointly and severally for all the debts, no matter if the debts were created by one of them or by both, during the marriage or before it. Thus the debt of one of them, even if it has arisen prior to the marriage, can be enforced and paid off not only from the joint property of spouses but from the exclusive property of the other (non-debtor) spouse as well.
The goal of this article was to provide you with a general overview of the wide area of joint property of spouses and some of the issues connected thereto. Should you have any further questions or comments on the above, please do not hesitate to contact us.
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