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Since the Czech Republic joined the European Union in 2004 the property buying process and related rules and regulations for foreign freehold ownership of real estate in the Czech Republic have been streamlined and simplified.

Having said that, the property buying process in the Czech Republic remains complicated and the ongoing property ownership rules can also be rather trying.  This is why you will find many intermediary companies available in the Czech Republic all offering to assist you with your property purchase and management!  If you wish to go it alone or at least have a good idea of what you’re about to get into then here’s the buying process in a nutshell.

It is an absolute must to secure the services of a lawyer from the outset when considering making an investment into property in the Czech Republic; in part this is because the majority of the documentation associated with the transaction will be written in Czech and it is also because you really need someone to ensure your legal rights and personal interests are looked after in a country where sadly ‘rich investors’ are occasionally seen as a fair target for unfair practice.

It used to be the case that anyone other than a Czech resident had to form a limited liability company in the Czech Republic known as an SRO in order to own land and property there.  Since the country joined the EU back in 2004 and also signed agreements with various ‘Favoured Nations’ such as the USA for example, this is no longer the case. 

Those who have residence in an EU nation and have a relevant residence permit can freely purchase land and property in the Czech Republic - although not agricultural land or forestry.  Non EU citizens and non-favoured nation citizens can still own real estate in the Czech Republic if they establish an aforementioned SRO.

Many estate agencies, lawyers and intermediaries as well as real estate investment experts still suggest that anyone considering buying investment property in the Czech Republic does so via a limited liability company though.  This is mainly to shelter the buyer from various taxation and liability issues - indeed, owning land in the Czech Republic other than through a limited liability country can be quite risky as all assets related to the land such as any immovable property built upon it can theoretically become subject to litigation - whether justified or not. 

Anyone thinking about buying property in the Czech Republic should really discuss their requirement to establish an SRO with their lawyer as well as discussing any benefits they may gain either by establishing a company or purchasing directly as an individual.

Once an international property investor is ready to purchase and has legal representation in place and has established whether or not forming a limited liability company is a necessity, it is time to source suitable properties to meet investment objectives.  At this stage many will simply employ the services of an estate agent - but please note that estate agencies in the Czech Republic are not necessarily regulated or licensed and that realtors need have no skills or experience to represent a property buyer or vendor.  Having said that many of the long established companies operating from Prague in particular are reputable and well worth their fees!

Once a property has been located the buyer should check whether it is being sold OV or DV...OV is private ownership and DV is cooperative ownership and usually applies to apartments in old apartment blocks.  Ideally the property should be OV and free of any debts or mortgages and an offer for it can be made to the vendor either directly or via the agent or lawyer.  If an offer is accepted it is sometimes necessary to submit a holding deposit which can be held in an escrow until the purchase contract is ready to be signed.

Before any contacts are signed it is necessary to check that the vendor has the right to sell the property and that its title is clean of any debts or issues.  The buyer’s lawyer should conduct searches at the Kadastral which is the central registry of property ownership located in Prague and also do due diligence on the property to ensure it is legally available for sale.  At this stage a property investor can have an independent structural survey done on the property as well.

Once everything has been checked and found to be satisfactory the purchase contract can be drawn up and signed and notarized.  Upon signing the contract the buyer does not become the legal owner of the property - this only happens after the contract and relevant documentation have been lodged with the Land Registry office and this whole process has been known to take several months.  It is usual therefore for a buyer to lodge the final funds for the purchase price in either a notarial or escrow account until the sale is legalized and complete, only then will funds and deeds be transferred.

In terms of additional fees associated with the property purchase in the Czech Republic buyers should allocate at least an additional 8% of the purchase prices for taxes and fees.  The property transfer tax should be paid by the vendor but the buyer will become liable for it if the vendor fails to pay it.  There are also annual property taxes to consider and anyone with an SRO will have to pay annual maintenance costs to cover accountancy, tax filing as well as registered office rental, and corporate taxation will be due on net taxable income although many expenses can be claimed against this to reduce or negate liability.

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