CZECH REPUBLIC Law and Practice Contributed by: Matěj Manderla, Jan Wagner, Ivo Hartmann and Aleš Malach, Tenacta, advokátní kancelář, s.r.o.
7.2 Assigning Responsibility for the Design and Construction of a Project The allocation of responsibility in Czech construction projects depends mainly on the contract, but also on legal roles defined by law, such as the investor, designer, contractor and site manager. In a typical setup, the investor hires the designer and the contractor separately. The designer is responsible for the project documentation, while the contractor is responsible for carrying out the construction. In a design-build (turnkey) model, the contractor usually takes full responsibility for both design and construc - tion. In practice, mixed setups are common, where the investor keeps control over the initial design, and the contractor handles detailed design and construction. 7.3 Management of Construction Risk Under Czech law, construction risk is shared between statutory rules and the contract. The contractor gener - ally bears the risk of damage to the works until hand - over and is responsible for defects. Hidden defects must be reported without undue delay, usually within five years after handover. In practice, contracts man - age risk through several key tools: defect liability and repair obligations, quality guarantees, contractual penalties, indemnities, insurance, retention (withheld payments) or bank guarantees, and agreed liability caps or exclusions. These limits are not absolute. Czech law does not clearly define terms like “indirect” or “consequential” loss, so they should be specified in the contract. Lia - bility also cannot be excluded in advance for inten - tional acts, gross negligence or harm to fundamental rights, nor can it unfairly limit the rights of a weaker party. 7.4 Management of Schedule-Related Risk In Czech construction projects, schedule risks are managed primarily through contractual arrangements. Agreements typically include a binding timeline with key milestones and a final completion date. Delays are usually addressed through contractual penalties, most often calculated as a daily amount or a percentage of the contract price. Under Czech law, claiming such a penalty generally excludes the right
ing rent for the unexpired term, provided it reflects a real financial loss. Contractual Penalties Commercial leases heavily feature liquidated dam - ages in the form of contractual penalties for various breaches, which are enforceable under Czech law without the need to prove actual damages. Landlord’s Lien The Czech Civil Code grants the landlord a statutory retention right over the movable assets owned by the tenant that are physically located within the leased premises, which can be used to secure unpaid rent upon termination. Forms of Commercial Security These include the following. • Bank guarantees: Institutional landlords strongly prefer bank guarantees. These are typically irrevo - cable, unconditional and payable on first demand, issued by a reputable bank. Their main advantage is insolvency protection, as they create a direct claim against the bank and do not form part of the tenant’s insolvency estate. • Cash deposits and corporate guarantees: Cash deposits are typically utilised only for smaller ten - ants. If the tenant is a newly established SPV, the landlord will often require an additional PCG from a financially strong parent entity. 7. Construction 7.1 Common Structures Used to Price Construction Projects A construction contract must either set a price or define a clear method for determining it. In practice, private development projects are based almost exclu - sively on a lump-sum (fixed) price model, particularly where the scope of work is sufficiently defined. Other pricing models, such as unit-price (remeasure - ment), cost-plus arrangements or budget-based pric - ing, are generally not used in this context.
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