What are the usual steps to buy a real estate property in the Czech Republic?

There are two steps of the acquisition process in the Czech Republic. A “Title”, which is a purchase contract, and a “Modus”, which is a registration of the ownership in a relevant land registry. A notarial signature certification is generally required for the registration in the land register or the land register will require a proof of the identification of the signed persons.

What legal checks should be done before buying a property?

It is important to consider many aspects such as

  • examination of legal owner of the object of purchase on the basis of the current land register,
  • if there is any existence of liens, charges in hand or other deficiencies regarding the object of purchase,
  • the condition of the property and control of a project documentation to it.

Buying  real estate through a company

Legal entities registered in the Czech Republic have the right to purchase any type of property. It is recommended when the owner intends to use the property as a business, either by renting or through acting as a developer.

Money laundering

Real estate agencies, lawyers, banks or notaries are obliged to identify the clients personally using ID documents and the origin of funds to be invested in the purchase of the property in compliance to anti-money laundering rules.

What are the purchase costs and taxes?

  • real estate transfer tax (paid by the buyer, 4 % of the purchase price or the usual market price – whichever is higher) – this tax has been abolished for the transfers which were registered in the land register in December 2019 and later,
  • land registry fee (2.000 CZK),
  • real estate tax (paid annually by the new owner, the value depends on the location or size of the property),
  • income tax (paid by the vendor, depends whether he/she is an individuals or legal entity, in some cases there is a tax exemption),
  • real estate agent costs + VAT,
  • lawyer and notary fees + VAT,
  • VAT 21% if the vendor is subject to VAT.

 What documentation must the buyer have in place before buying a property?

When signing the contract as an individual, you need an ID card, or a certificate of incorporation with company identification number being a legal entity. Further documents in individual cases.

What precautions have to be taken regarding off-plan purchases?

It is convenient to do the following checks:

  • Verify the developer is the registered owner of the land where the building will be built.
  • Ask for copy of the urban certificate of the land, the construction permit of the building and its annexes.
  • Verify that the construction permit corresponds to the project under which the building will be built.
  • The pre-contract to the sale contract should clearly state a date for the handover of the property, the amount paid in advance by the buyer, the date for the conclusion of the sale contract, the actual price that will be paid and the conditions of refund if the developer does not fulfil its contractual obligations.
  • Assure the statutes of the future community of owners don’t impose any unreasonable limitation of ownership.

Tips for clients looking to build their own property:

A building permit is needed when building own property. The authorisation procedure can be difficult and lengthy because one needs to gain approvals of many authorities. Once there is a building permit you need to find a reputable builder and formalize with him a proper contract. Construction must be supervised by a supervisor. Once the property is finished, the construction needs an acceptance by the building authority that all prescribed essential requirements are met. Every building needs to be entered in the land registry.

Annual running costs?

Real estate tax in the Czech Republic consists of land tax and estate tax. The real estate tax is levied at a basic federal rate (depends on type and size of real estate property) multiplied by a municipal coefficient (depends on location). Real estate tax rates are not high in the Czech Republic.

What minimum legal checks should be done when selling a property?

The vendor guarantees the correctness of any information disclosed and warrants that he did not withhold any relevant information. Usually he warrants his ownership of the property, that there are no other encumbrances other than those registered in the land register. The statutory warranty period for real estate is five years in case of latent defects.

Selling costs and taxes:

The real estate transfer tax has been abolished for the transfers which were registered in the land register in December 2019 and later. But there is an income tax and the rate depends on whether the vendor is an individual (15 %) or a legal entity (19 %). This value is levied from the net gain of the transaction. Being an individual who owns the property for at least 5 years, no tax is paid.

Other costs such as notary or lawyer fees are usually paid by the buyer or according to the agreement.