Czech divorce: Landmark decision on valorization of assets invested into marital property

The Czech Constitutional Court delivered a landmark decision on the issue of valorization of assets invested into marital property. This decision will have a far-reaching impact on divorce settlement of marital property in cases where either of the spouses used their exclusive funds towards purchase of marital assets.

Marital x exclusive property during marriage

Divorce settlement of property requires two separate steps under Czech law:

• First, it must be determined what exactly is part of marital property and what has remained an exclusive property of either of the spouses (see this article for overview of what constitutes marital property under Czech law).
• Secondly, only the marital property is divided between the spouses. The court takes into account also the extent to which either of the spouses made the marital property grow or diminish, and specifically also whether any exclusive property was used towards marital property or vice versa.

Constitutional Court’s landmark decision on valorization

In case Pl. ÚS 23/24, the Plenum of the Czech Constructional Court dealt with a case of a man, who had sold in 1988 a house that was exclusively his own. He then used the funds to purchase a new house which became part of the marital property. The spouses divorced in 2017.

The purchase price in 1988 was 180,000 crowns, paid entirely from exclusive funds of the husband. The value of the house as part of marital property in 2017 was 9,800.000 crowns. So how should the courts divide the value of the house in divorce settlement?

Until now, the case law of the Czech Supreme Court led to the outcome in which the husband would receive back his 180,000, while the remainder of the value of the house would be split in half. For a different outcome, the Supreme Court case law required the spouses to have a written agreement signed at the moment of purchase of the house (or at the moment of any other investment of exclusive funds into marital property).

Constitutional Court has now overruled this case law. It held that the Supreme Court’s interpretation of law ran in direct contradiction to the actual legislation. Thus, the Supreme Court overstepped its boundaries, and more importantly, violated the man’s constitutional right to property and to a fair trial.

Valorization in my practice

Over the years I had several cases where the issue of valorization of exclusive investment into marital property became a sore point – from both sides of the equation. I have always advised my clients that I consider the Supreme Court case law unconstitutional, but that trying to overturn it at the Constitutional Court would be a lengthy multi-year endeavor with unsure outcome.

I am glad that in all of my previous cases a negotiated settlement was reached which holds merit also in view of the Constitutional Court’s decision. Moreover, I am really pleased that going forward, I can provide a clear legal advice, and not just be laying down various options with their benefits and pitfalls.

If you are considering getting a divorce in the Czech Republic, don’t hesitate to contact me.