Czech law distinguishes between the following property rights:
Last modified 22 Mar 2024
There are no restrictions on foreign investors acquiring real estate.
In 2022, the member states of the European Union (including Czech Republic) established certain restrictions with respect to business, transactions, free movement, investments etc. in relation to the Russian Federation and several individuals, due to the Russian invasion of to Ukraine.
On 1 May 2011 the seven year transitional period during which temporary restrictions applicable to agricultural land and forests ended and from this date European Union rules regarding the free movement of capital apply to real estate acquisitions in the Czech Republic.
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Yes, but these pre-emption rights apply only in exceptional circumstances. They apply to culturally significant real estate, certain agricultural land and real estate located in environmentally protected areas.
With effect as of 1 July 2020, statutory pre-emption right of the real estate co-owners applies only if: (i) the co-ownership upon a property was established by inheritance or other similar succession so that the will of acquiring co-owners could not reflect upon their position and (ii) the relevant share is being transferred within the period of six months from the date on which the co-ownership was established. Unless the transferor and the transferee are classified as close persons (eg family members – spouses, siblings and direct ancestors) or unless the remaining co-owners of real estate property have pre-emption right in case of sale or donation of the respective share in the property.
Further, there is a specific pre-emption right applicable to structures (typically building) and the land underneath such structures in case the respective owners are different. The owner of the underlying land on which a structure was constructed which did not constitute integral part of the land in the past and have not become integral part of the land since the effective date of the new Civil Code, has a pre-emption right to the structure, and vice versa the owner of the structure has a pre-emption right to the underlying land.
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The transfer of title to real estate is generally governed by the Czech Civil Code (which deals with purchase or donation agreements). The provisions of Act No. 256/2013 on the Cadastral Registry (the Cadastral Act), regulates registration at the Cadastral Registry.
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No. The general system of legal regulation applies.
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The transfer of title to a buyer is effective when it is registered in the Cadastral Register of the Czech Republic. All transfer documents are subject to review by the relevant cadastral office, which examines whether the legal requirements of the transfer have been met. The registration with the cadastral register is effective as at the time of application for registration. Registration is not required for very small or specialised constructions, such as fences, walls etc.
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All real estate (with the exception of underground structures) is registered in the Cadastral Register. This is administered by special 'cadastral offices', which are each responsible for their own district. The Cadastral Register contains general information about real estate, including:
It also records how the title to ownership has been acquired and other relevant information.
Some real estate is still registered in the 'land register' which predates the Cadastral Register. This contains residual information on certain real estate which has not been carried forward into the Cadastral Register, since the process of incorporation is still ongoing. However, the number of entries remaining in the land register is limited.
Yes, transfer of title must be recorded in the Cadastral Register to be effective. All transfer documents are subject to review by the relevant cadastral office, which examines whether all the legal requirements of the transfer have been met. If this is found not to be the case, the parties to the transaction must remedy the situation, otherwise the transfer cannot be registered. However, since the cadastral office examines only certain aspects of each transaction, it cannot be held responsible if the transfer proves to be invalid for some other reason.
Apart from ownership rights, pledges and mortgages, easements, and certain types of pre-emption right, the Cadastral Act contains new provisions governing other types of rights which are also registered in the Cadastral Register (such as a right of construction or, subject to owner's approval or application, a lease). Preliminary sale agreements cannot be recorded.
Any documentation is archived in the "Collection of Deeds" which forms part of the Cadastral Register.
Yes, although provided almost exclusively by foreign insurance companies.
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Real estate transactions are normally either in the form of direct acquisition of the real estate (asset deal) or an acquisition of the company holding title to the property (share deal). The choice primarily depends on tax and risk considerations, the type of real estate, and the reliability of the other party to the transaction. A share deal provides certain tax benefits but there can be some associated risks for the holding company. The steps involved in the transaction as asset deal are:
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Yes, the extent of due diligence depends on the type of real estate. In-depth legal due diligence is normally carried out in relation to land since, for historical reasons, the information in the Cadastral Register is not completely reliable. This especially applies to pre-1993 records. Special attention needs to be paid to what are known as 'restitution claims' which may have been filed by individuals, or by institutions such as churches and civic associations, for the restitution of their title to holdings which were nationalised under communist rule. Due to the enormous number of claims made, not all have yet been fully resolved. Due diligence usually provides an accurate evaluation of the history of titles and therefore provides investors with the information they require.
From 1 January 2014, the reliability of the accuracy of the information in Cadastral Register has been strengthened by the rebuttable presumption that rights registered in the Cadastral Register have been registered in compliance with their actual legal status. This presumption may, however, be rebutted by the person with the true legal interest. Nevertheless, if the legal status registered on the Cadastral Register does not comply with the actual status, the registered status prevails provided the person obtained the registered right in good faith and for consideration.
The case law of the Czech Supreme Court is consistent in the opinion that when assessing the good faith of the acquirer of the right in rem, it is always necessary to take into account whether the contracting party, with the ordinary (usual) caution which may be required of anyone in view of the circumstances and nature of the case, did not or could not have had reasonable doubts that the information in the Cadastral Register corresponded to the actual legal situation. The ordinary (usual) caution does not, in principle, include its obligation to take active steps (investigations) regarding the registered status. However, if there are objective circumstances giving rise to doubts, it is for the acquiring person to verify (actively ascertain) whether the entry in the public register is in accordance with the actual situation. If he fails to do so, the acquisition will not normally be a bona fide acquisition.
Due diligence in relation to buildings is normally less complex and concentrates on the validity of title and of building and use permits.
Due diligence will also cover any encumbrances on the real estate and any leases and contracts relating to the property.
It is normally carried out before purchase. The buyer will normally provide for a period of exclusivity. This can either be in a non-binding form, such as through letters of intent or heads of terms, or set out in a binding contract for future purchase.
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If the real estate is jointly owned by spouses, the consent of both is required for a transfer. The consent of the other spouse is also required in case that the real estate is owned by only one spouse, but the family household is located in the real estate.
Consents may be required by corporate statutes.
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The deed of transfer must be made in writing and the signatures of the parties must be on the same page. The deed must provide full details of the property being transferred, and either what the purchase price is or how this will be determined.
In order to register the contract in the Cadastral Register, the parties' signatures must be authenticated by a notary public, local authority, attorney at law, or by another method prescribed by the Cadastral Act.
Any preliminary contract must take the same form as the final deed of transfer.
The transfer of title is effective upon registration of the buyer's ownership in the Cadastral Register.
The content of the contract is negotiable. In addition to the legal requirements, a typical contract includes the method of payment and details of any seller's warranties and representations relating to the property.
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Under the Civil Code, the seller must inform the buyer of any defects in the property that he is aware of. The term 'defects' covers factual defects (such as pollution, asbestos etc) as well as legal defects (such as the rights of third parties etc). If a seller fails to disclose this information, the buyer is entitled to a discount on the purchase price or, in some circumstances, to withdraw from the agreement.
If the buyer withdraws from the transaction, he is entitled to receive a refund of the price paid for the property and to obtain additional compensation for any losses suffered.
Claims in respect of hidden defects in the property must be made within five years from the acquisition, except when the seller knew or must have known about the defect at the time of handover of the property.
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The buyer is entitled to receive a discount on the purchase price or, in some circumstances, to withdraw from the agreement.
In addition, the buyer has a right to withdraw from the agreement if the seller assures him that the real estate in question has certain qualities, in particular those required by the buyer, or that it is free from defects, and this subsequently proves to be untrue.
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In particular, the following issues should be verified by the buyer:
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The person who originally caused the contamination or pollution of the soil is responsible for the damage. However, the owner may be affected in certain ways as well.
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The Zoning Plan, together with the local technical rules, gives an overview of the possible uses of specific areas.
Local authorities will issue a confirmation of the possible uses of a plot of land on receipt of a written request from the owner.
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The trend of responsible development is coming to the Czech Republic. The aim is to design new development in a broader context of the city with an emphasis on its location, such as revitalization of brownfields, and more sensitive adaptation to local conditions. Thus, the development agreements or cooperation agreements may be concluded between the developer and the municipality. But, the legal regulation of these agreements remains fragmented and it requires diligent and usually long negotiations between the parties to stipulate the transparent and clear conditions under which the developer will access the respective area.
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Yes, expropriation is possible in certain specific circumstances. It must be in the public interest and carried out only for certain purposes expressly provided for by law and subject to compensation. Although expropriation is rare in practice, a special type of proceeding for expropriation matters is set out by statute, to protect the owner's interests.
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Last modified 22 Mar 2024
The costs of the transaction depend on the specific details, including the type of company (limited liability company, joint stock company etc), its size, the value of its assets etc.
Costs include:
Each party usually bears its own legal costs. Notarial expenses and registration expenses are often split by agreement of the parties.
Last modified 22 Mar 2024
What seller's warranties are provided under statute in the sale of real estate in this country (for example, as to the state of the building, asbestos etc)?
Under the Civil Code, the seller must inform the buyer of any defects in the property that he is aware of. The term 'defects' covers factual defects (such as pollution, asbestos etc) as well as legal defects (such as the rights of third parties etc). If a seller fails to disclose this information, the buyer is entitled to a discount on the purchase price or, in some circumstances, to withdraw from the agreement.
If the buyer withdraws from the transaction, he is entitled to receive a refund of the price paid for the property and to obtain additional compensation for any losses suffered.
Claims in respect of hidden defects in the property must be made within five years from the acquisition, except when the seller knew or must have known about the defect at the time of handover of the property.
Last modified 22 Mar 2024