"[Rent] regulation in the Czech Republic is at a level that doesn't even allow [homeowners] to earn what they spend on costs," said Stanislav Němec, a lawyer representing the Movement for the Defense of House Owners (HOMR).

The Cabinet approved a bill July 13 that sets an annual 9.3 percent growth in regulated rents from October 2006 to 2012. The bill awaits Parliament's approval and the signature of President Václav Klaus.

Homeowners demand the government allow controlled rents to increase and the deregulation process be completed by 2010.

The Cabinet set the wheels of deregulation in motion after three years of hard talks and a March suit filed by homeowners against the government in the European Court for Human Rights (ECHR) in Strasbourg.

Deputy Regional Development Minister Ivan Přikryl said regulated rents in the Jihlava and Zlín regions of south Moravia will not increase very much because they already hover at market prices, while those in Prague's center could rise as much as 17.8 percent a year through 2012. The bill requires the owner and tenant to jointly agree on the rent by 2012, and if the parties fail to come to terms, a court could decide the rate.

The planned deregulation will affect about 750,000 households. Though rents on average would likely increase by more than half during the next seven years, Prikryl said, rents for half the affected households would not increase by more than 2 Kč (8 U.S. cents) per square meter (10.76 square feet).

The Cabinet rushed to introduce the new rent bill after learning the HOMR had filed a complaint with the ECHR that claimed the country discriminated against homeowners. If found guilty, the government could face hefty ECHR sanctions, including fines of as much as 50 billion Kč.

By filing a complaint, the HOMR followed the example of Polish homeowner Maria Hutten-Czapska, who in February successfully sued her government through the ECHR over rent control.

Přikryl said new legislation is essential to avoid sanctions. But homeowners maintain the proposed new law does not respect a Constitutional Court verdict stipulating that rent control cannot prevent homeowners from increasing rents to finance property maintenance and make adequate profits.