Public Auctions Made Easier

The new Public Auctions Act introduces significant changes to the conduct of public auctions in the Czech Republic. It aims to modernize auction procedures, enhance transparency, and align with the Civil Code.

Scope of the New Law

The Act only applies to auctions where the auctioneer invites an unspecified group of people to submit bids for a purchase contract or a future purchase contract with the highest bidder.  Auctions among a closed group or those aimed at contracts other than purchase agreements, such as lease contracts are not concerned. For example real estate agents conducting bidding processes among selected buyers are not subject to this law.

Key Changes Introduced

• Transfer of Ownership

Ownership of auctioned property now automatically transfers (převod) upon the completion of the auction, aligning with the Civil Code's view of auctions as a method of concluding contracts. The terms of this agreement will be set out in the auction announcement, and during the auction, only the details of the buyer and the purchase price will finalize the agreement. As a result, no separate written purchase agreement will be required after the auction. The official confirmation of the sale will be the certificate issued by the auctioneer. For real estate, the buyer becomes the owner only after the transfer is recorded in the Real Estate Register.

• Electronic Auctions and Central Register

The Act introduces a Central Register of Auctions, managed by the Ministry of Regional Development. This publicly accessible registry will contain information about auctioneers and auctions, facilitating easier access to auction details. It shall eliminate unnecessary paperwork and make the whole process more cost efficient. Additionally, the law supports electronic auctions, promoting digitalization of the auction process.

• Simplified Regime for Movable Things and Dutch Auctions

The Act introduces a simplified auction regime for movable things with a bidding price under CZK 300,000, streamlining procedures for lower-value items. Further, public auctions now include Dutch auctions, where the auctioneer starts with a high asking price, which is gradually lowered until a bidder accepts the current price.

• Sanctions for Non-Compliance and stricter regulations on forced auctions

Previously, there were no penalties for auctioneers breaching their obligations. The new law allows for fines up to CZK 1,000,000 for violations, aiming to enforce compliance and ensure fair practices. Further, stricter regulations are imposed on forced auctions. Once a forced auction is initiated, the property owner is prohibited from taking actions that could affect the property’s value or hinder the auction process. This prohibition will be recorded in the Real Estate Register, which will also include a note warning third parties about the pending auction.

• Auctioneers

Those conducting auctions must obtain the appropriate trade license, secure liability insurance, and may need to update their electronic auction platforms to comply with the new regulations. Non-compliance can result in significant penalties, including fines or suspension of business activities.

The new Public Auctions Act represents a shift in the legal landscape of auctions in the Czech Republic. By modernizing procedures, supporting electronic auctions, and enforcing compliance through penalties, the law aims to create a more transparent and efficient auction environment.

By Mgr. Bc. Karolína Szturc

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