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May 29, 2020
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Czech Republic: Real estate fraud behind housing scandal

Ústí nad Labem, 8.2.2013 9:58, (ROMEA)
A building in the Předlice quarter of Ústí nad Labem. Hard to believe until you see it for yourself. Photograph:  Saša Uhlová of news server Deník referendum.
A building in the Předlice quarter of Ústí nad Labem. Hard to believe until you see it for yourself. Photograph: Saša Uhlová of news server Deník referendum.

The room was lit by fire from a hole in the chimney. There was no running water in the whole building, they had disconnected the electricity, and someone had removed the steel girders, which most probably ended up at the scrapyard. The dejected woman on the bed didn't know whether the building might collapse on her and she might end up in the rubble like her niece.

She had moved to the ground-floor apartment from the first floor because her feet were too painful to take the stairs. "The moment I moved out, they started looting. Someone goes there every night. I don't know who, or what they are doing precisely, I am afraid to leave my apartment," Ms Gizela said of the conditions here. The owner of the building is incommunicado. There is no one to pay rent to, demand repairs of, or ask to protect the property against scrap metal thieves.

In the darkened room she told us about her youth, when she worked in a factory, first as a cleaning woman, and then at a machine after she was promoted: "There was enough money for food, we had someone make our clothes, there was no deprivation." After 1989 she lost her job: "This is how I have ended up. I get CZK 3 400 [EUR 135] in welfare a month. I can't find a job, I'm old. Even the young can't find work. I live like a vagrant. I'm 56 years old and I have never fallen this far in my whole life."

Just down the street is the gym where the Červeňák family had to sleep on cots. It was Saturday, 10 November 2012, and the family had been living there for a week. A hotplate lay on a bench and next to it a plate holding some unappealing yellow mush. There was a lot of play going on in the hall - activists had arrived from Prague to organize a day of fun for the children. The adults were exhausted and afraid of what might happen next. The children ran around, painted, and were glad someone had come to play with them.

Gizela Karičková stayed behind in her apartment. She refused to move into the gym despite the danger that the building might collapse. She kept hoping to find better housing, and eventually she did, probably thanks to the fact that she got into the media. Through the contributions of social workers, she moved into a new apartment in mid-December. She was grateful to the journalists for bringing attention to her case: "Before that, the social welfare department took no interest, but once I was on television, they suddenly wanted to help me."

It started long ago

Last September, in a building on Hrbotického street in Ústí nad Labem, a ceiling caved in and buried a young woman. She was a mother of two and Gizela Karičková's niece. It was not the first building in the Nové Předlice quarter to collapse, but it was the first time someone had lost their life during such an incident. Perhaps in connection with this event, the Building Works Authority accelerated its inspection of other buildings in the area.

One building on Beneše Lounského street was found to be dangerous because its ceilings were infested with dry rot. The owner had not moved the tenants out and they had started repairs on their own, but their efforts weren't enough. That is why the Červeňák family had to move into the gym.

Their building was in a devastated quarter that exists as a result of the wild privatization that began at the end of the 1990s. The buildings there, which no one has invested in for years, all gradually await a similar fate. However, in order to understand today's situation, we have to go even further back.

This story has its roots in the 1980s, when most of the original inhabitants of these streets moved away after being assigned apartments in newly-built housing estates. That was when the first Romani occupants began moving into the vacant apartments here, people now referred to as the "old-timers".

Another wave of Romani newcomers settled here just after 1989. A couple of the families were from Slovakia, but mostly they were families who had been evicted from more lucrative parts of town. Today these people are referred to as the "newcomers". Both groups disliked one another - until their dislike of a third group united them.

This third group was comprised of wealthy Romani families, originally from Moravia, who bought up some of the buildings in the locality during the privatizations between 1998 and 2002, forcing their tenants to sign financially disadvantageous contracts. Other buildings were purchased sometime later by the Spobyt firm.

Spobyt was the apartment cooperative of the Spolchemie enterprise. It sold off some of the buildings and later merged with the Czech Property Investment (CPI) firm. In 2010 it ceased to exist and CPI took over its housing stock. Today CPI owns more than 2 000 apartments in Ústí nad Labem alone.

Jan Černý of the People in Need organization, who was the director of its Ústí branch at the time, recalls the sale: "A firm from Prague bought up some of the neighborhood en bloc. One whole section. He was a small guy in red boots with six telephones on him. Then he just sold the apartments right there on the street. People had to give him money and he would sign contracts with them on the hood of his car. Some were purchased by locals and some were bought by an organized group from Dvůr Králové. They took out loans in other people's names using these buildings and fraudulent, phoney appraisals of them. Now the situation is such that technically nothing can be done about it. These ruins have been pawned to the bank and the owner is someone who is either past prosecution or already in prison."

During the past 15 years, many of the buildings have changed hands more than once. Some of the buildings have become the subject of credit frauds, conducted as follows: The building is fictitiously "sold" - without any money actually changing hands - to an "owner", usually a drug addict or a homeless person, for an amount exceeding the actual value of the building several times over. The new "owner" - who usually does not understand what he or she is involved in - then takes out a loan against the real estate for an amount near the fake sale price. He or she delivers the money to the organizers of the fraud and then disappears without ever starting to pay the loan back. The bank could foreclose on the real estate, but its actual value is exponentially lower than the loan that was provided.

"We had a client in Ostrava. She was a drug-addicted girl who had just come out of rehab. They found her somewhere in Olomouc. They cleaned her up, got her hair done, gave her an identity card, and "sold" her a building in Předlice. Then they took her to Náchod, where she took out a CZK 2.5 million [EUR 99 000] loan on the building and delivered the money to them. The girl then turned to us asking what she should do now because she is afraid they might kill her. If they were to stab her somewhere and throw her into the Morava river, no one would even notice she was gone," explains Jan Černý.

The landlords sometimes got rid of their tenants during these real estate sales, so they would empty out for some time. Some even removed the door and window frames for resale, leaving the buildings completely accessible. That provided an opportunity for metal scavengers to start taking the buildings apart.

The streets on which the buildings have undergone privatization look like a bombed-out war zone. Freshly reconstructed buildings stand side by side with ones that are just, with ones that are in ruins, and with ones that are now scrap-heaps. Locals say the state of the buildings is changing rapidly. On a site where a luxury villa used to stand there are now just a couple of half-dismantled walls.

A ruin can be temporarily repaired - re-plastered, made to look like a place to move into. During the three months during which this report was written, many of the buildings in the neighborhood were transformed. Some ruins just deteriorated further and the well-preserved buildings carried on, but it could be seen that someone had invested no small amount of money into repairing some of the buildings and giving them luridly colorful plastering.


No solution, bulldoze it

Veronika Kamenická, the local consultant for the Czech Government Agency for Social Inclusion, which was active in the neighborhood until the end of 2012, does not see the situation as very hopeful. According to her, the town owns almost no apartments because it privatized everything it could during the 1990s: "There is no concept of social housing here. Another 40 families could end up on the street soon, all it would take would be for one of the residential hotel operators to have a nervous breakdown. The town does not have a single residential hotel available under its own management."

Kamenická explained that because the owners do not take care of their buildings, the town walls up their ground floors for safety reasons and then tries to recover its costs from the owners. "Not only do the owners not take care of anything," she said, "they can't be brought to justice at all."

"The whole of Na Nivách street features 20 empty buildings owned by one and the same landlord, who promised to do something with them when he bought them. He then emigrated to Switzerland, where he just passed away this February. If the town were to demolish them, it would cost about CZK 20 million [EUR 792 000]. So they prefer to tape them off and post a sign that no one should enter them," Kamenická said.

When asked what she would do with the ghetto, she gives a laconic answer: "I'd bulldoze it. There's no solving it."

I would kill myself if they took them away

After 10 days in the gym, the Červeňák family moved into a residential hotel in the Krásné Březno quarter. They didn't want to move there in the first place because they feared getting stuck there. Its dark, vast hallways felt empty, except for the cockroaches.

"The social worker threatened to take our children into state care unless we moved in here. My children are the dearest thing I have. I would kill myself if they took them away," Ms Iveta said.

Another unpleasantness was the fact that municipal bureaucrats immediately informed them after the move that their permanent residential addresses had been changed. The very same authorities who had threatened to take away their children pressured them to quickly exchange their identity cards for ones with their new permanent residential addresses at the Ústí nad Labem town hall. "Otherwise we allegedly would have lost our welfare," explains Ms Iveta, who is obviously exhausted and losing hope.

Miroslav Brož of the Konexe association has often stayed with the families at the residential hotel since their fall move, doing his best to perform community work there. His activity was unpaid and for the time being doesn't seem to be structured in any particular way. He spent his own time with the people at the residential hotel, listening to them and doing his best to advise them.


He is a harsh critic of the People in Need (Člověk v tísni) organization, charging it with inaction and of being linked to the town leadership. Zuzana Kailová, who is Deputy Mayor of Ústí nad Labem today, is a former People in Need employee.

"Go take a walk through Předlice, where they have been working for 10 years, and talk with the Romani people there. Their brilliant image and PR will fall apart in 10 minutes like a house of cards," he recommended.

At the start of this whole scandal, Brož did his best to activate the other residents of Nové Předlice. He wanted to pressure the town to start addressing the quarter's problem. He pointed out that there are many buildings that might collapse at any moment there. He did his best to make sure the problem would not be reduced to just the building on Beneše Lounského street.

"This is a systemic matter. The nonprofits are forced to be loyal to groups that have influence over the awarding of grants; they are dependent on political support. This contradicts their loyalty to their impoverished clients, whose rights are often trampled precisely by those very groups. Who will bear political responsibility for the catastrophe of Předlice?” Brož asks.

Brož believes that the situation of impoverished Romani communities is deteriorating with each day, and what is worse, the deterioration is accelerating. Allegedly it is deteriorating irrespective of the social integration policy applied or the efforts of civic associations.

In the office of the Ústí branch of People in Need sit two employees, Vít Kučera and Jakub Michal, who seem somewhat resigned. They describe the catastrophic situation and explain that the current town leadership is better than when the opposition was in power. They defend the classic social work approach critiqued by Brož, in which clients are worked with on an individual basis, as a functioning model.

They also consider Brož's activity to be counterproductive. Allegedly he unnecessarily "raises exaggerated hopes" among the people. They consider it a success for the status quo to be maintained. "We are doing our best to maintain social reconciliation," they explain.

We don't talk to journalists

The Ústí nad Labem town hall is infamous for the fact that its elected representatives and employees do not communicate with the media. According to local journalists, this is particularly because of their non-transparent municipal tenders, but the method of silence was out to use even in this case, which the town views as just a mini-scandal. While council member Zuzana Kailová (Czech Social Democratic Party - ČSSD) did answer her phone, she quickly referred me to the town's press spokesperson after I asked her about the building on Beneše Lounského street and hung up.

The mayor was unavailable and other employees of the town hall also refused to speak, while others conditioned their consent to an interview on permission from above. Everyone consistently referred me to the press spokesperson. The director of the Building Works Authority, who of course is not part of the town but of the state administration, openly told me: "I am banned from communicating with the media, ask the press spokesperson."

Press spokesperson Romana Macová agreed by telephone to meet me, but called back an hour later. "I have spoken with Ms Kailová," she said. "It's not possible that you just ask me questions, send them to me by email and we'll see."

After the questions were sent, the following reply came: "We will send you a response as soon as possible.There is, therefore, no need to meet tomorrow." The answers were actually sent several days later, but they were, of course, unusable because they were so vague.


The sole occasion on which citizens of Ústí nad Labem can make themselves heard is the town council meeting, which is publicly accessible. Of course, those interested must sit through several hours of negotiations before the "various" point on the agenda comes up and they are able to ask their questions.

Ms Iveta Jaslová attended the December meeting, accompanied by several activists and relatives. After the trying experience of listening for hours to matters concerning millions of crowns, she finally took the floor along with other engaged citizens interested in the situation in Předlice. The response stirred up by the topic, however, showed that the Social Democrats are under the strict supervision of the opposition, which criticized them for spending money to move the building occupants to the gym and accommodate them there only to then move them on to a residential hotel.

"I believe that people who deserve it should be helped," insisted a councilor for the Health, Sport and Prosperity Party (Strana Zdraví Sportu a Prosperity). "The second thing is that I would like to ask how much this action cost the taxpayers." In his view, if other people had found themselves in such a situation, no one would have cared.

"Our task was to help these people," Kailová explained, suddenly finding herself in the position of someone who had done "too much" for the evacuees. The whole move cost not quite CZK 200 000 [EUR 7 900]. The town will seek to recover the costs from Klement Buncík, the landlord who lives in a luxurious villa, doesn't speak with journalists, and doesn't take care of his property. As we leave the meeting, someone half-whispers, "They deal in millions here and now they're skimping when it comes to CZK 200 000."

Only three days left in Krásné Březno


On Monday, 28 January 2013, the newly created Housing for All initiative held a demonstration in front of the Czech Labor and Social Affairs Ministry. The residential hotel in Krásné Březno was meant to close at the end of the month because the operator was in debt and not taking care of it.

Several hundred people attended the peaceful demonstration. Towards the end, roughly 15 activists forced their way directly into the ministry building to "talk" with the minister, which they did not succeed in doing, and to spark media interest, which they did succeed in doing.

What is the situation with the right to housing? The Czech Republic has signed the "International Covenant on Economic, Social and Cultural Rights. By adopting that covenant, the state has recognized the right of each individual to a roof over his or her head. The Government is responsible to the international community for fulfilling the obligations flowing from the Covenant," Anna Šabatová, chair of the Czech Helsinki Committee, told the protesters. This explains why the demonstration for the right to housing was held in front of the Ministry for Labor and Social Affairs.

According to Section 35 of the Law on Municipalities, a municipality is meant to create conditions for the development of social care and for satisfying the needs of its citizens. When a municipality does not fulfill its obligations, the responsibility to do so falls to the state. The state has guaranteed that no one should end up on the street. "This primarily concerns satisfying housing needs, protecting and developing health, transportation and communications, the need for information, child-rearing and education, overall cultural development, and the protection of public order," the law reads.

Where to? Wherever! Maybe to Hotel Freedom


On 30 January it was tense at the residential hotel. Police officers were supposed to come clear the building the next day, and the families also feared the social workers would take their children away. Activists gradually began arriving at the residential hotel that Wednesday, and in the evening the occupants of the residential hotel agreed with the activists on a common approach. A crisis scenario was also outlined, according to which the extended family would have to be split up.

If that happened, each of the nuclear families would move into a different apartment elsewhere. There was something wrong with all of the ones they had seen - one had no heating system, another no electricity, and others charged high rents. One family faced the prospect of ending up in an infamous residential hotel with the poetic name of "Hotel Freedom".

There are several residential hotels specializing in socially deprived clients in Ústí nad Labem. They do not offer much comfort in exchange for their rather high rents. Their operators mostly specialize in collecting rent and nothing else, and Hotel Freedom is such a case.

The next morning confusion grew at the residential hotel. Everyone was nervous. The children were playing drums brought there by the activists and the drumming rang throughout the entire building. Some of the occupants who were not members of the Červeňák family and who did not yet know where they were going, or those who were in the process of moving into overpriced apartments in poor states of repair, were stressed out. One of the men angrily commented on what was going on around him: "They came here to play, but we don't have anywhere to live!"

As the hours turned into days, the atmosphere at the residential hotel became even more oppressive. Concerns of a police raid, however, were unfounded. The police did not intend to intervene - their spokesperson even brought a list of apartments which the occupants might consider moving into.

At the start of the week, the People in Need organization had released itself from its side of the agreement to collaborate with the families at the residential hotel. On Thursday it issued a press release to the effect that the families had rejected nine appropriate apartments. For many of those observing the situation from afar, this press release convinced them that the extended family was ungrateful, and antigypsy sentiment against them was strengthened by other information.

The People in Need press release was also exploited by Deputy Mayor Kailová. After the activists did their best to reach her on Friday morning to meet, she called the media to come to their meeting in front of the town hall and read a declaration claiming the families had rejected dozens of apartments offered to them because they had been manipulated by activists.

"That's a lie," responded Ms Iveta, but there was no room for debate, to say nothing of a crisis negotiation or a meeting. Kailová read her statement, added a few words and left. The town hall doors shut on the start of the weekend.

The Červeňáks defended themselves against these charges. "We never heard of any list and no one offered us any apartments from it. We used People in Need's telephone to call advertised apartments and we found two. One was destroyed and the other is owned by a mafioso," Iveta Jaslová explained.

The situation escalated on Friday 1 February and Saturday 2 February. On Friday the CPI firm disconnected the electricity, heat and water. The activists found a gas-burning heater and arranged for fuel supplies. Concern rose that the Department of Social Care and Child Protection might take the children into custody. On Saturday the activists contacted the Counseling Center for Citizenship because they had no lawyer and the situation looked desperate.

A lawyer from the Counseling Center consulted the situation with them and other employees of the center got involved in a frantic apartment search. That evening the manager of a newly reconstructed building and his wife came to the residential hotel. They had been following the scandal through the media, and they offered the residential hotel occupants housing.

A happy ending for now, but other episodes on the way

On Monday 4 February, the last families left at the residential hotel managed to move out. Despite this victory, some of the activists went home with mixed feelings.

"We hadn't thought it through, it could have ended badly, they could have taken their children away,” confided one activist from Prague. Other reflections concerned the lack of preparation for the whole event, the fact that no lawyers were present, and the fact that there was no plan for what they even wanted to do there.

Miroslav Brož views the exhausting, hectic experience as having been good throughout: "We are slowly starting to realize what happened in Krásné Březno. Until now we were critics of the dead ends and non-working solutions, and now we know we can resolve situations," he concludes.

A sad moment of this whole story was the inability of the civic initiatives and organizations to join forces in an effort to resolve the situation. The press releases flew thick and fast and it was not easy for external observers to orient themselves in terms of who was really doing what or who was taking over whose work.

The radical left scene is at the start of a journey here. For the time being, its activists have not systematically dedicated much attention to the problems of impoverished Romani people. It seems that is starting to change. From the conclusion to the manifesto they published at the end of their action, we can expect an interesting future:

"We will be bitchy, bothersome, and ugly to everyone who denies poor people their dignity and rights. We will be passing on what we learned in Krásné Březno. We will turn up again in places where the powerful least expect us and where people at the bottom of the barrel want to fight for their rights to a dignified life, for the rights of their children, for housing, and against racism. Afterward we will go quiet again, put away our bandanas, and keep watch from the darkness."

This article was also published by news server Dení

Saša Uhlová, translated by Gwendolyn Albert
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