1 Real Estate Law

1.1 Please briefly describe the main laws that govern real estate in Slovakia. Laws relating to leases of business premises should be listed in response to question 10.1. Those relating to zoning and environmental should be listed in response to question 11.1.

Laws governing real estate in the Slovak Republic include, in particular, the following acts: Act No. 40/1964 Coll. the Civil Code; Act No. 513/1991 Coll. the Commercial Code; Act No. 50/1976 Coll. On Territorial Planning and Building Code (the Building Act); Act No. 162/1995 Coll. on the Land Registry and the Registration of Ownership Titles and Other Rights to Real Estate (Cadastral Act); Act No. 182/1993 Coll. on the Ownership of Apartments and Non-residential Premises; Act No. 116/1990 Coll. on the Lease and Sublease of Non-residential Premises; and Act No. 202/1995 Coll. the Foreign Exchange Act.

1.2 What is the impact (if any) on real estate of local common law in Slovakia?

The Slovak Republic belongs to the countries with continental legal systems. Therefore, real estate rights are exclusively regulated by generally binding legal norms, in particular by statutory acts. Nevertheless, court decisions, in particular decisions of the Supreme Court of the Slovak Republic and the Constitutional Court of the Slovak Republic in real estate matters, may represent an important source of interpretation of the provisions of the respective acts. These court decisions, however, are not generally legally binding (binding only the parties to the action in the course of which such decision has been delivered).

1.3 Are international laws relevant to real estate in Slovakia? Please ignore EU legislation enacted locally in EU countries.

Under Slovak legislation on private international law (both EU legislation as well as Act No. 97/1963 Coll. on Private and Procedural International Law) the parties are free to choose the law governing their contract, as well as the court having jurisdiction over possible dispute. However, the rights in rem to the real estate located in the Slovak Republic are governed exclusively by the substantial law of the Slovak Republic. Similarly, Slovak courts have exclusive jurisdiction over disputes, the object of which is rights in rem. Therefore, other national substantive laws do not have significant effect on the real estate law in Slovakia. However, international treaties and conventions regarding real estate are applicable.

2 Ownership

2.1 Are there legal restrictions on ownership of real estate by particular classes of persons (e.g. non-resident persons)?

In the Slovak Republic, both natural and legal persons are entitled to acquire real estate. There are no restrictions on ownership of real estate in the Slovak Republic, with the exception of some categories of land (see below). Any natural or legal person, a resident or a foreigner, is entitled to acquire and own real estate. A resident is a natural person who has his/her permanent residence in the Slovak Republic or a legal person who has his/her registered seat in the Slovak Republic. A foreigner is a natural or legal person that is not a resident.

There are only restrictions on ownership of land that belongs to the agricultural land fund situated beyond the border of the built-up area of a municipality and land that belongs to the forest land fund situated beyond the border of the built-up area of a municipality. These restrictions do not apply: i) to a foreigner that has inherited such land; ii) to a foreigner, who is a citizen of the Slovak Republic; and iii) to a foreigner, who is a citizen of a Member State of the European Union and who has a registered temporary residence in Slovakia in case of the acquisition of an ownership title to a land that belongs to the agricultural land fund and on which a foreigner has farmed for at least three years upon the Treaty of Accession of the Slovak Republic to the European Union becoming effective. Use of the relevant piece of land may be proved by a certain contract, e.g., a lease agreement or a sublease agreement. This restriction has been recently prolonged and will apply until 30 April 2014.

Ownership may be further restricted by special laws such as the Mining Act, the Water Act, the Road Act or the Cultural Monuments Act.

3 Real Estate Rights

3.1 What are the types of rights over land recognised in Slovakia? Are any of them purely contractual between the parties?

The most important types of rights over land in the Slovak Republic include the following: the right of ownership (the different types of ownership are exclusive ownership, co-ownership and undivided co ownership of spouses); possession; the right to mortgage; the right to lease; and the right of back purchase. The right of ownership in relation to land may be restricted by easements such as the right of way or the right to build.

There may be pre-emption rights over the land either based on substantial law or of a purely contractual nature arranged between the parties. The right of lease is also of a purely contractual nature between the parties.

Special rights over land arise from the administration of property of the State, of municipalities or of regional self-governments.

3.2 Are there any scenarios where the right to a real estate diverges from the right to a building constructed thereon?

Under the Civil Code, buildings do not form part of the land plots. This fact means that buildings are subject to transfers of ownership rights independently from the land plots. Therefore, it is possible to own a building situated on the land plot which is owned by a different natural or legal person.

4 System of Registration

4.1 Is all land in Slovakia required to be registered? What land (or rights) are unregistered?

All land in the Slovak Republic must be registered with the Land Registry kept by the respective cadastre administrations that form part of the state administration of the Slovak Republic. Rights over real estate, i.e., ownership rights, mortgage, easements, pre-emptive rights (if they have the effects of an in rem right), right of lease (if it exceeds or is expected to exceed at least five years in duration) as well as rights arising from the administration of a state property, municipal property, or the property of regional selfgovernments shall be also entered in the Land Registry. Further, some other events relating to real estate shall also be entered into the Land Registry, in particular orders declaring bankruptcy of the owner of a real estate, commencement of enforcement proceedings by the sale of a real estate, commencement of expropriation proceedings, and interlocutory injunctions prohibiting disposal with real estate.

In principle, no contractual rights over real estate shall be entered in the Land Registry, with the exception of rights to lease exceeding at least five years in duration.

4.2 Is there a state guarantee of title? What does it guarantee?

In the Slovak Republic, the principle of material publicity (principle of reliability) applies, according to which the information registered with the Land Registry is considered reliable and binding, unless the contrary is proven. Considering the communist past of the Slovak Republic, it has to be pointed out that it occurs even nowadays that an entry in the Land Registry proves to be untrue. Since the prescription period in the Slovak Republic in case of real estate amounts to ten years, prior to the purchase, it is recommended to verify the ownership titles to the respective real estate for the past ten years and the closest foregoing acquisition title. In addition, there is a possibility to have the acquisition title insured, however this is not common practice.

4.3 What rights in land are compulsory registrable? What (if any) is the consequence of non-registration?

The rights specified in question 4.1 must be registered with the Land Registry. Rights in rem acquire the effects of substantive law upon their registration with the Land Registry. Furthermore, should an owner, a person in possession of a real estate or a tenant, who is a natural person, fail to notify the Land Registry of any changes of data within the time limits prescribed by law, he/she may be held liable for committing an administrative offence, for which a fine of up to EUR 33.19 may be imposed. A fine for the same offence may be imposed to an owner, a person in possession of a real estate or a tenant, who is a legal person, of up to EUR 331.94. Consequences of non-registration are that the above-mentioned rights shall not be acquired.

4.4 What rights in land are not required to be registered?

In principle, only rights in rem (e.g., mortgage or easement) are required to be registered with the Land Registry. The only exception to this principle is the right of a land plot's lease which lasts or should last at least five years. Contractual rights over land are not registered with the Land Registry.

4.5 Where there are both unregistered and registered land or rights is there a probationary period following first registration or are there perhaps different classes or qualities of title on first registration? Please give details. First registration means the occasion upon which unregistered land or rights are first registered in the registries.

Pursuant to Slovak law, there is no probationary period following first registration, nor are there different classes or qualities of title on first registration.

4.6 On a land sale, when is title (or ownership) transferred to the buyer?

In case of a land sale, the ownership title to the land passes from the seller to the buyer at the moment of the decision of the competent Land Registry Administration on authorising registration with the Land Registry becoming final.

4.7 Please briefly describe how some rights obtain priority over other rights. Do earlier rights defeat later rights?

Pursuant to Slovak law, the principle of priority applies to rights in rem. Rights to the same real estate shall be registered with the LandRegistry in the order in which the contracts, public deeds, or otherdeeds on the creation, change or cessation of a right to the realestate were delivered to the Land Registry Administration forregistration with the Land Registry. Therefore, all Land RegistryAdministrations keep files of delivered motions for registration,containing the date, hour and minute of delivery of the motion forregistration. Motions for registration delivered earlier in time havepriority.

5 The Registry / Registries

5.1 How many land registries operate in Slovakia? If more than one please specify their differing rules and requirements.

In the Slovak Republic, there is only one Land Registry covering all real estate located in the territory of the Slovak Republic. Institutionally, the Land Registry is divided into: (i) Land Registry Administrations, with competence over particular districts (in Bratislava and Koaice there is a single Land Registry Administration covering several districts); (ii) Land Registry Offices, with competence over regions; and (iii) the central state administration body for Land Registry, i.e., the Geodesy, Cartography and Cadastre Authority of the Slovak Republic.

5.2 Does the land registry issue a physical title document to the owners of registered real estate?

The Land Registry shall, upon request, issue a title deed (list v lastnictva) to any natural or legal person. Such issuance is subject to an administrative fee of EUR 8. Only the title deed issued by the Land Registry can be used for legal purposes.

5.3 Can any transaction relating to registered real estate be completed electronically? What documents need to be provided to the land registry for the registration of ownership right? Can information on ownership of registered real estate be accessed electronically?

Land Registry proceedings may also be completed electronically. In case of filing the motion electronically, all the attachments (in one counterpart only) have to be submitted in an electronic form and furnished with the authenticated electronic signature and the time stamp.

For the purpose of ownership right registration, the application for the registration of the ownership right into the Land Registry should be submitted to the Land Registry Office together with all required annexes: i) two copies of particular agreement; ii) public deed or other deed proving title to the real estate; iii) land plots identification; iv) geometrical plan, if the land plot is being divided or joined or if the easement is being created over the land plot; v) agreement on authorisation (Power of Attorney) if the proceeding's participant is represented by the proxy, the proxy's signature has to be notarised if such authorisation is requested; and vi) paper notification, in case the application for registration was posted electronically, which shall be provided to the Land Registry upon registration of the ownership right.

Data from the Land Registry is also available at the internet portal (www.katasterportal.sk) of the Land Registry free of charge, however it is exclusively of an informative nature and cannot be used for legal purposes.

5.4 Can compensation be claimed from the registry/registries if it/they makes a mistake?

Yes. In case the Land Registry makes a mistake, resulting in damage, the aggrieved person may claim damages from the state pursuant to the Act No. 514/2003 Coll. on Liability for Damage Caused in the Course of Performing Public Authority. The Geodesy, Cartography and Cadastre Authority of the Slovak Republic shall act on behalf of the state.

5.5 Are there restrictions on public access to the register? Can a buyer obtain all the information he might reasonably need regarding encumbrances and other rights affecting real estate?

The Land Registry is public, i.e., accessible to anyone, also via the internet (see question 5.3). However, information on birth identification numbers of affected persons and information on the price of agricultural and forest land do not form a part of publicly accessible information. Public access is restricted with regard to the collection of documents which is, in principle, accessible only to owners and their legal predecessors (not taking into account the persons entitled to access it on account of their profession, such as land surveyors). From the above it follows that a buyer may basically obtain all information regarding rights in rem (and also information on leases exceeding five years in duration) relating to a real estate in a given moment, however he/she cannot verify such information retrospectively (compare also to question 4.2).

6 Real Estate Market

6.1 Which parties (in addition to the buyer and seller and the buyer's finance provider) would normally be involved in a real estate transaction in Slovakia? Please briefly describe their roles and/or duties.

(i) Real estate agencies

Real estate agencies provide various services to clients with respect to the transfer of ownership title to real estate, including market research, real estate research by criteria set by the client/buyer, search for potential buyers for clients/sellers, assistance in acquiring the necessary funds for the purchase of a real estate (in particular, assistance with obtaining bank loans), preparation of contractual documentation, development services, etc.

(ii) Lawyers/attorneys-at-law

Lawyers mainly provide legal consultancy services before proceeding with the transaction, and legal services in the process of concluding agreements for the transfer of the ownership title to real estate and the registration of rights over real estate with the Land Registry, drafting contracts and other legal documentation. Attorneys-at-law may also perform authorisation of the contract on the transfer of immovable property, which consists in the drafting of the contract, identification of the parties and their representatives, determination whether the contract is not contrary to or does not circumvent the law, whether it is not against good manners, and whether the conclusion of the contract does not result in an event establishing grounds for damage. The authorisation is attached to the contract.

(iii) Notaries

Notaries mainly provide the following services: signature authentication (pursuant to Slovak law, the signature of the seller affixed to the deed providing for the transfer of a real estate has to be authenticated); drafting purchase agreements in the form of a notarial deed; and also attestation of significant legal events (e.g., prescription of a real estate).

(iv) Other persons

There are additional persons who may participate in the transfer of the ownership title to real estate, such as appraisers, land surveyors, tax advisors, technicians, employees of state authorities (e.g., the Public Health Authority, Work Inspectorate), architects, building engineers, banks, insurance companies, and alike.

6.2 How and on what basis are these persons remunerated?

(i) Real estate agencies

The remuneration of real estate agencies is, in most cases, agreed in advance in writing. Payment usually becomes due after the conclusion of the real estate transfer agreement. The fee varies between different real estate agencies, usually representing an amount between 2% and 10% of the purchase price.

(ii) Lawyers/attorneys-at-law

Pursuant to the Decree of the Ministry of Justice of the Slovak Republic No. 655/2004 Coll. on Fees and Reimbursements to Attorneys-at-Law in Connection with the Provision of Legal Services, attorneys' fees are usually agreed upon contractually, either by an hourly rate, by percentage, as a fixed fee or as a cap. Remuneration for attorneys-at-law can also be governed by the above-mentioned decree on tariff fees; however these legal provisions shall be used only if there are no other arrangements between the attorney-at-law and the client. In practice, attorneys' fees are, in most cases, agreed upon individually.

(iii) Notaries

Notarial fees are, in principle, regulated by the Ministry of Justice of the Slovak Republic Decree No. 31/1993 Coll. on Notarial Fees and Reimbursement.

(iv) Other persons

Remuneration of other participants is, in most cases, agreed individually on a contractual basis.

6.3 How has the real estate market in Slovakia recovered or reacted following the global credit crunch and worldwide recession in 2008/2010? What were the most important real estate transactions in Slovakia in the past year? Please include both local and international investors in your answer.

Prior to a full recovery of the Slovak real estate market from the recession caused by the financial crisis, a second wave of the crisis is negatively affecting developments. As a consequence of this situation, the Slovak housing market remains volatile with slightly decreasing prices in 2012. Production realised by constructing companies in Slovakia had decreased in 2012 as well. The Slovak industrial market remained stable during 2012 and vacant space increased due to new developments. The trend of increasing vacancy rates continues in the market in relation to offices. Notwithstanding the foregoing, some housing as well as office building projects have been successfully realised in Slovakia over the last months. For instance, the shopping and office centre Central or the green office building BBC 1 Plus in Bratislava.

6.4 Is there a trend in Slovakia towards the investment in retirement homes / nursing homes due to the increased ageing of the population?

The Slovak market has not experienced any significant increase in investment activities related to retirement or nursing homes recently. Nevertheless, certain reconstruction projects, mostly financed from Euro-funds or private funds, have been realised. Retirement/nursing homes, except for private ones, are founded and managed by municipalities, which might be one of the reasons for the lack of substantial investments in this field.

7 Liabilities of Buyers and Sellers in Real Estate Transactions

7.1 What (if any) are the minimum formalities for the sale and purchase of real estate?

With respect to real estate transfers, the Civil Code requires that a contract is concluded in writing and that transferor(s) (seller(s)) signatures are authenticated by a notary public. Manifestation of intent of the parties must be contained in the same document, otherwise the agreement on the transfer of real estate is deemed to be invalid. The agreement on the transfer of real estate must clearly identify the parties, the object, the place and time of performance of the legal act in question, the real estate, in accordance with the requirements of the Cadastral Act, and the purchase price. The ownership title to the respective real estate is acquired when the decision of the respective Land Registry Authority on authorising registration with the Land Registry becomes final. Further requirements stipulated in Act No. 182/1993 Coll. on the Ownership of Apartments and Non-residential Premises must be fulfilled with regard to contracts on the transfer of apartments or non-residential premises.

7.2 Is the seller under a duty of disclosure? What matters must be disclosed?

Should the property that is subject to a sale have defects of which the seller is aware of, the seller is obliged to inform the buyer about these defects in the course of negotiating the purchase agreement. These defects may be factual defects (such as defects concerning quality or functionality) or legal defects (such as limitation on the transferability of ownership).

7.3 Can the seller be liable to the buyer for misrepresentation?

In case the seller assured the buyer that the property had certain qualities or that it had no defects and if such assurance later proves to be untrue, the buyer shall be entitled: (i) to withdraw from the contract; (ii) to have a price reduction from the agreed purchase price, corresponding to the nature and the extent of the defect; (iii) to the reimbursement of necessary expenses incurred in connection with asserting his/her claims regarding the liability for defects; and (iv) to damages pursuant to the general provisions of the Civil Code. In case of apparent defects or defects that can be determined from the respective records of the Land Registry, it is not possible to assert claims for the liability for defects, unless the seller explicitly assured the buyer that the property did not have any defects.

7.4 Do sellers usually give contractual warranties to the buyer? What would be the scope of these? What is the function of warranties (e.g. to apportion risk, to give information)? Are warranties a substitute for the buyer carrying out his own diligence?

The purchase agreement (i.e., also a contract on the transfer of a real estate) may contain different representations and warranties of the seller, which may serve as a legal basis for asserting claims against the seller regarding its liability for defects of the subject of the contract/subject of transfer or for other breaches of law occurring in connection with the transfer of the ownership title. Representations and warranties may relate to the characteristics of a real estate, rights over real estate (such as mortgage and easement), use of a real estate, etc. Representations and warranties mentioned in this section are common in transferring real estate of a higher value and serve for reducing the buyer's risks, to the disadvantage of the seller. Legal due diligence is usually conducted before purchasing real estate or a company owning (also) a particular real estate of a higher value. It is recommended that legal due diligence is conducted instead of relying on the representations and warranties, as claiming damages later may be complicated and time-consuming.

7.5 Does the seller warrant its ownership in any way? Please give details.

Most of the contracts on the transfer of a real estate (purchase agreements) contain a representation that the seller is the owner of the real estate and that the real estate is free of third parties' rights restricting the owner of the real estate (e.g., easements, mortgage), or a representation that such rights exist, although such representations do not form part of the essentials of a contract on transferring the ownership title to a real estate. These facts may be checked with the Land Registry. Land Registry information is, however, binding as long as the contrary is not proven. Should it be proven that the seller has intentionally transferred real estate of which he was not the rightful owner, in addition his/her criminal liability might be invoked.

7.6 What (if any) are the liabilities of the buyer (in addition to paying the sale price)?

Generally, the buyer shall bear the costs of registering the ownership title with the Land Registry. He may also bear notary's or attorney's fees incurred in relation to concluding the contract on the transfer of a real estate; this is, however, subject to the agreement of the contracting parties.

8 Finance and Banking

8.1 Please briefly describe any regulations concerning the lending of money to finance real estate. Are the rules different as between resident and non-resident persons and/or between individual persons and corporate entities?

Lending of money to finance real estate is governed by the general legal regulations of the Commercial Code (or the Civil Code, respectively). There are no special provisions that would specifically concern the lending of money to finance real estate. The most commonly used contract is the credit contract pursuant to the Commercial Code, under which the lender (in most cases a bank) shall provide funds up to a certain amount and the borrower undertakes to pay back such funds together with interests. From the legal point of view, there is no distinction made between individual persons and corporate entities, or between resident and non-resident persons. However, lenders do adjust the conditions for the provision of a loan depending on the fact whether the borrowers are individual persons or corporate entities, or resident or non-resident persons, respectively.

Claims of mortgage banks for mortgage loans are secured by a mortgage. Mortgage loans can be granted up to 70% of the value of the secured real estate (the bank may grant loans in excess of 70% of the value of the secured real estate, which loans, however, in total may not constitute a portion higher than 10% of all mortgages granted by such bank).

8.2 What are the main methods by which a real estate lender seeks to protect itself from default by the borrower?

Usually, lenders (banks) require that a mortgage is created over real estate to secure the loan. In most cases it is possible to create a mortgage also over the real estate for the financing of which the funds are provided, or over unfinished constructions. Further options are pledging movables or securities, a bill of exchange, life insurance or having the real estate insured, and blocking the respective insurance payment in favour of the bank. Pursuant to the Slovak Banks Act, real estate loans may be secured by a mortgage over domestic real estates.

8.3 What are the common proceedings for realisation of mortgaged properties? Are there any options for a mortgagee to realise a mortgaged property without involving court proceedings or the contribution of the mortgagor?

Under the Slovak Civil Code there are the following options to realise mortgaged property:

  • the realisation of mortgaged property in the way agreed under the mortgage agreement. In most cases this would be a direct sale of the mortgaged property. Such realisation does not require the court to be involved in the realisation of mortgaged property;
  • the sale of mortgaged property in voluntary auction under the Act No. 527/2002 Coll. on Voluntary Auctions; it requires no court involvement; or
  • the sale under the Act. No. 233/1995 Coll. on Court Executors and Execution Activity (Execution Order). This way, however, involves court proceedings as the mortgage agreement by itself is not a title to enforcement needed for mortgage realisation. Therefore, this way of realisation is not widely used.

8.4 What minimum formalities are required for real estate lending?

The credit contract on the provision of funds to finance the acquisition of a real estate does not require any special formalities, as compared to other credit contracts. Formalities to be fulfilled by the contract are of a general nature, i.e., mainly that both contracting parties have legal capacity to perform legal acts, furthermore the contract may not be in breach of the law, circumvent the law, or contravene good morals.

Usually, when granting a loan to finance real estate acquisition, in addition to a credit contract, a mortgage contract is also concluded, in order to secure the claim under the credit contract. A mortgage contract has to be made in writing. To create a mortgage over a real estate, its registration with the Land Registry is required.

8.5 How is a real estate lender protected from claims against the borrower or the real estate asset by other creditors?

The most common way of protection is creating a lien over the borrower's, or, possibly, a third person's property. Under Slovak law, to satisfy a secured creditor, the order of registration of the security interest in the respective registry shall be of decisive importance (in case of real estate, it is the Land Registry). Earlier registration enjoys priority. As already stated above in question 4.2, it is recommended to verify the ownership title to the property used as security - in the case of real estate - 10 years retrospectively, including the first directly preceding acquisition title.

9 Tax

9.1 Are transfers of real estate subject to a transfer tax? How much? Who is liable?

Since January 1, 2005, transfer tax on the transfer and transition of real estate is abolished.

9.2 When is the transfer tax paid?

Transfer tax is not applicable in the Slovak Republic. See question 9.1.

9.3 Are transfers of real estate by individuals subject to income tax?

Yes. Please see also the answer to question 9.5.

9.4 Are transfers of real estate subject to VAT? How much? Who is liable? Are there any exemptions?

In general, pursuant to Act No. 222/2004 Coll. on Value Added Tax, real estate transfers are considered as delivery of goods, whereby a buyer acquires the right to dispose with such goods as the owner. As of 1 October 2012, a taxable person becomes a tax payer in case of transfer of a building or its part (flat or business premises) or a building plot or when such person receives a payment before their delivery and if the transaction turnover achieved the amount of EUR 49,790.

The Act stipulates events, whereby real estate transfers are exempt from the payment of a tax. The transfers of a land (except for building plots) as well as the delivery of a construction, or its part, including the delivery of a building plot, if such delivery (transfer) is made five years following the issuance of the first occupancy permit for a building or five years following the day of the commencement of the first use of a building, are exempt from the payment of a transfer tax. Occasional transfer of a building, its part or a building plot is exempted as well.

The value added tax is currently 20% of the tax base. However, the current level of value added tax is temporary and will be reduced to 19% of the tax base as of January 1 of the year following the year in which the European Commission (Eurostat) shall publish the data showing that the actual Slovak government deficit is lower than 3%. 9.5 What other tax or taxes (if any) are payable by the seller on the disposal of a property?

Income Tax

Income from real estate transfer is subject to income tax. Act No. 595/2003 Coll. on Income Tax stipulates a number of cases in which income from real estate transfer is exempt from this tax liability. The tax rate is 19% of the tax base. Please note, that the Slovak government intends to raise the taxes as of January 1, 2013. In case the Slovak Parliament passes its current proposal, the income tax for natural persons (individuals) will generally be 19% of that part of the tax base, not exceeding 176.8 times the amount of the current Slovak subsistence minimum and 25% of that part of the tax base, which exceeds 176.8 of the current Slovak subsistence minimum and the income tax for a legal entity will be raised to 23%.

Real Estate Tax

Real estate tax is a local tax administered by municipalities. Under the Act No. 582/2004 Coll. on Local Taxes and Local Fees for Municipal Waste and Minor Construction Waste, the owners of real estate (of lands, buildings or apartments) are subject to this tax. The tax rate may vary from municipality to municipality.

Value Added Tax

Under certain conditions, VAT is payable by the seller upon the disposal of a property.

9.6 Is taxation different if ownership of a company (or other entity) owning real estate is transferred?

Real estate transfer tax has been abolished in the Slovak Republic; for the application of VAT and income tax see questions 9.1, 9.4 and 9.5.

10 Leases of Business Premises

10.1 Please briefly describe the main laws that regulate leases of business premises.

The lease of business premises is regulated by Act No. 116/1990 Coll. on the Lease and Sublease of Non Residential Premises with subsidiary application of the Civil Code. The Lease and Sublease of Non-Residential Premises Act in particular regulates lease agreements, the rights and duties of landlords and tenants, sublease, rent, termination of the lease and other matters relating to the lease of business premises.

10.2 What types of business lease exist?

Slovak law does not distinguish among different types of business leases. Slovak law distinguishes only between residential and nonresidential leases while the latter in most cases cover the term "business lease".

10.3 What are the typical provisions for leases of business premises in Slovakia regarding: (a) length of term; (b) rent increases; (c) tenant's right to sell or sub-lease; (d) insurance; (e) (i) change of control of the tenant; and (ii) transfer of lease as a result of a corporate restructuring (e.g. merger); and (f) repairs?

a) Length of term

This is regulated by the lease agreement and can be agreed for a definite term or for an indefinite term. In case of a lease agreed for a definite term, the lease shall terminate by the expiry of the agreed time of lease, or by a notice of termination by the tenant, or the landlord, but only for reasons enumerated by law. In case the lease was agreed for an indefinite term, it can be terminated also without stating the reason, if the lease agreement does not stipulate otherwise. Unless agreed otherwise, the notice period is three months for both leases for a definite and an indefinite term and starts running the first day of the month following the month in which the termination notice was delivered.

b) Rent increases

This is not regulated by the Act on Lease and Sublease of Non-Residential Premises. The amount of rent, as well as its increase, is determined by the agreement of the contracting parties. Usually an annual rent indexation is agreed in the lease agreement and it is based on the consumer price growth index.

c) Tenant's right to sell or sub-lease

By law, the tenant is not allowed to sell the object of the lease. The tenant is allowed to sub-lease the object of the lease (as a whole or its part) only with the approval of the landlord.

d) Insurance

For business premises, this can be concluded both by the landlord and the tenant, subject to their agreement. This insurance contract usually covers the following insurance risks: damage caused by unforeseeable events, such as natural disasters, fire, burglary; damage caused in connection to the performance of activities in the object of the lease; and losses inflicted upon the object of the lease.

e) (i) Change of control of the tenant

Under Slovak law, this does not affect the lease. The contracting parties may, however, agree to specific obligations on the tenant's part or specific rights on the landlord's part in their contract for the event of change of control of the tenant.

e) (ii) Transfer of lease as a result of a corporate restructuring (e.g. merger)

Under Slovak law, this does not affect the lease. The contracting parties may, however, agree in their contract for such cases, for instance an obligation of the tenant to notify the landlord or some other obligations of the tenant, or certain specific rights of the landlord vis-a-vis the tenant. In case of change of the ownership to a real estate, the lessee has the right to terminate the agreement even if it was agreed for a definite term.

f) Repairs

Unless agreed otherwise, the landlord is obliged to maintain the business premises in a proper condition for its agreed or customary use, at its own costs. The tenant is obliged to notify the landlord without undue delay of any repairs that have to be carried out by the landlord and to enable the landlord to carry out such and any other necessary repairs, otherwise the tenant shall be liable for the damage inflicted by not fulfilling his/her duty.

10.4 What taxes are payable on rent either by the landlord or tenant of a business lease?

(i) Income Tax

The landlord is an income tax payer. The tax rate is 19% of the tax base. Income from the lease of real estate of natural persons is exempt from tax up to the amount of EUR 500.

(ii) Value Added Tax

The lease of real estate or its part are exempt from value added tax, with the exception of a lease and sublease of accommodation facilities (hotels, guesthouses, etc.), parking facilities, permanently installed devices and machines, safe-deposit boxes, which are subject to value added tax. A payer of value added tax that leases real estate or its part to another payer of value added tax may decide that the lease is not exempt from the tax. The tax rate is 20% of the tax base (see question 9.3) and is paid by the landlord.

(iii) Real Estate Tax

The landlord, as the owner of the building is, in addition, a real estate tax payer (see question 9.4).

10.5 In what circumstances are business leases usually terminated (e.g. at expiry, on default, by either party etc.)? Are there any special provisions allowing a tenant to extend or renew the lease or for either party to be compensated by the other for any reason on termination?

The Act on the Lease and Sublease of Business Premises provides for a list of methods by which business leases can be terminated.

Contract for a definite term

In case of a lease for a definite term, the landlord may terminate the lease early by a written termination notice in the following cases: (i) if the tenant uses the business premise in breach of their agreement; (ii) if the tenant is more than one month late with the payment of the rent or for the provision of services which are connected to the lease; (iii) if the tenant who has the obligation to provide certain contractually-agreed services to the landlord fails to provide such services duly and in a timely manner; (iv) if the tenant or the persons using the business premises jointly with the tenant grossly disturb the peace or violate order, in spite of a written warning; (v) if the use of the business premises is connected to the use of an apartment and the tenant was obliged to vacate the apartment; (vi) if the removal or alteration of the building, whereby the use of the business premise is disabled, was ordered; (vii) if the tenant subleases the business premises or its part without obtaining the consent of the landlord; (viii) if the leased business premises is located in real estate that has been released to the entitled person pursuant to Act No. 403/1990 Coll. on Mitigation of Some Property Injustices; and (ix) if the leased business premises is located in real estate that has been returned to the entitled person pursuant to Act No. 229/1991 Coll. on Modification of Land and other Agricultural Property Ownership.

The tenant may terminate the agreement in the following cases: (i) he loses the capability to perform the activity for the performance of which the business premises have been leased; (ii) the business premises have become unfit for the agreed use, with no fault of the tenant; and (iii) the landlord grossly violates his duties.

Contract for an indefinite term

Any of the contracting parties may terminate the lease in writing, without stating the reason for such termination.

The Civil Code stipulates that should the tenant continue using the property after the termination of the lease and the landlord does not file a motion for the release of the property or the vacation of the real estate within 30 days, the lease agreement is renewed under the same terms as originally agreed. Leases agreed for a period longer than one year shall be renewed for one additional year each time; leases agreed for a shorter period of time shall be renewed for such shorter period of time.

The aggrieved party may assert its claim at the court for unlawful termination of the lease.

10.6 Does the landlord and/or the tenant of a business lease cease to be liable for their respective obligations under the lease once they have sold their interest? Can they be responsible after the sale in respect of pre-sale non compliance?

In case of a change of ownership of the leased real estate, the acquirer of the real estate shall enter in the legal position of the landlord. The lease shall continue between the original tenant and the new owner as landlord. In principle, the new landlord takes over the rights and the obligations of the original landlord. Without having reviewed the lease agreement in question, however, one cannot establish with certainty that the original landlord ceased to be liable for all of its obligations under the lease (for instance, it might have been contractually agreed that certain obligations should be performed directly by the original landlord). The same applies to the liability for pre-sale non-compliance after the sale. The change of ownership of the leased premises may be a reason for terminating the lease by the tenant, even in cases where the lease was agreed for a definite term. In such a case, a notice of termination must be given in the next termination period, unless agreed otherwise. A change merely in the ownership structure of the landlord shall have no effect on the continuation of the lease

10.7 Green leases seek to impose obligations on landlords and tenants designed to promote greater sustainable use of buildings and in the reduction of the "environmental footprint" of a building. Please briefly describe any "green obligations" commonly found in leases stating whether these are clearly defined, enforceable legal obligations or something not amounting to enforceable legal obligations (for example aspirational objectives).

Pursuant to Act No. 555/2005 Coll. on Energy Performance of Buildings, when leasing a building, an energy performance certification is required, i.e., a classification by energy categories. The energy performance certificate, valid for a maximum of 10 years, is an attestation of carrying out the prescribed energy performance certification. Further "green obligations" may be stipulated in the lease agreement (pursuant to the principle of the freedom of contract of the parties). A contractual obligation that is possible to be performed and is permitted by law, which is not breaching or circumventing the law, agreed between the landlord and the tenant shall represent an obligation that may be legally asserted.

11 Public Law Permits and Obligations

11.1 What are the main laws which govern zoning and related matters concerning the use and occupation of land? Please briefly describe them and include environmental laws.

The main legislative act governing zoning and the use of land is Act No. 50/1976 Coll. on Territorial Planning and Building Code (the Building Act) and related ordinances. The territorial planning documentation, particularly the zoning plan of a municipality and of a region, constitutes a basis for rendering a zoning decision. We distinguish between four types of zoning decisions, whereas their aim is to define rules for sitting and the functional use of a territory, harmonise the interests and activities which have an impact on territorial development, the environment and ecological stability. Environmental protection is further regulated by Act No. 17/1992 Coll. on the Environment, Act No. 543/2002 Coll. on the Protection of Nature and Landscape, Act No. 24/2006 Coll. on Environmental Impact Assessment, and Act No. 478/2002 Coll. on Air Protection.

11.2 Can the state force land owners to sell land to it? If so please briefly describe including price mechanism.

The Building Act regulates expropriation, through which the state can acquire plots of land and buildings necessary for constructing buildings and adopting measures in the public interest (expropriation is also regulated by the Constitution of the Slovak Republic and the Civil Code). Expropriation is only permitted in the public interest and exclusively for those purposes enumerated in the Building Act (the reasons are also stipulated in other legislative acts, such as the Mining Act and the Aviation Act), for instance the building of motorways. Expropriation must be adequately compensated, in case of plots of land and buildings, determined as a sum of money corresponding to the market price as established by an expert opinion. The market price is the price of an identical or a comparable real estate at the same time and place and of comparable quality. Adequate compensation can also be provided by granting a plot of land or a building of a quality comparable to the expropriated real estate.

11.3 Which bodies control land/building use and/or occupation and environmental regulation? How do buyers obtain reliable information on these matters?

In the Slovak Republic, the body controlling land/building use and/or occupation and environmental regulation are the building authorities, which are the municipalities. For specific buildings (motorways, airports, etc.) a specific entity acts as the building authority, in most cases the respective Regional Building Authority. Among the competences of building authorities are provisions for a change of land use, conducting building proceedings, the issuance of building permits, and levying respective administrative sanctions.

The Slovak Environmental Inspection Authority, through its inspectorates, supervises compliance with generally binding environmental legal regulations.

Buyers can obtain the necessary information on building proceedings from the respective building authorities that are obliged to provide information on their activities pursuant to Act No. 211/2000 Coll. on Free Access to Information (subject to certain restrictions).

11.4 What main permits or licences are required for building works and/or the use of real estate?

The location of buildings is permitted upon the issuance of a zoning decision by the respective building authority.

Construction of a building, their changes and maintenance works on these may be carried out only upon the issuance of a building permit by the building authority or on the basis of a notification to the building authorities (notification suffices in cases of simple constructions, etc.).

After constructing a building that required a building permit, it can be used only upon obtaining the occupancy permit from the competent building authority.

A permit from the building authority is also required in case of changing the use of a building, its removal or ground works.

11.5 Are building/use permits and licences commonly obtained in Slovakia? Can implied permission be obtained in any way (e.g. by long use)?

With certain exceptions stipulated by law (e.g., simple constructions where a notification shall suffice), it is necessary to obtain a zoning decision and a building permit for all constructions. Further, a building permit is required also to make changes in buildings, mainly for additional buildings or parts. In such cases, a finished building may be used only upon obtaining an occupancy permit (see question 11.4).

In cases where a building has been constructed without a building permit or in breach thereof, proceedings for additional authorisation of a building can be initiated. The building authority shall make an assessment whether to issue an additional building permit or to order the demolition of such a building.

11.6 What is the appropriate cost of building/use permits and the time involved in obtaining them?

The length of the procedures for issuing zoning decisions or building permits may vary and depend on a number of factors. Approximately, both proceedings take one to two months, but may last longer. The costs of issuing zoning decisions or building permits are greatly determined by the scale of the applicable administrative fees. The administrative fee for the issuance of a zoning decision for natural persons is EUR 6.50 and for legal persons EUR 100. The administrative fee payable for the application to issue a building permit varies depending on the particular building and the built-up space (e.g., family house up to built-up space of 600 m3 EUR 33 plus EUR 20 for each started 100 m3 of built-up space). The cost relating to the above mentioned proceedings may be further increased by additional expenses connected with obtaining the necessary documents and prescribed documentation.

11.7 Are there any regulations on the protection of historic monuments in Slovakia? If any, when and how are they likely to affect the transfer of rights in real estate?

The historical monuments are protected under Act No. 49/2002 Coll. on Protection of Monuments and Historic Sites. Under this act, the state (Slovak Republic) has a pre-emption right to purchase culture heritage monuments, which obliges the seller to offer the culture heritage monument to the state. Such an offer should include the purchase price as well as all conditions of the sale. If the state fails to fulfill any of the conditions offered by the seller, to compensate them by the agreed price or if it is not able to pay the price offered by a third party, the pre-emption right shall lapse. The pre-emption right expires also if the state does not accept the offer within 30 days from its delivery.

11.8 How can e.g. a potential buyer obtain reliable information on contamination and pollution of real estate? Is there a public register of contaminated land in Slovakia?

Under the Ordinance No. 340/2010 Coll. (which amended Ordinance No. 51/2008 Coll.), the Registry of Environmental Burdens was established. The registry is accessible on the internet and maintained by the Ministry of Environment. The register consists of three main parts. Part A contains records on likely environmental burdens, part B contains records on environmental burdens, and part C contains records on regeneration and reclaimed sites. Its use is free of charge. Information therein does not include the latest information for all monitored areas. Therefore it is always recommended to conduct your own research and request the latest information from the responsible state authorities.

Other registers providing information on the environmental condition of real estate are, for example, the Land Registry or Landfills Registry, while the latter is maintained by State Geological Institute of Dionyz Stur and both of them are accessible online free of charge; however, some of them are subject to prior registration.

11.9 In what circumstances (if any) is environmental clean up ever mandatory?

As of 1 January 2012, a new Act No. 409/2011 Coll. on Some Measures in the Field of Environmental Burden entered into force. The Act set up the rules for the designation of a person liable for the environmental burden. The liable person under this Act can be either the originator or an obliged person in case the originator has ceased to exist. An obliged person is designated based on the decision of the Regional Office for the Environment and it is usually the legal successor of the originator. The inheritor or person who had her/his real estate returned subject to a specific statutory act (e.g. on the basis of restitutions) is not deemed to be a legal successor. The act sets forth rights and obligations for the originator and obliged person in connection with the removal of environmental burdens as well as exceptions for a non-considered person to be an obliged person. However, in case it is impossible to designate the originator or his/her legal successor, the owner of the real estate shall be liable for the clean up of the environmental burden on the basis of a decision of Regional Office for the Environment.

11.10 Please briefly outline any regulatory requirements for the assessment and management of the energy performance of buildings in Slovakia.

In the Slovak Republic, the subject is regulated by Act No. 555/2005 Coll. on Energy Performance of Buildings, transposing Directive 2002/91/EC of the European Parliament and of the Council on the Energy Performance of Buildings of December 16, 2002 into Slovak legislation. Pursuant to the said Act, every new building has to fulfill the minimum requirements for the energy performance of buildings (set forth by technical norms). In case it is technically, functionally, and economically feasible, also existing buildings have to fulfill the minimum requirements for the energy performance of new buildings, upon carrying out major repairs. The act further sets up the obligation of an energy performance certification (i.e., classification by energy categories) in the event of a sale or a lease of a building or upon the construction of a new building or performing major reconstructions to an existing building. In other cases, certification is voluntary. The energy performance certificate, valid for a maximum period of 10 years, constitutes an attestation of completion of the energy performance certification. Additional regulatory requirements had been adopted into the Slovak legislation as a result of the transposition of the Directive 2010/31/EC, which repealed Directive 2002/91/EC with effectiveness as of January 1, 2013. These new requirements aim at cutting the energy consumption in the EU by 20% by 2020 and at increasing the share of renewable energy sources to 20%. It also imposes stricter conditions on the buildings' energy efficiency, mainly for newly built buildings. It assumes new financial tools will be adopted that will finance the construction of energy efficient buildings.

Further Acts regulating requirements for the assessment and management of the energy performance of buildings is Act No. 476/2008 Coll. on Efficiency in Energy Use (Energy Efficiency Act) and ordinances, i.e., Ordinance No. 429/2009 Coll. Establishing Procedures for the Enforcement of the Energy Audit,

the content of a written report and a set of data for monitoring the efficiency in energy use and Ordinance No. 311/2009 Coll. Laying down Details of the Calculation of Energy Performance Certificates and Energy Content. Due to the above mentioned transposition, the Ordinance No. 311/2009 Coll. will also be replaced by a new one as of January 1, 2013.

12 Climate Change

12.1 Please briefly explain the nature and extent of any regulatory measures for reducing carbon dioxide emissions (including any mandatory emissions trading scheme).

The Slovak Republic (as well as all the Member States of the EU) is a party to the Kyoto Protocol (see below in question 12.2). Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 established a scheme for greenhouse gas emission allowance trading within the Community, and amended Council Directive 96/61/EC was adopted for the purpose of compliance with specific commitments of the EU Member States set forth in the Kyoto Protocol. This directive was implemented into Slovak law via Act No. 572/2004 Coll. on Emission Allowance Trading, which regulates the issuance and the trading of greenhouse gases and contaminated substances emission allowances. This act stipulates that the responsible state authority (i.e. the Ministry of Environment of the Slovak Republic) shall elaborate the National Allocation Plan for each period (currently it is 2008 – 2012), which is subject to approval by the European Commission. The new National Allocation Plan had not been approved by the European Commission yet. Then allowances are allocated to operators of installations, which release greenhouse gases or contaminated substances into the atmosphere based on the permit issued by the relevant local environmental state authority, in accordance with the above-mentioned National Allocation Plan. These allowances are then tradable, subject to certain legal requirements. The Regulation No. 920/2010 adopted by the Commission shall establish a system of standardised registries in the form of electronic databases for monitoring the issue, holding, transfer, and cancellation of allowances. Such registries shall guarantee public access to information, confidentiality, and conformity with the provisions of the Kyoto Protocol.

Further changes to this system will take place due to the so-called third climate package adopted by the EU, which have not yet been implemented completely into Slovak law.

12.2 Are there any national greenhouse gas emissions reduction targets?

The Slovak Republic signed and ratified The Kyoto Protocol in 2002. According to the Kyoto Protocol, the Slovak Republic has committed to reduce greenhouse gas emissions by 8% by 2012 compared to 1990. There are no problems with fulfillment of the objective expected, therefore the emission allowance trading scheme has sufficient space in the Slovak Republic (see question 12.1).

12.3 Are there any other regulatory measures (not already mentioned) which aim to improve the sustainability of both newly constructed and existing buildings?

Besides the Act No. 555/2005 Coll. on Energy Performance of Buildings (see question 10.7 and question 11.10), there is a new Act adopted by the Slovak Parliament on Regular Checks of Heating and Air-Conditioning Systems which should become effective as of January 1, 2013.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.