The attractiveness of the Czech Republic continues to grow. The very convenient location of the country in the middle of the old continent, and its diverse natural and rich cultural heritage are the main attractions for tourists and investors. The high level of security, which ranks the Czech Republic sixth among other countries, is also a great advantage. All this predestines our country for a pleasant life and attracts foreign buyers to acquire property.
Thus, buying real estate in Czechia as a foreigner might be a good investment - whether as a permanent relocation for yourself, a holiday home, or renting out to tenants. The good news is that, unlike other countries such as Switzerland or Denmark, there are no restrictions on foreigners buying property in the Czech Republic – you’ll just need a high enough income and be able to qualify for a Czech mortgage.
Many foreigners purchase property in the Czech capital of Prague, but other cities and towns such as Karlovy Vary, Brno, Spindleruv Mlyn, Pec pod Snezkou or Lipno might also be attractive. For those who are thinking about buying a house or apartment in the Czech Republic, the following paragraphs provide answers to the most common questions related to purchasing property in the Czech Republic.
Is land registration necessary in the Czech Republic?
Yes, so that you become the owner of the property in question, the Land Registry (cadastre) must register you as a new owner. Recent changes to the registration process have significantly reduced potential fraud in real estate transactions and greatly increased transparency.
Is acquiring real estate in the Czech Republic safe?
Acquiring real estate in the Czech Republic is legally secure and possible without any problems, provided that some local peculiarities are taken into account. Recent changes to the registration process have markedly reduced this possibility and greatly increased transparency.
What are the main steps if I want to buy property in the Czech Republic?
Buying land or a building in the Czech Republic is not as complicated as in neighboring countries such as Germany. However, it is still a relatively complex administrative and legal matter. That is also true for nationals. In view of this, it is advisable to contact a consultant, especially an attorney, who can take care of all the essential details of the purchase.
The main steps in this process are (not necessarily in the order listed + some steps may be missing or added):
(1) finding a suitable property;
(2) finding a lawyer and meeting him/her;
(3) legal due diligence;
(4) arranging funding for the purchase;
(5) reserving the property and negotiating the terms of the sale;
(6) signing the contract (usually with escrow of the purchase price);
(7) filing the registration with the land registry (cadaster);
(8) registering the property with the Land Registry;
(9) follow-up steps (e.g. property handover, transfer of energies and services, and filing a tax return).
Are there any obstacles for a foreigner to buy a property?Do foreigners need a permit to purchase real estate in the Czech Republic? Do I need to move to the Czech Republic to buy a house there?
As of today, no special requirements are imposed on any foreigners from the point of view of the legal system. As a foreigner, you do not need any special permit to buy real estate in the Czech Republic. Therefore, you can quite easily buy property in the Czech Republic as a non-resident.
The conditions are the same for residents and foreigners, whether EU citizens or third-country nationals. The purchase of agricultural and forestry land is also possible for foreigners.
However, the current liberal legislation does not bring about the removal of factual barriers. Foreigners unfamiliar with the local situation may encounter local customs and the Czech bureaucratic system, and, therefore, can only be advised to use the services of professionals.
Can I rent a property in the Czech Republic (immediately) after purchase?
Yes. Even as a non-resident, you can buy a property with the expressed purpose of renting it out, or you can choose to rent out your own home if you move away from the Czech Republic.
Can the ownership of the property help me obtain a long-term or permanent residence permit?
We would rather disappoint you because ownership of the real estate in the Czech Republic should not, in principle, have a significant impact on the issue of aresidence permit.The acquisition of real estate does not fundamentally change your status when applying for a residence permit and plays only a supporting role.
However, by owning a property used for living purposes, you can prove you have accommodation for the duration of your stay in the Czech Republic and can justify the lower (monetary) resources needed for the duration of your stay. Furthermore, the authority granting the specific residence permit might take the ownership of the property into account as a factor in the administrative discretion.
Are there any restrictions on real estate acquisition through a (foreign) company?
Buying a property is allowed for natural individuals, as well as for legal entities.
Please note that the Czech land registry may require certified proof of (a) the existence of a foreign company/partnership and (b) the power of representation of the individual(s) representing the foreign company/partnership (e.g. directors). We arefamiliar with the particularities applicable in each individual case (e.g. certificate of incorporation; certified foreign company register excerpt) and are happy to liaise with foreign legal counsel or notaries.
Do I need a real estate agent or a lawyer to buy real estate in the Czech Republic?
You don't necessarily have to sign the purchase contract for the real estatein the Czech Republic in front of a notary or a lawyer. A real estate agent is not necessary to buy (or sell) real estate. Nor is a lawyer strictly required.
Nevertheless, since real estate has a relatively high monetary value, it is important to be aware of some crucial aspects that may save you from many troubles. Thus, it is strongly recommended to at least have the assistance of a Czech lawyer during the process, especially if you do not speak Czech. Most Czech officials do not speak English, let alone German, Spanish, or French. And that can cause a severe problem, of course, because omitting even a single step can be fatal to the entire transaction. An example of the practical problem that foreigners may encounter is the actual filling in the application form at the Land Registry. The designation of foreign persons may often not correspond to the realities in the Czech environment. What data should you, as a foreign person, provide in the fields of birth number, permanent residence, or identification number if you have none?
Plus, signing a contract without knowing the language and legal specifics is extremely risky. That is why it is advisable to engage the services of a legal advisor to ensure that your interests are sufficiently protected and that someone does not take advantage of the language barrier.
At least in the larger Czech cities, there is a high chance of finding an English (German, etc.) speaking lawyer who will assist you throughout the entire process (or will arrange everything for you). The lawyer will also ensure that the contract is drawn up in Czech-English, or can translate the entire contract for you. The attorney may also witness and legalize your signature of the contract. Then, the attorney can help you with the registration of your ownership and (if needed) also with filing a tax return.
What do I need to have to purchase real estate in the Czech Republic?
In general, for a real estate purchase, you require valid personal documents and a power of attorney if someone will represent you.
The purchase contract must always meet statutory requirements and be clear and understandable. The seller's and your signature must be notarized by an authorized authority, which in the Czech Republic is an attorney, notary public, etc.
What taxes are payable related to the acquisition or ownership of the property?
The huge advantage of buying a property in the Czech Republic is that you don´t have to pay any real estate acquisition (or transfer) tax (unlike, e.g., Germany).
After the real estate acquisition in the Czech Republic, you have to pay the real estate tax annually. The tax depends on the location and size of the property, but it´s generally very low. For instance, for a flat of approx. 80-100 m2, you have to pay about 50 EUR in taxes yearly.
How long does it take to acquire real estate in the Czech Republic?
It is quite easy if you have already selected the building, flat, or land you want to buy. If you are still searching for the right location or property, it´s not that easy to estimate.
If you are buying property in cash, the average time from finding the property to its acquisition is two months (in case of a tough negotiation with the seller,maximum of three months).
If you apply for a mortgage in the process, the resulting period will be slightly longer, let's say, about 4 to 5 months.
In any case, it takes you approximately one month from signing the purchase contract to your registration as an owner in the Land Registry (cadastre). As written above, before signing the contract, it is always advisable to perform due diligence of the property in question to avoid any unexpected defects.
Can I be represented under power of attorney in the property purchase process in the Czech Republic?Can a Czech attorney buy a property on behalf of a foreigner?
Yes, you can. You do not even have to travel to the Czech Republic. A Czech attorney can handle all the formalities for you.
However, the power of attorney must be legalized. In some cases, it shall also be apostilled (e.g. if you will sign it in Germany, the USA) or even superlegalized.
What transaction costs associate with the real estate purchase in the Czech Republic?
Inevitably, buying real estate isn’t simply a matter of taking out a mortgage and putting an offer on your dream home. There are several other transactioncosts associated with purchasing a property, usually:
- the estate agent's commission,
- conveyancing tax,
- legal fees,
- escrow and/or attorney fees,
- valuation reports and the costs associated with the conveyancing itself,
- and more – especially the administrative fee for the registration at the Land Registry in the amount of 2000 CZK (about 80 EUR) and bank charges.
As already mentioned, the most severe cost (the 4% acquisition tax) has been abolished in 2020.
That means transaction costs related to buying real estate in the Czech Republic are much lower than, for example, in Germany or Austriaand,in some cases, can be up to EUR 4,000.
Is escrow (custody) necessary to acquire the property in the Czech Republic?
No, it´s not absolutely necessary. However, it´s common and 100% recommended for every buyer. You can choose from attorney escrow, bank escrow, and notary escrow. Each of them has its advantages and disadvantages. We recommend attorney escrow, which is also the most common.
The advantage of attorney escrow is its flexibility and price.
What should buyers be aware of when buying a property in the Czech Republic?
There are a lot of potential issues to keep an eye on. However, there are not more of these potential issues than when buying property in another country.
First of all, it is necessary to check the legal title properly, as well as the factual condition of the property. That is related to the contractual provisions concerning defects. Particularly important are the provisions on liability for defects in quality or title that become apparent during or after the completion of the purchase of the property. The buyer's legal rights, namely withdrawal from the contract, price reduction, and/or compensation for damages, may be modified by a contract.
You should also make sure you have all documents necessary for the conclusion of the contract (e.g. extract from the Land Registry (cadastre), waivers of pre-emption rights, powers of attorney…).
Particular caution should be exercised when acquiring properties that are currently rented. Czech tenancy law provides a high degree of protection for tenants. However, once you acquire the property, the new owner may, under certain conditions, evict the tenant on the grounds that he and/or a close relative need to use the property personally.
If you are buying a property from a married owner, but the property is registered in the Land Registry as not being part of the community property, you need to find out why. The aim is to avoid a situation where one of the spouses later claims the purchase contract is invalid.
In general, we can say the following. It is better to spend more time verifying the property details and preparing the contract than to rush everything. Resolving a problem in court will take several years and cost you a lot more than getting a lawyer involved in the acquisition process.
Conclusion – buying real estate in the Czech Republic is foreigners-friendly!
In general, the process of buying real estate in the Czech Republic is relatively easy. The main pitfalls, such as language barriers, and lack of local knowledge, can be easily overcome by simply choosing an appropriate representative. In such a case, it seems ideal to select experts in the field who will (in the worst-case scenario) be liable for any damage caused to you.
In our opinion and experience, the best and most comprehensive assistance and care for foreign investors are provided by lawyers.
Our law firm has assisted foreign clients from all over the world with hundreds of acquisitions of real estate in the Czech Republic. In particular, we advise foreign clients on the purchase of luxury apartments in metropolitan areas throughout Czechia, especially in Prague. If required, we can also provide related tax advice. Our clients appreciate our hassle-free and practical advice and guidance throughout the buying process. All the legal services we offer are tailored to the clients’ needs, as we collaborate from the start for the best possible results.
For further details, please don’t hesitate to contact us here.