Settlement of community property or co-ownership (vypořádání SJM / spoluvlastnictví)
Division of shared assets and debts after the community property of spouses (společné jmění manželů, SJM) ends (§ 736 et seq. of the Civil Code, občanský zákoník) or after co-ownership in shares is dissolved (§ 1140 et seq.). It is done by agreement, otherwise a court decides. If SJM is not settled within 3 years of its end, the statutory presumption under § 741 applies: real estate passes to the spouses in co-ownership in equal shares, and debts to both equally.
Example
After a divorce, a couple have a flat worth CZK 6,000,000 and a mortgage with CZK 3,543,000 outstanding. The net value is CZK 2,457,000; the wife receives half, CZK 1,228,500. To repay the original loan and pay her out, the husband takes a new mortgage of CZK 4,771,500 (LTV 79.5 %) at 5.00 % over 25 years with a payment of CZK 27,894. Because of the SJM settlement he repays the original loan without a penalty, provided at least 24 months have passed since it was signed.
In practice
Have an attorney or notary draw up the settlement agreement on the property; the land registry entry is then changed on its basis. The bank, however, is not bound by it: as long as the departing spouse remains in the loan contract, he or she owes the whole payment. Releasing a co-borrower or refinancing needs the bank's approval, based on the creditworthiness of whoever keeps the flat. Sign the settlement only once the financing of the payout is certain.
How it differs
Settlement divides community property of spouses once it ends; during the marriage it stays undivided. Release of a co-borrower (vyvázání spoludlužníka) deals with the relationship to the bank. Without it, settlement changes ownership but not liability for the mortgage.
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