Will Mayor Svoboda seize control of property in Prague 10 over dodgy deal?

Pressure group fears housing privatization in Prague 10 district may be rigged, calls upon the Czech capital’s mayor to intervene

István Léko 16.1.2012
Změní starosta Prahy 10 Milan Richter (vpravo) svůj názor na prodej lukrativních příbytků poté, co se o případ začal zajímat primátor Bohuslav Svoboda? | na serveru Lidovky.cz | aktuální zprávy Změní starosta Prahy 10 Milan Richter (vpravo) svůj názor na prodej lukrativních příbytků poté, co se o případ začal zajímat primátor Bohuslav Svoboda? | foto: © ČESKÁ POZICE, Richard CortésČeská pozice
Změní starosta Prahy 10 Milan Richter (vpravo) svůj názor na prodej lukrativních příbytků poté, co se o případ začal zajímat primátor Bohuslav Svoboda?

The civic pressure group Fair Housing in Prague 10 says plans drawn up by the district’s administration, led by district Milan Richter (Civic Democrat, ODS), to sell off 44 residential villas are non-transparent, non-conceptual and unfair, and fears the tenants will be evicted. The properties are worth a total of around Kč 1 billion.

The residents of the houses earmarked for sale by the Prague 10 district council appealed to Prague City Hall at the end of November. In a long letter addressed to Prague Mayor Bohuslav Svoboda (ODS) and elected representatives of the TOP 09 party, they request the city’s central administration intervene in the sale. The properties in question are formally owned by Prague City Hall, thus the Prague administration has powers to remove jurisdiction over the properties from the district.

Czech Position has learnt that the new leadership in City Hall (the ODS and TOP 09 coalition) has looked into the case and has decided to intervene if Prague 10 doesn’t change the conditions of the proposed property sale. If City Hall does resort to such a measure, it would set a precedent.

To put it mildly, the administration of Prague 10 has proved to be adventurous with the management of its assets, including public funds, as demonstrated by the Key Investments scandal first reported by Czech Position. The district is basically ruled by the powerful lobbyist Tomáš Hrdlička with the help of Richter and Antonín Weinert (Social Democrats, ČSSD). Unfortunately, the Prague 10 administration did not provide us with comment on the planned sale because it resolved not to communicate with this publication in any way after after Czech Position exposed the Key Investments scandal.

Irregular conditions

Last summer the Prague 10 administration decided to sell the 44 residential villas (each containing up to six flats) as a whole — in privatizations of municipal property it is standard practice to offer individual apartments to tenants — and will be offered to legal entities formed by tenants. However, the villas will also be offered to other companies. If they place an offer higher than that of the company formed by tenants, the latter will be given the opportunity to buy the villas at the price offered by the highest bidder; if not, the highest bidder will buy the property at the price they bid. 

“According to the conditions set, tenants interested in buying their homes will have to reach agreement with all other tenants in the same building and together with them form a legal entity at a significant cost which they may not use at all, and then wait to see what the conditions of the property auctions will be and whether they will be able to enter the auction at all,” the members of the Fair Housing in Prague 10 pressure group wrote in their letter to Mayor Svoboda.

“A single resident unwilling or hesitant to enter into the vaguely-formulated sell-off process could stall the sale of a building to the legal entity formed by the other residents. To establish a legal entity requires specialist knowledge and entails significant costs. Many tenants are older, including pensioners aged 80-90 years old, and for them to participate in the establishment of a firm in uncertain circumstances is unimaginable. The basic conditions for the planned sale are discriminatory and will provide opportunities for all sorts of speculation,” the group said.

Fair Housing in Prague 10 also says the conditions are more favorable for potential buyers who are not officially tenants in the buildings for sale. “These individuals can bid as legal entities but also as individuals. They are exempt from the requirement to establish a legal entity,” the pressure group points out in its letter.

What about conflict of interest?

The pressure group also says the principles of the property privatization set by Prague 10 do not take into account potential conflicts of interest. “There is a group of individuals who, due to their dealings with property in the past and present, both legal and illegal, must be excluded from the privatization. Information available to them, but not to others, could put them at an advantage and put tenants and other interested parties at a disadvantage,” the group said.

Fair Housing in Prague 10 names several companies that may gain access to and take advantage of confidential information, including PMC Facility, Praha 10 – Majetková, and Prominecon Group, which is part of the non-transparent Natland Group. The pressure group says individuals from these companies and also members of the Prague 10 administration may also take advantage of confidential information about the privatization.

Circumventing City Hall

According to the statutes of the Prague city administration, districts of the city must inform the central administration of all plans to transfer ownership of property valued above Kč 50 million. Nevertheless, Prague 10 has not informed Prague City Hall about the intention to sell off the 44 villas, despite the fact that their total estimated value reaches around Kč 1 billion.

It’s quite possible that Prague 10 intends to get around the obligation to inform City Hall about the planned sale by treating the sale of each villa as an individual privatization, as no single villa is valued above Kč 50 billion. But Fair Housing in Prague 10 claims it is obvious that the privatization of the villas has the hallmarks of a single operation and that any other interpretation would amount to circumventing the law.

Fair Housing for Prague 10 has thus called upon Svoboda to take steps to remove jurisdiction over the properties earmarked for sale in Prague 10 from the district’s administration if an alternative and transparent privatization process is not drawn up; the mayor has yet to react.