11. September 2018
Asset Protection for Clients of Svoboda & Williams
Svoboda & Williams, in cooperation with the Polverini Strnad law firm, presents the Asset Protection (AP) service. Its aim is to protect real estate and other assets from theft or other risks. Attorney Mgr. Pavel Strnad, Ph.D. answered our questions about AP.
What does asset protection (AP) entail and who is it for?
AP is a set of legal tools that protect the client and his or her assets from everyday risks. In effect, it is something that goes beyond regular insurance in that it protects the client’s assets from events that cannot be insured against. You can, for example, insure your real estate against destruction or damage, but not against theft. Life is full of risks which concern, for instance, asset inheritance proceedings (especially of real estate or shares in a company) with multiple heirs, complicated family relationships, matrimonial property (MP) with existing debts, ungrateful descendants, owning shares in a company with multiple shareholders, being bullied, being the object of envy, or having the privacy of your assets infringed upon.
Some of the AP tools could previously only be used by very wealthy people due to their high cost. We offer solutions that a wider spectrum of clients can afford. The AP service is tailored for those who want to live a peaceful life and realize that they may find themselves in an unexpected situation and want to be assured that they won’t lose their assets if unfavorable circumstances occur. These are typically real estate investors, entrepreneurs (statutory representatives, managers, etc.), people who have complicated family relationships, or have been the target of envy.
How does your office cooperate with clients? Is it a one-time engagement or a long-term cooperation?
Mostly it’s a long-term collaboration because we help the client with more than one issue. But we also have clients who we represent only once. Consider, for example, someone who intends to buy a property, signs a reservation contract, and then – ideally before signing the purchase contract – contacts us about getting asset protection. We meet with them within 48 hours to discuss their situation. For simple cases, we provide legal advice immediately, for more complicated cases, we come up with tailored solutions generally within a week. Costs for the initial consultation and asset protection proposal start at CZK 1,000, and generally don’t exceed CZK 10,000. In some cases, we find out right away that the client’s assets are already sufficiently protected and our AP services are thus not needed. From the client’s perspective, it’s crucial that the process of acquiring AP services does not slow down the purchase of the property.
The AP service helps people avoid problems. Do you offer something for those who have already gotten into trouble?
In the 20 years that we’ve been specializing in real estate law, we’ve dealt with hundreds of residential property cases. It was clients who needed help with their real estate problems who motivated us to launch our AP services. We would often see the same legal issues over and over and we realized that simplifying some of the processes would significantly lower their costs. In some cases, our prices are as low as 30% of the usual market price.
We also represent clients in court as well as in out-of-court settlements. We’ve won over 150 complicated court cases and represented clients in more than 30 insolvency proceedings in which the debt amounted to over 20 billion CZK. We also specialize in complicated cases that are often seen as lost causes.
Property – unlike a car or a wallet – can’t be easily stolen. Nevertheless, there are cases of people losing their property. Is there an easy way to eliminate the main risks?
I’ll answer your question by using one of our cases as an example. A client randomly checked on her property and found out that her land was owned by a company she’d never heard of. Her permanent residence was in Znojmo, but she lived in Prague. The problem started when she lost her ID and a fraudster used it to sell the land. Although the usual bureaucratic processes took place, nobody noticed anything wrong and the cadastre changed the ownership of the land based on a fraudulent claim.
This case would never have happened if the client had taken several very simple steps. The simplest and least expensive step to protect your property is to get the Service for Monitoring of Changes that the Cadastre of Real Estate offers for CZK 200 per year for up to 20 properties. The client then could have had a much higher chance of finding out that somebody was trying to steal her property. But even in this case the fraudster could have falsified her signature in the request for this service. We therefore recommend that clients use several legal tools at the same time. If, for example, the client would have borrowed money from a good friend and secured her return of the money with a contract with a negative pledge, she would have basically eliminated any possibility of theft. We often hear that a mortgage and an encumbrance are bad things that must be gotten rid of as quickly as possible. But there is something positive about encumbrance. It’s usually the “clean” unencumbered properties that are the targets of thieves and scammers.
Can you mention some of the myths about property law that you often have to convince your clients are not true?
I’ve already mentioned one myth. Many people believe that if their ownership is registered in the cadastre, their property is safe or untouchable. There are also many myths about matrimonial property (MP). People forget that any property gained during a marriage is generally considered MP (even the salary paid into your bank account), as are the debts incurred by one of the spouses. People who try to eliminate risks by entering into agreements that limit MP often erroneously believe that this solution gives them absolute protection.
We also often hear that the articles of association of a limited company with multiple shareholders is a standard document that one doesn’t have to think about too hard. We disagree. We dealt with a situation in which the majority shareholder died and was replaced by his wife and children aged 16 and 19. The articles of association lacked a clause about what happens in the event of the death of a shareholder and the inheritance shares, and so his shares automatically went to all of his inheritors. As it often happens, each had their own opinion about what to do with their shares and in the end agreed to sell them. The minority shareholder didn’t want to sell his shares, and so they removed him from his position as the executive director. He lost control over the company and couldn’t even manage its business. The divergent interests of the shareholders thus froze the company. Since the minority shareholder didn’t have enough funds to buy out the majority shareholder, he was, in effect, forced to sell his shares. And so he lost a prosperous company that he helped build as well as his only source of income. This could have been prevented by a simple check of the articles of association and their amendment at a notary’s office. The cost of the notary’s services is several thousand Czech crowns.
Some people try to protect part of their family’s property with an agreement that narrows the scope of MP. To what extent is this solution effective?
Narrowing the scope of MP can be an effective measure, but it is by no means a universal solution. The main risk is that the agreement between spouses or fiancés must not touch on a third party’s rights (i.e. any creditor), unless this third party agrees with the agreement. If this agreement is signed without the agreement of the creditor, it’s not effective with respect to them.
Due to the absence of established court practice concerning the relevant regulations of the Civil Code, it’s not even certain that these agreements can act as sufficient protection against the future debts of the other spouse. To eliminate this risk, it’s imperative to register the agreement into the electronic List of Matrimonial Property Agreements at the Notarial Chamber of the Czech Republic. For things entered into public lists (i.e. property lists) it’s necessary to register the agreement into this list as well to make it effective against third parties. In short, the basic downside of narrowed MP may be the fact that anyone can easily look up that one’s assets have been “set aside“ by one of the spouses and can legally challenge this, even just for calculated reasons.
Arrange a legal consultation about Asset Protection.