Beware of the obligation to duly settle up bills for services provided in commercial leases

Incorrect billing can have a major impact on the landlord

We recommend that you pay attention to the recent decision of the Supreme Court of the Czech Republic, which has a major impact on commercial lease of business premises.

The Supreme Court ruled that the landlord’s obligation towards the tenant to duly settle up bills for services also applies to the lease of business premises (formerly non-residential premises), not just residential premises.

Landlords must therefore ensure that they duly settle up the actual costs and advance payments for individual services in the legally required form towards all tenants, whether residential or commercial.

If the settling of bills reveals an overpayment/underpayment, the amount must be clear and easily verifiable in terms of the arrangements and rules agreed for the billing. In principle, the billing statement must be prepared within four months of the end of the billing period.

A billing statement that suffers from defects (e.g. lacks any of the prerequisites or contains incorrect amounts) is not considered a proper bill, which may have a significant impact on the landlord. If the landlord fails to submit a proper billing statement, it is assumed that the settlement has not occurred at all. Until submission of the correct billing statement, the landlord is not entitled to claim underpayment on the part of the tenant, while any consideration for such underpayments paid by the tenant would be considered performance without a legal reason that the tenant could claim should be returned.

In addition, if the situation is considered as if no settling of bills has occurred, which is what happens if an “incorrect” billing statement is submitted, the tenant cannot be in default of any payment. Moreover, the tenant is entitled to a penalty of CZK 50 for each day of the landlord’s delay in providing a proper settlement. Associated claims may also be brought up, such as claims for damages.

In accordance with the above case law, defects in the settling of bills may have a material impact on the landlord’s property, and we recommend not underestimating the situation.

 

For more information, please contact Pavel Fára, Veronika Chrobok or your contact person in our office.