Purchase of a house or land in the Czech Republic

Legal framework

What should be considered when buying a house or land in the Czech Republic?

1. ACQUISITION OF A HOUSE OR BUILDING IN CZECH REPUBLIC

Czech real estate can be purchased free of charge from individuals or companies. The acquisition of Czech real estate may take place directly or indirectly through a legal person domiciled in the Czech Republic whose shares are either wholly or partly owned by the actual purchaser (private person or company). The acquisition of a Czech "ready-made" company or the founding of a new Czech company generally costs between EUR 1,000 and EUR 1,500, including the associated legal advice.

The investors can thus acquire the ownership of the house and land in the Czech Republic without restriction. This also applies to land that belongs to the agricultural or forestry land fund.

The costs for the preparation of the purchase contract, fiduciary storage of the purchase price with a lawyer and a legal examination of the property to be acquired are generally between EUR 1,000 to EUR 2,000, depending on the complexity of the acquisition of ownership.

1.2. Date of acquisition of ownership of a house or building in the Czech Republic

The acquisition process takes place in Czech Republic in two acts. After the establishment of a purchase contract (title), ownership is constitutively transferred by registration in the relevant real estate cadastre (Modus). In immovable property, therefore, a transfer of ownership takes place when the new owner is entered in the Czech land register. An administrative fee of EUR 40 is payable to the land registry office per application.

In addition, a notarial signature certification is generally required so that the registration in the land register can be carried out without a proof of the identification of the signed persons in the context of the registration procedure.

1.3. Settlement of the purchase price payment

The purchase price and the manner of its determination is an essential requirement of any purchase contract. The parties agree on the nature of the purchase price individually, often a lawyer, a bank or a notary is involved for the fiduciary storage of the purchase price until the date of registration of the new owner without any defects or ongoing procedures. This approach provides a necessary level of security for both the seller and the buyer.

1.4. Due diligence and liability insurance for the acquisition of a house or building in the Czech Republic

In addition to the examination of the legal owner of the house or building on the basis of the current land register extract is also important to consider the existence of any liens, charges in hand or other deficiencies regarding the object of purchase. The minimum requirement is the inclusion of a corresponding guarantee clause of the seller in the property purchase agreement. On the basis of this declaration, the seller is liable to the buyer for any legal defects of the sold house or building.

The excerpt can also be withdrawn via Internet (EUR 2 per page) and the basic information (identification of the owner, ongoing procedures, etc.) can even be downloaded for free on the Internet at Website of the Czech land registry office.

The new civil code also strengthened the "good faith" when buying property from a Czech house or building. The term "good faith" describes a situation in which, for example, the seller was not entitled to sell a thing, but the buyer knew nothing of the lack of authorization. In certain cases, despite the lack of power of disposal, the legal validity of a transaction may be presumed if the buyer could presume that the seller was authorized to dispose of it.

The new Czech Civil Code regulates the rebuttable presumption that the person registered in a public register may in principle also dispose of the matter in question. This rule is particularly important for the purchase of real estate, as it is usually checked before the acquisition, whether the seller and registered in the land register person are identical.

Foreign insurance companies also offer insurance of ownership of Czech real estate (Title Insurance). For higher-value or bank-financed transactions, title insurance is fairly common.

1.5. Different owner of house or building and underlying land in the Czech Republic

The previous Czech property law assumed that a building and a property legally represent two separate items and thus can be purchased separately from each other.

Since 2014, the new Czech Civil Code has again introduced the principle of "superficies solo cedit" after about 64 years. This principle states that property that is inseparable from a property will legally become part of that property. It follows from this principle that buildings and other objects intrinsically linked to a property are no longer to be considered as self-contained property but are part of the property on which they are located. A separate transfer of ownership of a property or a building, without at the same time also acquire the ownership of a building or the property thereon, is therefore no longer possible. The ownership of these things can in principle only be acquired together. Structures that are not inseparable from the property are, however, considered by law to be so-called "temporary buildings".

Compared to the foreign legal area so far was a peculiarity of the Czech real estate law that the owners of buildings are in many cases different from the owners of the underlying plots. Therefore, it is very common in the Czech Republic for the moment that the landowner and the building owner are different. The new Czech Civil Code has therefore granted a right of first refusal to the buildings located on their land.

1.6. Co-ownership and the right of first refusal in the Czech Republic

Under the new Civil Code, co-owners enjoy reciprocal legal right of first refusal (with certain exceptions).

2. CZECH CADASTRE OF REAL ESTATE

The Czech real estate cadastre is a public register in which everyone is granted access without proof of legal interest and excerpts from the cadastre are made on request.

Enrolled in Czech real estate cadastre are property rights, pledges, pre-emption rights and real charges. Rights that have arisen or expired by law, by decision of a public body, by solicitation of the publicity in a public auction, by incorporation, by extension and processing, shall be recorded by a memorandum on the basis of documents drawn up by the public authorities and other instruments which confirm or certify the legal relationships according to separate regulations.

The Czech land registry office executes the entry into the Czech cadastre at the latest on the working day following the delivery of the document on the basis of which the entry into the cadastre is carried out. The person assuming a registration in the real estate cadastre has a good faith that the status quoted in the cadastre is up-to-date, unless he should have known that the registration status in the cadastre did not reflect the fact.

After initiation of the proceedings before the Czech land registry office, any disposal of the real estate for 20 days is prohibited and impossible. The land registry office informs all parties involved (in particular the current owner of the property) about the initiation of the proceedings concerning the real estate in question. This blockage is intended to allow the owner to take appropriate legal action against any unauthorized possession of the property. At the same time, all persons have the possibility to order from the czech land registry office an e-mail notification about possible changes concerning Czech real estate for EUR 8 per year.

The land registry office examines the right of the owner to dispose of the object of the transaction with respect to the principle of protection of the public belief according to the information recorded in the real estate cadastre, also by checking the correctness of these previously performed entries according to the original document proving the acquisition title (eg purchase contract or donation contract).

3. BUILDING LAW, EASEMENTS, BURDENS, LIENS AND SERVICES IN CZECH REPUBLIC

3.1 Heritable building right in the Czech Republic

The hereditary building right in the Czech Republic is a temporary (limited to a maximum of 99 years) law resulting from a contract between a real estate owner and a developer, which makes it possible as a new legal institution to construct own buildings on third or third-party land. From a legal point of view, the leasehold is itself a type of property; as such, it is registered in the Czech land register, is transferable, and can be pledged, inherited or encumbered with a mortgage. It can be ordered for a fee or free of charge. The hereditary building right is independent of the physical existence of a building and can therefore be ordered even if construction work has not started yet. It does not go out just the same way, as the building in question might be demolished or otherwise destroyed. As long as the ground lease continues to exist, the owner and the landowner enjoy reciprocal rights of first refusal. After the leasehold has expired, the building becomes part of the respective property.

3.2 Actual loads (rights of use) in the Czech Republic

The new Czech Civil Code distinguishes between easements and so-called real burdens.

The Czech Civil Code distinguishes between two types of easements:

- easements. As an example of such easement is the easement in favor of supply networks. Under that provision, accessibility to supply-related facilities, such as sewerage or energy networks, can be ensured through a service,

- personal easements. As an example, the usufruct can be cited.

The real burdens are real burdens, in which the owner of a burdened thing commits to actively doing something that benefits the other person. This refers, for example, to cases in which the fruits from the agricultural use of an area benefit a third party (the creditor). If the burdened owner does not comply with such an obligation, the claimant may demand a monetary substitute instead of the fruit and, if payment is not made, extend it into the property. For a "real load" to be effective, it must be entered in the real estate cadastre.

3.3 Liens in the Czech Republic

For the creation of a lien, a deposit contract and registration in the real estate cadastre is required. In principle, this is subject to the written form requirement and the authentication of the signatures of the contracting parties.

If you need more information, please contact us at any time:

JUDr. Mojmír Ježek, Ph.D.
Managing Partner

ECOVIS ježek, advokátní kancelář s.r.o.
Czech legal office
t: +420 226 236 600
e: mojmir.jezek@ecovislegal.cz
e-mail: mojmir.jezek@ecovislegal.cz
www.ecovislegal.cz/en

About ECOVIS ježek advokátní kancelář s.r.o.
The Czech law office in Prague ECOVIS ježek practices mainly in the area of Czech commercial law, Czech real estate law, representation at Czech courts, administrative bodies and arbitration courts, as well as Czech finance and banking law, and provides full-fledged advice in all areas, making it a suitable alternative for clients of international law offices. The international dimension of the Czech legal services provided is ensured through past experience and through co-operation with leading legal offices in most European countries, the US, and other jurisdictions. The Czech lawyers of the ECOVIS ježek team have many years of experience from leading international law offices and tax companies, in providing legal advice to multinational corporations, large Czech companies, but also to medium-sized companies and individual clients. For more information, go to www.ecovislegal.cz/en.