Real Estate Due Diligence in Czech Republic

Real Estate Due Diligence in Czech Republic

Updated on Sunday 03rd November 2019

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Real-Estate-Due-Diligence-in-Czech-Republic.jpgCzech Republic represents an attractive destination for the purchase of a real estate property. Persons interested in buying an apartment or a house in Czech Republic are advised to perform real estate due diligence procedures on the property, to verify if the settlement is sold in good faith. Due diligence on a real estate property is performed by a team of specialists, who can check the integrity of the building, in the sense that they can verify if the property respects all the regulations imposed by the local authorities. If you want to buy a property in Czech Republic, our team of Czech lawyers can offer you assistance on this process and can help you perform due diligence procedures

Due diligence in Czech Republic 

If you have found a property in Czech Republic that meets your standards and budget, you should perform due diligence procedures before signing any contracts with the seller. Our lawyers can provide you with assistance on this matter, as the procedure requires the professional help of various specialists, such as attorneys, tax advisors or accountants. As a general rule, real estate due diligence is carried out for the following: 
  • • the legal aspects referring to the property are verified by our lawyers in Czech Republic, who can attest if the documents respect the applicable law. Information registered at the Land Registry after 1st of January 1993 is considered to be in good faith; for entries before this date, it is recommended to perform in-depth legal due diligence if you buy a property on land, as the information on the real estate may not be complete. 
  • • the taxation aspects are verified by the local tax advisors;
  • • the technical and environmental aspects of the property are checked by technical advisors; 
  • • a verification if there is any construction intervention of potential hidden risks.
Real estate due diligence refers to the general state of the building, but also to possible developments that may be carried out on the property, as stipulated by the Czech legislation; our law firm in Czech Republic can provide you with an in-depth presentation on this subject. 


Czech legislation for the sale of a property 

Any person interested in buying a property can request to perform real estate due diligence procedures on that certain property, but you should know that the Czech legislation stipulates that the seller is obliged to disclose information on the negative aspects of the building. This may refer to any aspect that would decrease the selling price of the property, such as the lack of an adequate construction permit for the building or technical defects.  If the seller does not disclose this information, the buyer can request compensation claims or the annulment of the ownership transfer agreement. 

Who needs real estate due diligence?

Both natural or legal persons interested in purchasing a real estate property in the Czech Republic can ask for real estate due diligence through which an in-depth verification is made. The sale-purchase or the lease contract is verified, alongside other documents to see if there are any litigations or problems involved. It is important to check the price of the property and see if it aligns with the other properties on the market and has the right value. Real estate due diligence procedures can be explained by one of our Czech lawyers who can also take your case and make the needed verifications.

Commercial real estate due diligence

Foreign investors interested in commercial properties in the Czech Republic should consider the importance of a due diligence procedure before making any acquisition. A due diligence investigation report can tell if the investment is safe and if the future property has problems or not. Some entrepreneurs might be interested in buying storages, old factories, restaurants, office buildings or even shopping centers, so a commercial real estate due diligence is recommended. A team of experienced real estate due diligence lawyers know how to conduct an investigation in this matter, and there are many questions to consider when interested in a property:
  1. If it offers complete access to public streets and if there is a parking space.
  2. If there are any structural improvements or are needed.
  3. If it has all the environmental licenses and permits.
  4. If there are any encumbrances or hidden litigations. 
Identifying in time the potential risks linked to a commercial property is among the targets of a real estate due diligence process in the Czech Republic. One of our Czech lawyers can provide such services and can offer an accurate and transparent report about the property you wish to acquire in this country, whether for personal or for business purposes.

Purchasing a property in the Czech Republic

The legislation in the Czech Republic does not restrict the possibility of foreigners to purchase properties in this state, as long as these are not state-owned. Houses, studios, apartments, agricultural lands, office buildings, storehouses, and any other type of structures can be purchased by foreigners in the Czech Republic. The acquisition of a property in the Czech Republic starts with a reservation contract and a first deposit that should not exceed 30% of the value of the asset. If the first sale contract is made, this means that a real estate due diligence was made, although, this isn’t a mandatory request, but recommended. As for the taxes involved, one should know that the real estate acquisition tax of 4% of the property price is imposed. Our Czech attorneys can verify the sale-purchase contracts of properties you wish to buy and can also provide support for tax matters and compliance.

Do I need a technical due diligence procedure?

Yes, a technical due diligence procedure is recommended for individuals interested in purchasing a commercial property, but some might ask for such procedure for other types of assets. A technical due diligence procedure can reveal several factors like environmental risks, or if there is a need for particular repairs or replacements in the building. If you would like to know more about technical due diligence procedures that can be made for properties in the Czech Republic, we invite you to talk to one of our Czech lawyers.

Making investments in Czech Republic

The appealing business environment offered by the Czech Republic attracts numerous investors from abroad in sectors like manufacturing, infrastructure, real estate, tourism, IT and many more. Being among the largest FDI recipients in Europe, the Czech Republic sustains all investors with varied incentives and stimulations. Many greenfield projects have support from international entrepreneurs in Czech Republic, and for more details about the investment direction in this country, we present you the following facts:
  • approximately USD 9,479 million was the inward FDI flow for 2018;
  • for investments of at least 1.9 million, foreigners can receive Czech long-term residency. 
  • the 2019 Doing Business report presented by World Bank ranks Czech Republic 35th out of 190 worldwide economies.
  • the total FDI stock for 2018 stood at around USD 155,024 million;
  • most of the foreign investments are directed to car manufacturing, metallurgy and energy.
If you need further information on the due diligence in Czech Republic, please contact our Czech law firm for assistance or representation in this matter.