On 1 January 2015, an amendment of Act No. 56/2001 Coll., on conditions for the operation of vehicles on the roads came into force, published in the Collection of Laws under no. 239/2013. Among other things, the amendment aims to simplify the paperwork associated with the transfer of motor vehicles. This article examines the practical ramifications of this amendment.

In our opinion, the practical ramifications of this amendment will essentially affect individuals – ordinary people, who need to buy or sell a used car, and used car dealers (dealerships) for whom the sale of used cars is the main subject of their business.

Sale of used cars between non-entrepreneurs

Current practice

When selling a used car, the practice to date has been that the seller and buyer would sign a purchase agreement, in which the seller undertook, among other things, to deregister the vehicle. The seller would then deregistered the vehicle at the local department of transport on the next office day and send the vehicle’s registration certificate to the buyer, who, after a certain interval, registered the vehicle in his/her name. The period between deregistration of the vehicle by the seller and registration of the vehicle by the buyer was called the “half-transfer”. From 1 January 2015, this half-transfer will no longer be possible.

New practice

The seller and the buyer will newly be required to go to the department of transport at the seller’s place of residence together. The vehicle will be transferred to the buyer, who will also receive new licence plates for his/her region, or retain the existing registration number of the vehicle.

If the seller and/or buyer cannot come to the administrative office, either can grant the other party a power of attorney, or the seller and the buyer can authorise a third party to perform this “deregistration” on their behalf. The power of attorney must however be signed with a certified signature, so they will have to visit at least a branch of Czech Post.

Another catch will be the new conditions for changing an entry in the register of vehicles. The buyer will be required to submit confirmation of a registration check and proof of valid statutory insurance of the vehicle (compulsory third party insurance).

Therefore, if both parties are from different parts of the Czech Republic, the sale of a used car can be much more complicated and will essentially rule out sales outside office hours, if the buyer wishes to drive the vehicle away after its purchase.

The simplification of the administrative process promised by the amendment will therefore only be evident on the part of authorities, which will now be able to handle the whole transfer with one operation. However, for the participants in the transfer themselves, it will be more of a complication and place major constraints on the possibilities of selling a used car.

Used car dealers

Leaving a car in so-called half-transfer was common practice, especially among used car dealers, where a new owner was only registered after the buyer had purchased the car from the seller (used car dealer). Used car dealers routinely left cars intended for sale unregistered.

The new legislation can therefore be expected to noticeably affect used car dealerships. They will be newly required to register vehicles intended for sale in their name. This, of course, comes with associated administrative costs (registration check, eco-tax, certified power of attorney, transfer fee, etc.) and labour, which used car dealers will need to take on.

Interim provisions

Of course, the amendment has not forgotten vehicles that were already in half-transfer as of 1 January 2015. Under the amendment, these vehicles will have to be registered by 30 June 2015. If a vehicle is not registered by this date, it will be deleted from the register effective from 1 July 2015 and will be considered defunct. It will not be possible to operate such a vehicle on the roads ever again.

What about sales abroad?

An interesting point is that the amendment has forgotten about the sale of cars abroad, which is common, especially in border regions. The above model cannot work when the authority in question cannot deregister the vehicle or issue licence plates for a foreign country and enter a foreign national as the new owner.

In this case, it will probably be necessary to proceed according to the provisions for the export of vehicles abroad, however this places great responsibility on the seller. Such a procedure could discourage non-entrepreneurs from selling vehicles abroad and could even be considered as an indirect restriction of the free movement of goods within the EU.

Personalised plates

The amendment should also allow vehicle owners to purchase personalised licence plates for a fee of CZK 5,000 per plate. These licence plates will be transferable throughout the Czech Republic and their owners will be able to subsequently transfer them to their next vehicle.

Conclusion

Given the above, it can be summarised and said that the amendment will significantly affect both the ordinary sale of used cars between non-entrepreneurs, as well as the business of used car dealerships, for whom it will significantly increase costs.

If the purpose of the amendment was to simplify the transfer of used vehicles, it must be said that only the relevant authorities and their departments of transport will notice a simplification of the process. For ordinary participants in the purchase/sale of a used car, it will be more of a complication.

For more information, please contact our office’s partner, Mgr. Jiří Kučera, e-mail: jkucera@kuceralegal.cz ; tel.: +420604242241.