Useful information for property buyers
CHOOSING AN AGENCY
Do not be surprised to see the same property listed by more than one agency, cross listing and co-operation between agencies is common in Prague. It is often advisable to select one agency to work with such as At Home who will be able to show you not only their own listings, but also through other agencies at no extra cost to you.
CHOOSING AN AREA
We always recommend that you consider how an area and its connections work before purchasing a property, not only during property inspections, but also at other times of the day and at night. Our brokers can advise you on specific issues and will be able to offer alternative areas which might be more suitable to your way of life and expectations.
During property inspections it is generally advisable not to discuss the price of the property if the owner is present. If you are interested in purchasing the property, it is best to discuss with your broker who will advise you how to present an offer and on the initial steps of the sales process.
MAKING AN OFFER
Premature discussions can often lead to misunderstandings which can lead to the unessescary breakdown of negotiations. You broker will advise you on what information whould be included in any offer to purchase a property and we ensure that any offer is made in writing for absolute clarity.
FORMAL REQUIREMENTS OF A SALE CONTRACT
In the Czech republic all contracts for the sale of real estate must be in writing and authorised by an advocate, lawyer or public notary, without this it is not possible for the land registry office (Cadastre) to register the transfer of ownership of the property.
OBLIGATORY CONTENTS OF A SALE CONTRACT
Contracts of sale in the Czech republic are straightforward documents without too much legal jargon. They must be in the Czech language but we can secure a translation for you if you wish.
The main elements that must be included in the contract are;
- the full identities of the contractual parties including any legal representatives by power of atorney,
- full description of the subject of the sale (the property),
- the price of the sale and the structure of the sale including when monies are paid and where they are secured,
- the agreement and authorised signatures of the contractual parties.
Although our brokers are able to advise you on all property matters, assist and advise you throughout the purchase process, we are not legal advisers. We have worked with a great many reasonably priced lawyers whom we can recommend. The process is straighforward and unless there is a complicating factor, it can be quick. To prevent a conflict of interest, At Home does not employ an in-house lawyer, we outsource all legal work.
STRUCTURE OF SALE
Most sales structures will involve 3 stages:
- The acceptance of an offer and conclusion of a reservation agreement and the holding of a reservation deposit.
- Contract of a contract for future sale. This will normally be used when certain conditionsneed to be fulfilled before the final sales contract can be signed, usually the provision of a mortgage. This contract will also include all of the conditions and payment mechanisms that will appear in the final sales contract and will normally be the signal for the deposit of part of the sales price.
- The contract of sale. This will be concluded once the contractual partnies are able to fulfill their obligations arrising from the sale.
WHO CAN BUY PROPERTY IN THE CZECH REPUBLIC
Any citizen of the EU has a legal right to own property in the Czech republic, other countries such as the USA have special allowances for their citizens. Citizens from other countries and investors purchasing property for business purposes can choose to purchase through a legal entity, the most simple being an s.r.o. (Limited Liability Company). It is possible to purchase a shelf company or form a new company fairly quickly and cheaply. Your At Home broker will lead you through the process.
BUYER BEWARE – DUE DILLIGENCE
We must always advise that all clients conduct their own due dilligence where possible, most of the information that you need to find out about your property will be publicly accessible on the Land Registry, any hindrances, loans, mortgages or other issues will be recorded on the full owneship document that you can get from any post office or local authority office with a Czechpoint service. Your lawyer will also be doing this and should have direct access to the registry. It is not usual for a full survey to be carried out on a property before purchase, however, a bank valuation will be carried out for mortgage purposes. We do advise all purchasers to carry out their own inspection with a qualified person such as a builder or architect who will be able to highlight any potential problems, and to identify matters that might need fixing and their proposed cost. In previous decades there were quite a number of fraudulant sales and unclear transactions. Recent changes to the registry process have markedly reduced this possibility and greatly increased transparency.
At Home brokers do not accept or hold deposits or other monies on behalf of the sellers. All monies are held under contract in an escrow account held either by a public notary or lawyer who will also hold the relevant insurance. Unless specifically agreed otherwise, the purchase price is released automatically to the seller once the title of the property has been transferred to the purchaser.
The Czech property register (Cadastr) is the central office for recording all property ownership, transactions and any legal changes to properties throughout the country. The transfer process commences once the signed contracts of sale and the official request for the transfer are lodged at the cadastr. The file will be given a number and then sit in quarantine for 21 days. Notification of the start of the process will be sent to all of the contractual parties who can then question the case if there are any questions of fraud. Once the quarantíne period has expired, the transfer will be processed, a standard case will usually take about 7 days, so allow about 30 days in total.
It is possible to follow the process on the official registry website
IF THINGS GO WRONG
This is a rare occurance, most lawyers ensure that their clients will not conclude an agreement that is risky or on a property that has some possible legal issues. However, if a legal hindrance does arise during the transfer process, the contractual parties will be called upon to try and resolve the issue so that the transfer can proceed, and this usually happens without a problem. If the transfer does not proceed then the case is returned and the purchase funds are returned to the purchaser.
It is fairly simple to arrange a mortgage in the Czech republic and there are many brokers who will find a good deal for you for free or for a small fee. Before starting your property search we advise you to contact a broker who will be able to tell you approximately your financial limits. At Home brokers will be able to point you in the right direction.
There is a property transfer tax of 4% on the purchased property payable by the purchaser. This 4% is calculated on the actual transfer tax or the formal tax valuation that you will need to commission. The 4% is taken from whichever amount is higher.
Property taxes in the Czech republic are payable once a year and are very low, but remember to pay them.