Czech town sells its active debt from back rents to its own property management firm

The Czech town of Most has sold its active debt to the Mostecká bytová leasing firm, which is owned by the town itself. For active debts calculated in excess of CZK 101 million, the town has received only CZK 1.3 million. The vast majority of the debt is comprised of back rents owed by tenants at the troubled Chanov housing estate. The town leadership believes the company it owns will be more successful at collecting on the debt than the town hall has been.

“Mostecká bytová has experience in collecting back rents for the apartments it manages. It is having rather good success, much more success than collections agencies are. Its sole shareholder is the town, we have de facto put all of our active debt of a similar type under one organization,” says town official Vlastimil Vozka.

The prefab housing estate of Chanov was erected in Most in the late 1970s as an attempt to prove that socialist society knew how to assimilate Romani people and eliminate poverty. The estate had housing capacity for several hundred families.

Both individuals and companies owe the municipality almost CZK 101.5 million in back rents. However, the town hall has sold the debt for just 1 % of its value. Most of the debt is from back rents at Chanov.

The Chanov debt has been irrecoverable for years and just keeps growing. It is now estimated to total around CZK 93 million. Since 1996, there has been no hot water service to the housing estate because of the tenants’ failure to pay utilities. This high, hard-to-recover amount has now been reduced to the bare minimum through the sales package.

“An expert analysis found that it is mainly the debt owned by residents of Chanov that has been greatly reduced through this sale. Nevertheless, I consider the sale a very good step. The town never had a chance to get any more of that debt back. Now, if some of this money is collected, it will go to a company that is 100 % owned by the town, which is also interesting for us,” points out town official Karel Novotný.

Mostecká bytova was founded several years ago by the town, originally to manage its apartment properties, but the town gradually privatized the apartments it owned and needed something else for the company to do. The company acquired the lease on Chanov’s residential hotel for the socially deprived, which mainly houses rent defaulters and people who are incapable of maintaining basic relations with their neighbors. Last summer the firm began managing all of the Chanov housing estate.

Mostecká bytova has succeeded in cooperating with a firm owned by Romani entrepreneur Josef Tonka, which has been working in Chanov and has managed, after quite some time, to ensure the streets are clean there. The firm has also cleaned out some of the housing estate’s cellars and elevator shafts. Thanks to Tonka’s firm, locally hired strongmen have been supervising cleaning and order at Chanov.