Purchase a Property in Czech Republic
Purchase a Property in Czech RepublicUpdated on Monday 12th August 2019
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Since Czech Republic became a member state of the European Union (EU), the process of buying a property is much easier for foreign companies or foreign individuals who are interested in owning a building or an apartment here. Although the Czech legislation stipulated that EU citizens who do not have a residence permit in Czech Republic are not allowed to own a property here, the applicable law changed its provisions, allowing EU citizens to purchase a property without the issuance of a residence permit. If you are interested in buying a property here, our Czech lawyers can offer you assistance through this procedure. Also, we can handle your business registration in this country.
Who can buy properties in Czech Republic?
According to the legislation applicable in Czech Republic, several categories of individuals suffer no restrictions in terms of acquiring a property:
- • Czech citizens can buy all kinds of properties in this country, besides the state-owned ones;
- • legal entities which have the headquarters established in Czech Republic;
- • foreign individuals owning a residence permit on the territory of the Czech Republic;
- • individuals who have applied for asylum in Czech Republic and who were granted this right.
The legislation stipulated that EU citizens are not allowed to buy a property for seven years after moving to Czech Republic, but the provision has been amended in 2009. As such, the European citizens (including persons from Iceland, Norway, and Liechtenstein) can request the right to reside in Czech Republic as long as they can prove they have sufficient financial funds to sustain themselves. In order to apply for the right to reside in Czech Republic, any EU citizen should provide to the authorities two photos, the passport or the identity card, plus the health insurance certificate.
What types of properties can I buy in Czech Republic?
Agricultural lands, apartments, office buildings, condominiums, studios, or warehouses are among the assets you can purchase in the Czech Republic. We remind that foreigners cannot acquire the properties which are owned by the state. The legal aspects of property purchase in this country can be entirely explained by our Czech attorneys.
Real estate due diligence in Czech Republic
A real estate due diligence procedure is normally suggested at the time foreigners want to purchase a property in the Czech Republic. This is an important method through which a property is verified before the ownership is transferred. Complete information about the history of the property is normally provided by the seller, in order to see if there are any litigations involved, if the construction permits are available and if all the taxes have been paid. We remind that our Czech lawyers are entitled to perform real estate due diligence for all foreign individuals who are interested in purchasing a property in the Czech Republic.
Procedures for buying a property
It is recommended that, after you have found the property you’d like to live in, to perform due diligence procedures. The purchase should take place under the supervision of a Czech lawyer and a real estate agent. You will have to sign a reservation contract (which shows the interest in buying a certain property) and the contract of deposit, in which you will pay a certain percentage of the price of the property (customarily, the deposit varies between 10% and 30%, as agreed by both parties). The purchase process in Czech Republic usually takes a month or less. According to the Czech legislation, at the transfer of ownership, the seller must pay the real estate acquisition tax which is 4% of the selling price. Also, the agent fee (2,5% to 5%) needs to be considered and paid by the new owner of the property.
Real estate acquisition tax plus other fees
Until 2014, the real estate transfer tax has been imposed on all property transactions. Right after this year, such a tax has been replaced by the real estate acquisition tax which is set at a 4% rate and based on the property sale price. In most property transfers, the seller needs to pay the real estate acquisition tax, however, the parties involved in the transaction can decide on who can pay such a tax. Apart from this kind of tax, the seller and the buyer must pay the agent’s commission fee that ranges between 2.5% and 5%. In most cases, for example in Prague, such fee can be split between the seller and the buyer, however, this is not a general rule. If you need legal advice for purchasing a real estate property, feel free to talk to one of our Czech lawyers.
Land registration in the Czech Republic
A Land Registry Office declaration is needed at the time a person wants to purchase a residential property. This kind of document must contain complete details about the real owner of the property, the only person in charge of selling that property, and about the ownership, the plot number and the address. In special cases, a lawyer acting with a power of attorney can take care of all the formalities involved in selling a property in the Czech Republic. It is important to know that such a declaration will also tell you if there are encumbrances, lawsuits or loans on the property you wish to buy. The official website of the Land Registry Office offers free services for those wanting information, picture or maps of Czech properties. On the other hand, if you do not want to deal with such formalities before purchasing a property, you can talk to our Czech attorneys and find out how they can legally help.
What is a professional appraisal?
A professional appraisal of a property is a short report comprising information about the building materials, the cadastre extract, the initial purchase contract, previous expert valuations, measurements, building approvals and many more. Even though such a report comprises a wide range of details, it is best to talk to the owner and find out more about the property you are about to purchase. He or she can tell you about the building permits, isolation, heating, property changes, etc. If you would like to request a professional appraisal before buying a real estate property in the Czech Republic, do not hesitate to get in touch with one of our Czech lawyers. This way, you can be sure that there are no hidden problems or wrong information about a building, house, condominium or apartment.
Foreign residents and mortgages in the Czech Republic
A person with temporary or permanent residence in the Czech Republic can receive a loan to buy a property in this country. There are many banks in the Czech Republic that offer a clear picture of the mortgage conditions for foreigners. Among these, some banks might request proof of a steady source of income and living for at least two years in the country. Having said these conditions, many entrepreneurs set up companies in the Czech Republic in order to have better chances to obtain loans for buying a house. All the legal aspects of mortgages in the Czech Republic can be solicited to our Czech attorneys.
Facts about the real estate sector in the Czech Republic
The real estate sector in the Czech Republic continues to bloom each year, numerous construction companies already activating in the country and addressing all types of consumers. There is also a high interest in mortgage loans among national and foreign citizens in the Czech Republic who want to acquire a property in this country. The following facts and numbers can describe more the direction of the real estate sector mentioning that numerous developments have been registered in recent years, as the population continues to rise alongside the need for housing:
- There have been more than 2,800 apartments sold in the first 6 months of 2018 in the Czech Republic.
- The residential construction grew by 18.5% in 2018 compared to the previous year.
- Prague is the most expensive city were the square meter of apartments costs around $2,500.
- The mortgage loans rate grew by 2.58% rate in the third quarter of 2018 from 2.17% registered in the previous year.
All the legal aspects involving the purchase of a property in the Czech Republic can be explained by our team of Czech lawyers who can also answer all your questions. For additional information in this matter, please contact our team of Czech lawyers.