H-System Flats


H-System Clients Lose Bankruptcy Dispute, Ordered To Vacate Flats

Brno, July 24 (CTK) – Clients of the bankrupt H-System developer firm have lost their dispute with its bankruptcy administrator as the Supreme Court (NS) ordered them to leave the houses they had completed on their own, the NS announced to media today.


The decision concerns 60 families in eight houses, who have to vacate their flats within a month of the NS verdict’s effect.


The parties to the long-lasting dispute were Josef Monsport, the bankruptcy administrator, and the Svatopluk housing cooperative associating a part of H-System’s clients.


Its members are the people who completed their flats in Horomerice on the northwestern outskirts of Prague on their own after H-System went bankrupt and left the housing project incomplete.


Monsport plans to sell the flats and divide the money among all clients damaged by H-System’s collapse.


Shocked by the NS verdict, the dwellers concerned refuse to leave their flats. They have no money to finance new housing, they told CTK.


The one-month deadline set for them is too short, they said, adding that in the past 25 years, they changed the original framework house construction into cosy flats, investing lots of money in them.


The NS declared the rent contracts between the Svatopluk cooperative and the dwellers absolutely void, since Svatopluk completed a developer project on H-System’s plots, thereby actually investing money in another owner’s property.


The court’s decision making in this case meant the search for “the best of the worst variants,” judge Zdenek Krcmar said.


The NS said Svatopluk waged a risk by completing selected flats without the step being approved by the bankruptcy court. Svatopluk had only a preliminary agreement with the then bankruptcy administrator about the flat completion and sale for a firmly set price.


However, the risk must not be transferred onto the other clients, i.e. the H-System bankruptcy creditors who did not breach the law on property sales, the NS said, stating that after the flats are sold, the money will be divided among all creditors.


The debts H-System left behind exceed two billion crowns, judge Krcmar said.


He said he expects Svatopluk to challenge the verdict at the Constitutional Court (US).


“I expect that after the long-lasting 18-year martyrdom dispute, the defendant will not come to terms with the NS verdict as the final say on the case,” Krcmar said.


He said the bankruptcy administrator could sign new contracts with the dwellers in question.


The court set a comfortable one-month deadline for Svatopluk members to leave their flats, Krcmar said, adding that Svatopluk would face a distraint should the deadline not be met.


“There was no reason for the case to be further protracted,” he said.


Svatopluk’s representative Martin Junek said the people tried to save the incomplete houses at the time.


“There were 1,000 of us, the clients who invested their money in [what we considered] a trustworthy H-System, a project enjoying support from politicians and seeming impossible to collapse. Nevertheless, H-System eventually did collapse and we tried to save the clients somehow so that they did not lose their money,” Junek said.


This is why the Svatopluk cooperative was founded to complete the houses. It was joined by about 700 of the 1000 clients. A total of 147 houses and flats were completed. Afterwards, the bankruptcy administrator sold some of them, those located in nearby Velke Prilepy, to the relevant clients.


“As for the flats here, in Horomerice, he would not sell them for some mysterious, maybe emotional reasons,” Junek said.


Lower-level courts, or the Municipal and High Courts in Prague, previously dismissed the lawsuit in which Monsport sought the vacation of the flats by the dwellers.


Among others, the courts said that the compliance with Monsport demand would go counter to good morals. They said the flats completion had been financed by members of the Svatopluk cooperative and approved by the previous bankruptcy administrator.


After its establishment in 1993, the H-System firm signed contracts on the construction of flats and houses near Prague with hundreds of clients. However, it went bankrupt in the autumn of 1997, after managing to complete only 34 detached houses. Some 1,000 people together lost about one billion crowns. H-System’s majority owner Petr Smetka spent 12 years in prison for having unlawfully siphoned off assets from the firm.