From the first offer to the final contract there are many steps involved in the process of buying property in the Czech Republic. This article gives you a short outline of the purchase process and what to watch out for.
If you want do buy property in the Czech Republic you usually start with signing a reservation contract. You have to pay a small amount of money to take the property off the market for a period of two to four weeks. You can now use this time to check everything concerning your purchase and to get legal advice.
Your first check should be a land registry check. Is the person selling the legal owner of the property? If he is - are there any disputes about the property? Sometimes, ownership issues take years to solve and you might end up buying a property that is never legally yours.
Next, you need to check the status of the property. If you want to build on it you need a construction license. When buying a house you should check that there is a habitation certificate allowing you to actually live there. In addition you need to check if the area your real estate is in is specially protected. Quite often, and particularly for older houses, there are limitations on what you are allowed to build on your property or what alterations you can make to your home. You also need to make sure that the boundaries of the property are clear. Any information you get should be verified by your lawyer.
If everything is okay so far, the next step is signing a preliminary purchase contract. Along with it you pay a deposit of 10% - 30% of the total price. Be careful - this contract is legally binding! It should be connected to certain conditions that, if not fulfilled, allow you to cancel the contract and get your money back. If you need a mortgage but don't yet know if you will get one, this should explicitly be a cancellation condition in the preliminary purchase contract.
If any problems occur you can pull out of the contract. If one of the specified cancellation conditions occurs or if you have to cancel due to legal problems, you are entitled to get your deposit back. However if you simply don't want to buy any more your deposit will be lost.
As always, be careful when signing any legally binding contract. Sometimes the naming of contracts can be confusing and you might be tricked into signing a preliminary contract instead of a reservation contract. Always have the contract checked by your lawyer before signing.
When all parties are ready to proceed, the final contract of sale is signed. Now the remaining price of the property is paid. If you have used an agency their fees will have to be paid now as well.
After signing the contract, you need to register at the Cadastral Register. This is very important since only your proper registration will guarantee all the rights you have as owner. In bigger cities this is not so important. In rural areas you may encounter problems because land records are very often out of date or even missing. Moreover, there is no standard computerised system for property in the Czech Republic. Therefore it might take up to a couple of months to get the registration done.
The purchase process, beginning with the reservation contract and ending with the signing of the contract of sale, usually takes about twelve to eighteen weeks.
The real estate transfer tax accounts for 3% of the value of the property as evaluated by the tax authorities. The actual price set in the contract is not relevant for taxation purposes. The real estate transfer tax has to be paid by the seller. It is important to remember that the seller needs to provide proof of having paid the tax, as well as a statement allowing the buyer to register with the Cadastral Register. This is due within 30 days of signing the contract of sale.
The tax also has to be paid if you inherit real estate – in this case by you.
The buyer of real estate has to pay registration fees (around 0.01% to 0.02% of the value of the property) and the agency fees of around 2% to 5%.