In the first article of this mini-series, we looked at the sustainability of the property itself for both long and short-term rent, as well as the practical issues and restrictions for the landlord when negotiating a tenancy agreement. In this second article, we will look at the issues associated with utilities – their negotiation, allocation, billing and related obligations for the landlord and the potential risks of non-compliance.
The rent of residential premises under Act No. 89/2012 Coll., the Civil Code (hereinafter referred to as the “CC“) does not distinguish between whether an apartment or a house is being rented. These articles will do the same. If, in a specific case, a certain conclusion is different for an apartment and a house, this will be explicitly stated in the text. Otherwise, the conclusions will apply to both types of real estate.
Which utilities are provided by the landlord
Firstly, it is recommended to specify in the lease agreement which utilities related to the use of the apartment or house are provided by the landlord and which by the tenant. If this is not clarified in the agreement, the statutory provisions shall apply, according to which the landlord is obliged to provide the so-called essential utilities for the duration of the rent, whereby essential utilities are considered to be water supply, sewage disposal including cleaning of septic tanks, heat supply, municipal waste collection, lighting and cleaning of common areas of the building, provision of radio and television reception, operation and cleaning of chimneys, and, where applicable, operation of elevators (Section 2247 (2) CC).
Although it is not excluded that the landlord does not provide any utilities, in practice, in almost all cases the landlord will always have to provide at least some. If the subject of the lease agreement is an apartment in an apartment building in which there is an owners’ association, the landlord will typically provide the utilities provided by the owners’ association. The same applies to cooperative housing.
In addition, specific legislation may specify which utilities are to be paid for exclusively by the owner of the property (e.g. Section 2(6) of the Water Supply and Sewerage Act[1] explicitly states that the customer is the owner of the land or building (in the case of a family house) or the owners’ association (in the case of an apartment building).
When renting an apartment in an apartment building where the owner pays a down payment to the owners’ association, it is also necessary to keep in mind that the tenant is strictly prohibited from paying particular utilities. In general, the tenant may only pay for those that are related to the apartment and provide the tenant with a “benefit” for the use of the apartment. Typically, this includes a repair fund, which is usually a significant expense, as well as building management fees, remuneration for members of the owners’ association, and building insurance. Any provision in the lease agreement transferring this responsibility to the tenant would be invalid.
Electricity (and possibly gas) supplies are a separate issue, that may be provided by the landlord, but also can be “transferred to the tenant”. In such case, the tenant is then the one who concludes a contract for the supply of utilities with the electricity or gas supplier, pays the advance payments directly to the supplier, and receives any overpayment directly from the supplier, while the supplier will collect any underpayment directly from the tenant. If these utilities are provided directly to the tenant, the landlord avoids the trouble of paying for and billing them and, at the same time, does not have to pay them if the tenant becomes insolvent.
Setting payment amounts for services
The owner of an apartment or house should specify in the lease agreement with the tenant how the provided services will be paid for. The most common method is an advance payment in accordance with Act No. 67/2013 Coll. (hereinafter referred to as the “ZPB“)[2]. According to Section 4(1) of the ZPB, the amount of advance payment should primarily be agreed upon by the landlord and tenant in the lease agreement. If the contracting parties cannot reach an agreement, the landlord shall determine the monthly advance payment for individual services as a monthly share of the costs estimated based on the previous year, the last billing period or from the costs derived from the estimated prices for the current year (Section 4(2) of the ZPB). There is therefore some room for agreement between the parties or discretion on the part of the landlord, but the legal limits must be observed, and the advance payment must not be set at an unreasonable level.
Ideally, the amount of the advance payment should correspond to the estimated consumption. However, the landlord must bear in mind that in the event of an underpayment for services, it is the landlord who is primarily responsible for paying the service providers and recovering the underpayment from the tenant.
We also recommend that the maximum number of people who might use the rented property be agreed upon in the lease agreement, as this fact also has a significant impact on the total payment amount of the advance payment. A young couple who spends their working days away from home at work and often go on weekend trips will have a different consumption, while a family where one parent takes care of two young children on parental leave and the other parent often works from home (home-office) will have a different consumption. Landlords should therefore consider these facts in advance.
Payments for utilities can also be paid in a fixed amount (Section 9(1) of the ZPB), either as a separate fixed amount payment or as part of one fixed amount together with the rent, or it can be stipulated that the payment for utilities is a fixed amount included in the rent. The advantage for the landlord is a considerable reduction of the administrative burden.
Another advantage of the fixed amount payment is that any overpayment for services then remains with the landlord. However, the logical disadvantage is that the landlord must cover any underpayment from its own assets. For tenants, therefore, a lump sum payment for utilities often signals that the utilities can be consumed “freely”. In addition, for lease agreements concluded for an indefinite period or longer than 24 months, the law explicitly declares which utility bills cannot be paid in a fixed amount. Thus, payment for the supply of heat and centralised hot water and the supply of water and sewage cannot be included in the fixed amount payment (Section 9(4) of the ZPB). These supplies must therefore always be billed. If the contracting parties wish to include these services in the fixed amount payment for utilities, the lease agreement will have to be concluded for a period which lasts less than 24 months.
If there are common areas or other areas specifically used by the tenants, or if the individual units do not have extra energy meters, we recommend negotiating rules for the tenants’ share of the costs of the provided utilities, where the ratio of the floor area of the tenant’s unit to the other tenants or the number of people using the building is most often used. If you are renting units in an HOA or cooperative housing, the cost share will be determined by those entities. If the tenant’s share of the costs is not determined by contract, the law sets out rules for the specific determination, always according to different criteria depending on the utility in question.
If the lease agreement includes an arrangement that the tenant pays advance payments for other services (e.g. building security, doorman, etc.), then the parties are obliged to determine the method of accounting for these services in the lease agreement, as these services are no longer subsidiary regulated at the statutory level.
Billing period
The parties must bear in mind that for purpose of the settlement for utilities payments, a so-called billing period needs to be established. The billing period means the period for which the tenant pays the utility charges and which the landlord must subsequently charge to the tenant.
If the billing period is not determined in the contract, it is up to the landlord’s will to specify the exact billing period. The law provides a single condition whereby, according to Section 2(1)(c) of the ZPB, the billing period must be a maximum of twelve months. The parties may thus agree on a shorter billing period, but the billing period is usually bound to the calendar year or the signing anniversary of the contract, but nothing prevents from a different arrangement between the landlord and the tenant. If the provision of services is linked to other third parties (HOA, cooperative), we recommend that the billing dates are aligned with the billing dates of these parties.
Billing to the tenant
In the case of advance payments, the landlord is obliged to settle the advance payments for utilities after the end of the billing period and to settle any underpayment or overpayment with the tenant. Although the billing of utilities may appear to be a relatively simple matter, the landlord needs to be diligent and in accordance with the contractual arrangement or the law.
At the end of the billing period, the landlord is obliged to issue the tenant with a bill summing up payments for utilities. The landlord is obliged to make and deliver the billing to the tenant no later than 4 months after the end of the billing period (Section 7(1) ZPB). The landlord cannot include the cost of drawing up and executing the billing in the cost of services (Section 7(4) ZPB).
If the landlord fails to deliver the bill to the tenant on time, the tenant is entitled to a delay fee of CZK 50 for each day of delay (Section 13(2) of the ZPB). This penalty at the tenant’s benefit may reach up to CZK 18,000 per year for this reason. If the invoice issued by the landlord is found to be incorrect, it is assumed that the landlord has not issued the invoice and the obligation to issue an invoice remains. However, the tenant’s right to request the landlord to issue a statement of account for services is subject to a general three-year limitation period (see the decision of the Supreme Court of the Czech Republic of January 18, 2017, case no. 26 Cdo 3256/2015).
The landlord and the tenant may adjust the amount of the fine in the lease agreement, but it may not exceed the CZK 50. If the parties do not agree on the amount of the fine in the lease agreement, the statutory CZK 50 shall apply in the alternative. Even though it is a penalty in the terminology of the law, it is not a contractual penalty, but a so-called statutory penalty (§ 2052 CC).
After delivery of the bill, the tenant has the right to request in writing within 30 days that the landlord provide the tenant with proof of the costs of individual services and the statement in accordance with the law or contractual agreements, and to allow the tenant to obtain copies of the supporting documents. The landlord then has a further 30 days to comply with the tenant’s request.
If the tenant does not raise any dispute with the bill within 30 days of its delivery, or within 30 days of the landlord providing proof if requested by the tenant, it is presumed that the tenant agrees with the content of the bill and the method of allocation. The landlord must resolve any objections raised in a timely manner within 30 days of receiving them. The above penalty of CZK 50 for each day of delay applies not only to the landlord’s delay in issuing and delivering the bill, but also to the obligations associated with the tenant’s right to inspect the related documents regarding the bill and the obligations associated with resolving the tenant’s objections.
It is up to the landlord and tenant to arrange in the lease agreement how the financial settlement based on the utility bill will be handled. Unless the landlord and tenant agree otherwise in the lease agreement, the statutory rule applies, according to which the landlord and tenant shall settle financially within 4 months of the date of delivery of the utility bill (Section 7(3) of the ZPB).
The law also defines the consequences of incorrect billing (in the event of properly raised objections by the tenant) for the payment of overpayments or underpayments. Overpayments for services are always payable, even if the bill was issued incorrectly. If the bill is subsequently corrected and the new amount of the overpayment differs from the original amount, the tenant will be unjustly enriched and will be obliged to return the difference to the landlord. However, this does not affect the landlord’s obligation to reimburse the tenant for the overpayment based on the incorrectly issued bill.
If the bill is incorrect, the underpayment will also be payable (and the tenant will also be obliged to pay it), but only if the faults in the bill do not affect the amount of the underpayment. Therefore, if the tenant objects that the calculated additional payment is incorrect, the additional payment shall not become payable, and the landlord shall not be entitled to claim such additional payment from the tenant until the bill has been issued correctly and/or the tenant’s objections have been settled.
It is common practice for any unpaid balance to be paid by the tenant in the form of a payment in addition to the rent and the bill for the following period. It is recommended that in the event of a larger underpayment, the landlord should increase the advance payments. Any overpayment can be paid to the tenant in a single payment, or alternatively, the tenant’s claim for a refund of the overpayment can be settled against the landlord’s claim for future rent or payment for future services, to the amount that they cover each other.
Landlords should therefore not underestimate the issue of utility bills and advance payments when negotiating a lease agreement. Although it is possible to simply “get rid” of this administrative burden by using a fixed payment for services, it is important to consider that any additional costs arising due to excessive consumption of utilities by the tenant will have to be paid by the landlord from their own resources, and the tenant will not be obliged to compensate the landlord for any expenses.
Payment of arrears from the security deposit
If there are arrears based on the bill, this balance may be settled by payment from the security deposit, if agreed in the lease agreement. The landlord and the tenant may conclude that the tenant is obliged to pay a security deposit (known as a “kauce”). However, according to Section 2254(1) CC, the security deposit together with the contractual penalty (if agreed in the lease agreement) may not exceed three times the monthly rent.
If the contracting parties have agreed on a security deposit, the landlord may use this deposit to cover any outstanding payments for utilities. However, it is necessary to stipulate this explicitly in the lease agreement at the time of its signing. Although the law does not impose such a requirement and the security deposit may be used to cover outstanding payments for utility bills without further complication, it is necessary to consider the period after the tenancy ends.
If the tenancy is terminated, the (now former) landlord and tenant must usually settle up utility bill for the last period. According to the Civil Code, the landlord is obliged to return the security deposit at the end of the tenancy, together with interest (Section 2254(2) CC). Since the security deposit plus interest is returned to the tenant at the end of the tenancy, the landlord cannot hold the security deposit until the end of the next billing period. In such a case, the security deposit cannot be used to pay for any outstanding utility bills.
Conclusion
Prior to the beginning of tenancy relationship, landlords should consider how they will arrange the billing period, how the costs of services that are not directly measured by a sub-meter will be divided among the tenants of the property, and how and when they will bill advance payments. Landlords should exercise diligence when settling bills for utilities, as the law gives tenants considerable options for defence, such as financial penalties or deferral of payment.
As a landlord, you will also have several other obligations during the term of the rent, such as liability towards the tenant, or several issues in the event of a breach of the tenant’s obligations. We will address these topics in the next parts of this mini-series dedicated to landlords renting residential properties.
If you have any questions, not only about renting, billing for utilities, or other areas of civil law, our service is at your disposal. Please do not hesitate to contact us.
[1] Act No. 274/2001 Coll., on water supply and sewerage for public use and on amendments to certain acts (Act on water supply and sewerage.
[2] Act No. 67/2013 Coll., regulating certain issues related to the provision of benefits associated with the use of flats and non-residential premises in houses with flats
Mgr. Ondřej Růžička, attorney at law – ruzicka@plegal.cz
Mgr. Karel Janeba, junior lawyer – janeba@plegal.cz
3. 7. 2025