The consequences of the death of a member of a housing cooperative are regulated in the Civil Code and the Commercial Code. In the Civil Code, the provisions concerning inheritance and the transfer of tenancy of a flat are primarily relevant to this issue, whilst in the Commercial Code the provisions regulating the termination of membership in a cooperative are relevant.

Civil Code Inheritance From the legal regulation of inheritance, the provisions of §§ 481 to 484 of the Civil Code are particularly significant for resolving the situation that arises after the death of a member of a housing cooperative. These provisions contain rules for the court’s decision on how the estate property will be divided. If there is only one heir whose right of inheritance is established, the court shall confirm that he has acquired the entire estate. If there are multiple heirs, they may conclude an agreement among themselves on how they will settle the estate between them. This agreement must be approved by the court which is dealing with the estate. The court shall approve the agreement unless it is contrary to law or good morals. If no agreement is reached or if the agreement is not approved by the court, the court shall confirm the acquisition of the estate according to inheritance shares to those heirs whose right of inheritance is established. The provision of § 175q of the Code of Civil Procedure is in full accordance with the legal regulation in the Civil Code, which, if there are multiple heirs, also gives the court no other option than to approve their agreement on the settlement of the estate or to confirm the acquisition of the estate according to inheritance shares. The court cannot, in the absence of an agreement between the heirs, itself decide what specific assets from the deceased’s estate will fall to individual heirs.

These provisions regulating the law of inheritance are clear and unambiguous, but they are inconsistent with the legal regulation of the transfer of tenancy of a cooperative flat and also with the provisions of the Commercial Code regulating the procedure following the termination of membership of a natural person in a cooperative as a result of their death.

Transfer of tenancy The transfer of tenancy of a cooperative flat is regulated in § 706(2) and § 707(2) of the Civil Code. These provisions establish different legal regimes for the consequences of the death of a member of a housing cooperative depending on whether it concerns a flat which was in the joint tenancy of spouses or not.

If it does not concern a flat in the joint tenancy of spouses, upon the death of the tenant, their membership in the cooperative and the tenancy of the flat pass to that heir to whom the membership share was assigned.

If it concerns a flat in the joint tenancy of spouses, it is important whether the right to the cooperative flat was acquired before the conclusion of the marriage or during the marriage. If the spouse who acquired the right to the cooperative flat before the conclusion of the marriage has died, upon their death the membership in the cooperative and the tenancy of the cooperative flat pass to that heir to whom the membership share was assigned. If either spouse (or both) acquired the right to the cooperative flat during the marriage, the surviving spouse remains a member of the cooperative and the membership share in the cooperative is also assigned to them and they remain the tenant of the flat. In this last case, the court in the inheritance proceedings must take into account the fact that the surviving spouse will continue to be the sole member of the cooperative and the sole tenant of the cooperative flat.

From the above facts it follows that a problematic situation will arise if the membership share in the cooperative is the subject of inheritance and the testator has multiple heirs. If no agreement is reached between the heirs, the court shall confirm the acquisition of the estate according to inheritance shares to the heirs. This will result in a situation where the membership share in the cooperative is assigned to multiple heirs at once. However, such a state is inconsistent with the above-mentioned provisions of § 706(2) and § 707(2) of the Civil Code, according to which, as I have already stated, the membership in the cooperative and the tenancy of the cooperative flat will be assigned to that heir to whom the membership share was assigned. The Civil Code does not mention in these provisions the procedure in case there are multiple heirs and does not anticipate such a situation. From the last sentence of the provision of § 707(2) of the Civil Code, which provides that if there are multiple objects of tenancy, the testator’s membership may pass to multiple heirs, I infer a contrario that if there is only one object of tenancy, it is not possible for the testator’s membership to pass to multiple heirs. Moreover, § 700(3) of the Civil Code provides that in the case of a cooperative flat, joint tenancy may arise only between spouses.

If, therefore, in inheritance proceedings the court decides to confirm the acquisition of the membership share in the cooperative to multiple heirs, it will thereby cause, without being able to do anything about it, a state which is contrary to law. The situation where the membership share in the cooperative is awarded to several heirs according to their inheritance shares in inheritance proceedings has only two possible solutions: The first and also the best solution is a mutual agreement between the heirs on which of them will be the sole member of the cooperative and thus also the sole tenant of the cooperative flat, and how they will settle with the other heirs. The second solution to be considered is that one of the heirs files an action with the court, with a proposal that it be decided which heir will continue as a member of the cooperative as the sole tenant of the cooperative flat and how they will settle with the others. Since the law does not regulate how the court should proceed in deciding, it is necessary to proceed from the provision of § 853 of the Civil Code, which provides that civil law relations, if they are not specifically regulated either by the Civil Code or by another law, are governed by the provisions of the Civil Code which regulate relations closest to them in content and purpose (so-called analogy). In this case, it is appropriate for the court to proceed by analogy according to the provision of § 142(1) of the Civil Code, which regulates the settlement of co-owners upon cancellation of shared co-ownership. When deciding to which of the heirs the membership share in the cooperative will be assigned, the court should therefore be guided by the criteria set out in § 142(1), i.e. the size of the shares and the efficient use of the thing.

Commercial Code According to § 232 of the Commercial Code, upon the death of a natural person, their membership in the cooperative ceases. The heir of membership rights and obligations may request membership in the cooperative. As a general rule in cooperatives, the board may decide whether to accept a particular person as a member of the cooperative or not. An exception to this rule exists precisely for housing cooperatives – if the heir has acquired the rights and obligations associated with membership in a housing cooperative, the consent of the board to their acceptance as a member of the cooperative is not required. From the wording of § 232(1) and (2) of the Commercial Code, I infer that the heir should request membership in the cooperative. Whilst the board of the cooperative cannot refuse the heir’s application, in my opinion it cannot be unequivocally inferred from the provision of § 232 of the Commercial Code that the heir becomes a member of the housing cooperative without requesting membership.

Whilst the heir of a deceased natural person should request membership in the housing cooperative, the legal successor of a dissolved legal person becomes a member of the cooperative automatically. The creation of their membership in the housing cooperative is therefore not only not subject to the consent of the board of the cooperative (as in the case of the death of a natural person), but moreover it is certain that their expression of will to the effect that they wish to become a member of the cooperative is not required either. Legal persons are thus unjustifiably favoured over natural persons. I consider it appropriate that the legal regulation be amended and that in future the legal position of natural persons be entirely unambiguous in the matter of the transfer of membership, equal with legal persons, i.e. that the heir of a deceased natural person who was a member of a housing cooperative should automatically become a member of that cooperative. In this way, the legal regulation of the transfer of membership in a cooperative would also be brought into line with the above-mentioned provisions of § 706(2) and § 707(2) of the Civil Code, which stipulate the moment of death of the tenant as the moment of transfer of tenancy of the cooperative flat.

The Commercial Code, like the Civil Code, does not in any way address the question of how to proceed if, in accordance with the provisions of §§ 483 and 484 of the Civil Code, the membership share in the cooperative is assigned to multiple heirs. The Commercial Code does not contain any provisions on the possible division of the membership share in the cooperative (as is the case, for example, with a limited liability company).

Determination of the value of membership in a cooperative In practice and in the literature, three different views appear on how to determine in inheritance proceedings (and not only in them) the value of the testator’s membership in a housing cooperative. To answer this question correctly, it is necessary to decide what actually falls into the estate by virtue of the testator’s membership in the housing cooperative. Depending on the resolution of this question, the testator’s membership share in the housing cooperative may be valued either as the residual value of the testator’s membership share in the cooperative, or as their settlement share, or as the usual (market) price of their membership rights and obligations.

Residual value of the membership share A few years ago, courts most often proceeded from the fact that membership in a housing cooperative has the value of the residual value of the membership share. The concept of residual value of the membership share was used before the Commercial Code came into effect and was understood to mean the basic membership contribution together with the member’s contributions to the cooperative attributable to the flat of which they were the user (tenant), which were reduced according to the period of use of the building in which the flat was located (taking into account the period of its lifespan). It is clear that this is a concept which has little in common with the actual value of membership in the cooperative. It would therefore not be logical for membership in the cooperative to be valued for the purposes of inheritance proceedings (and for the purposes of other proceedings – for example, proceedings on the settlement of shared co-ownership or proceedings on the settlement of joint property of spouses) as the residual value of the membership share, i.e. for the residual value of the testator’s membership share in the cooperative, which does not correspond at all to the actual value of membership in the cooperative, to be the subject of inheritance.

Settlement share The settlement share represents the determination of the member’s property participation in the cooperative in the event of the termination of their membership. According to the provision of § 233(2) of the Commercial Code, the amount of the settlement share is determined by the ratio of the paid-up membership contribution of the former member of the cooperative multiplied by the number of completed years of their membership to the total of the paid-up membership contributions of all members multiplied by the completed years of their membership (unless the statutes of the cooperative provide otherwise).

The settlement share cannot be the subject of inheritance. This is because a claim to a settlement share can only arise for a former member of the cooperative whose membership has ceased, or for an heir of a member of the cooperative who has not become a member of the cooperative. The first case cannot be involved, because the former member of the cooperative is deceased and therefore no new rights or obligations can arise for them. However, the second case is also not applicable, because it only applies to situations where the heir has inherited membership rights and obligations in the cooperative, thus has these rights and obligations for a certain period, but for some reason has not become a member of the cooperative. The settlement share cannot be part of the estate, because the membership rights and obligations in the cooperative are part of the estate, which the heirs did not yet have and therefore there is nothing to settle in relation to the cooperative (see also the judgment of the Supreme Court of the Czech Republic, file no. 22 Cdo 1523/2000).

Moreover, I believe that the settlement share means an amount which is intended to enable the cooperative to financially settle with a person who has terminated their membership in that cooperative, and such an amount cannot be used for the purposes of mutual settlement of persons who were not yet members of the cooperative.

However, I draw attention to the judgment of the Supreme Court of the Czech Republic, file no. 20 Cdo 411/99, whose legal principle reads: “For determining reasonable compensation in connection with the settlement of heirs’ membership share in a housing cooperative, it is possible to proceed from the value of the testator’s settlement share determined by the procedure according to § 233(2), (3) of the Commercial Code (or adjusted according to the statutes of the cooperative)”.

Usual (market) price of their membership rights and obligations With the membership share of the deceased member of the housing cooperative, all rights and obligations associated with membership in the housing cooperative, including the tenancy right to the cooperative flat, pass to the heirs. The rights and obligations associated with membership in the housing cooperative or part thereof may be transferred by agreement, which is not subject to the consent of the organs of the cooperative. Membership rights and obligations in a housing cooperative are therefore a property right which is freely transferable and whose price can be determined by the usual price (market price). The heir to whom the membership share in the cooperative is assigned in inheritance proceedings therefore quite clearly obtains a property value corresponding to the usual price of property rights associated with membership in the cooperative. This price can be determined for the purposes of court proceedings by an expert opinion of an expert from the field of economics, prices and valuation of real estate. It is also conceivable to determine the usual price of membership rights and obligations associated with membership in a housing cooperative in the form of reports from several different entities operating in the real estate market. I consider such a determination of the value of membership in a housing cooperative for the purposes of inheritance or other court proceedings to be the only correct and fair approach. I do not think that it would be lawful and in accordance with good morals for the heir to whom the membership rights and obligations in the housing cooperative are assigned to be unjustifiably favoured over other heirs.

Conclusion In conclusion, I should like to state that I am of the opinion that the legal regulation of the inheritance of membership in a housing cooperative should be changed by the legislature so that the Civil Code and the Commercial Code are in accordance with each other, so that their individual provisions do not contradict each other. Furthermore, I believe that it would be appropriate to unify the practice of courts regarding the determination of the value of membership in a housing cooperative, in such a way that this value will be determined as the usual price of membership rights and obligations associated with membership in the cooperative.

This text was translated from Czech to English using an AI translator.