You can rent the common areas in the apartment building. What are the pitfalls and who is liable for tax?

The general legal framework for defining what is meant by a common part of the house can be found in Section 1160 of Act No. 89/2012 Coll., the Civil Code. Specific examples can then be found in Government Regulation No. 366/2013 Coll., on the regulation of certain matters related to residential co-ownership. This regulation lists as common parts, inter alia, attics, laundries, drying rooms, carriage rooms, wheel rooms, cellars and rooms located in the common parts of the house that are not defined as an apartment or part of an apartment. As a rule, this definition corresponds to the owner's declaration, but it can be regulated in other ways (typically, that the right of exclusive use of a particular cellar or parking space is associated with a particular apartment). The owner's declaration can therefore deviate from the Civil Code and government regulations, so the main document for identifying common areas in a building is the building owner's declaration.

The most common subjects of lease include:

• Unused storage in the house
• Former laundry/drying room in the house
• A parking space in the common area
• Land
• Former CO shelter
• Area for advertising

Who can decide on the lease and its terms?

The lease is not decided by the HOA committee (HOA – Homeowner association), but by the individual unit owners at the unit owners' meeting. It is ideal to approve the basic parameters of the lease agreement there, or in the best case a model lease agreement and the procedure for selecting the tenant. The condominium bylaws should specify the requirement for a voting quorum. If no quorum is specified, the consent of a supermajority of the owners present at the meeting is sufficient to decide on the lease of the common parts. The actual signing of the contract and the control of the fulfilment of the obligations arising therefrom is then carried out by the body of the HOA, most often the HOA committee.

The unit owner acts essentially on three levels:

1. Owner of his/her residential/non-residential unit and co-owner of the common areas
2. The member of the HOA on whose account the rent is usually paid
3. Member of the HOA assembly (the highest body), which decides on the terms of the lease

In the case of cooperative ownership, the situation is simpler. The owner of the property is the cooperative and the contract is therefore concluded directly by the board of directors of the housing cooperative.

Who is entitled to income from renting common areas?

As a legal entity, the HOA may not conduct business and is established primarily to provide management of the building. Therefore, rental income is not and cannot be the income of the HOA. Although rent is often sent to the HOA's account, it is the income of the individual unit owners, which they divide among themselves according to the size of their co-ownership share. The HOA therefore does not account for this income in income but as a liability to the owners if the income is paid out, or other liabilities if the owners decide to retain it in the HOA's account, for example for activities related to the management of the building.

In practice, the unit owners often decide not to pay themselves the income from the rental of the common parts, but to keep it in the HOA's account as an extraordinary contribution. However, this does not relieve them of their tax liability.

Who taxes income from renting common areas?

Since the income from the rental of common areas (e.g. storage, garage, laundry, workshop), but also other income from common areas (e.g. advertising placed on the house, antenna on the roof), is not income of the HOA, the HOA is not obliged to tax this income. The tax liability in the relevant tax period is borne by the individual owners according to their share of the common parts of the house. The actual taxation of this income depends on the other income of the individual member of the HOA and is therefore assessed individually (employee, self-employed, pensioner, etc.).