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What forms of ownership exist in the Czech Republic?
1) Sole ownership – the property is owned by a single person who is entitled to exercise the rights of ownership.
2) Mutual ownership – the property is owned by more persons. In this case the rights of ownership are exercised by mutual owners. The ownership share is a key term here. This share, expressed as a fraction or a percentage, represents the rate of the co-owner´s participation in rights and duties. However, it is constituted as a so-called ideal share, i.e. a share that does not correspond to a certain real part of the property. With respect to mutual ownership it is important to mention that in case of the sale of a co-owner´s share, other co-owners have the right of first refusal to this share. A co-owner is entitled to be offered the share under the terms proposed by a third party. If a co-owner meets these terms, there is a priority right to buy the ownership share of the other co-owner over the third party. If the co-owners do not agree otherwise (mostly in cases when there are more bidders for the released share), all the other co-owners can buy out the released share in proportion to their shares.
3) Joint property of spouses – the property is owned by spouses. As opposed to mutual ownership, there is no share determined – i.e. an ideal share neither. In case of joint property of spouses, this share is specified only as of the day of the termination of the marriage and the settlement of joint property and the shares of both the spouses are assumed to be identical.
In contrast to private ownership, the property is owned by a legal entity – a cooperative – that is stated in the Real Estate Cadastre as the owner of the property. In case of purchasing a property that is a part of the cooperative, the buyer becomes a mutual co-owner of this cooperative property. The size of the share is determined similarly to the case of blocks of flats in private ownership. The transfer of the real estate is carried out by the transfer of the share between the seller and the buyer. This change is not registered in the Real Estate Cadastre and the approval of the bodies of the cooperative is required neither.
What agreements are necessary in case of purchasing a property?
A Reservation Contract is a contract on the basis of which the seller reserves the relevant property including its accessories for the buyer. On its basis the buyer pays the reservation fee, which is subsequently included as the advance payment of the purchase price. In the contract, the subject of the future transfer (flat unit/chamber/cellar/parking or garage places/pieces of land in mutual ownership and especially preliminary areas) are specified exactly, furthermore here are plot numbers of pieces of land on which the house is to be built. The contract determines business terms.
A Future Purchase Contract describes rights and duties of both the contractual parties in more detail. On the side of the future seller here is above all the obligation to make the Declaration of the Owner and to finish the building within the stipulated period so that the Final Inspection Approval can be issued by this deadline. The future buyer is especially liable to settle the purchase price according to the determined payment calendar.
The Purchase Contract (The Unit Ownership Transfer Agreement) is a contract by which the ownership is transferred from the buyer to the seller and which is – as the only of the contracts mentioned above – registered at the relevant Land Registry. It contains not only the specification of the unit according to the Declaration of the Owner, but also the amount of ownership shares. Furthermore all the rights, duties and obligations being transferred to the buyer, such as Easement Agreements or Facility Management Contracts, are stated here. The Purchase Contract is submitted to the Land Registry in the appropriate number of copies, depending on the number of participants, together with the proposal of entry. If the buyer funds the property via a mortgage or another type of credit, the Security Agreement is also registered at the Land Registry.
What is mortgage?
A mortgage is a long-term credit, whose repayment including interests is guaranteed by a lien on the property for the benefit of the mortgage bank, including a property under construction. Formerly this credit was provided only for investing in properties – e.g. in case of their building, purchasing, reconstructing, acquiring a building plot, settlement of financial means related to a property (settlement of legacy, joint property of spouses etc.). Nowadays mortgages are no more purpose-limited and banks provide them for funding almost anything. The guarantee of the credit is assured by a lien on the property for the benefit of the mortgage bank. The property being acquired is as a rule the subject of pledge. However, the credit can also be guaranteed by a different property which does not have to be in the ownership of the applicant.
What is the Declaration of the Owner of the Building and the Declaration of the Owner of the Units under Construction?
The Declaration of the Owner of the Building is a unilateral legal act of the owner, by which a building is divided into units (i.e. flats and non-residential premises).The Declaration of the Owner describes the building and the land on which it is situated, delimits the units inside the house and specifies the common parts of the building, regulates the rights to the plots and rights and obligations related to the building, states the rules of co-owners´contributions to the administration of the house and the rules of the administration of the common parts of the house, including the person of the administrator. By the registration of this Declaration at the Land Registry, the existing owner of the house becomes the owner of each unit. The Declaration of the Owner of the Building is a basic prerequisite for the transfer of the ownership of the individual units inside the building. The Declaration of the Owner of the Units under Construction delimits the units under construction which will be built inside the object on the basis of a building permit. After the final inspection the units under construction transform into finished units by the deposit of a legally effective final inspection approval at the Land Registry.
What is a Property Sheet and where to get it?
The extract of the Real Estate Cadastre (the extract of a Property Sheet, “list vlastnictví”, often abbreviated as “LV”, in Czech) is a public document, which certifies the state recorded in the Real Estate Cadastre as of the moment of its issuance. It is marked by the number of the Property Sheet and as a public document it has to feature the date, a round stamp of the Land Registry with the national emblem, the name and signature of the executive of the Land Registry and a stamp or a clause of the settlement of the administrative fee. It is arranged either as a Property Sheet with properties or as a Property Sheet with flats and non-residential premises in the ownership of persons. A Property Sheet gives evidence of the ownership of the relevant property or land, e.g. of pledges, executions, easements, seals etc. The document can be obtained in return for payment at the relevant Land Registry or at the Czechpoint places (post offices, municipalities, local authorities etc.).
What is a Homeowner Association and how does it come into being?
A homeowner association (HOA – in Czech SVJ – Společenství vlastníků jednotek) is a legal entity established for the purpose of ensuring the management of the house and of the piece of land. The new Civil Code – Act No. 89/2012 Coll. (hereinafter referred to as NOZ – an abbreviation widely used in Czech and corresponding to the Czech term "Nový občanský zákoník" – New Civil Code) has brought a number of changes to both the existing HOAs and the newly-emerging ones. Whereas under the previous legislation an HOA came into being automatically with the registration of the property rights of the first 2 residential or non-residential units different from the original owner, now an HOA is established by approving the Statutes and comes into being on the date of the registration in a public register. The duty to establish an HOA occurs in a house with at least five units, of which at least three are owned by three different owners. The establishment of an HOA is ensured by a rule under which it is necessary to submit the documents confirming the establishment of the HOA in the house to the Real Estate Cadastre in case of transferring ownership of the fourth unit in the house. The supreme body of an HOA is the Assembly of Unit Owners, comprising all the owners of the units in the building. The statutory body of an HOA is the Committee; its rights and duties are determined by the HOA Statutes. NOZ requires that existing HOAs bring their Statutes into line with NOZ within 3 years from its entry into force, i.e. by 31 December 2016. The provisions of the existing HOA Statutes that are inconsistent with the peremptory provisions of NOZ lost their force on 1 January 2014.
What is notarial custody?
The notarial custody serves for depositing testaments, securities, deeds and also money with the aim of their being handed over to other persons/parties. In connection with property transfer, contracts and means, the payment of which is stipulated in the Purchase Contract or in the Agreement on Custody, are usually deposited with the notary.
How is the takeover of the unit carried out?
The takeover of the unit is usually carried out after the fulfilment of two basic conditions: a full settlement of the purchase price by the buyer and at the same time the submission of the proposal of entry to the Land Registry. The takeover of the unit is a formal act during which the buyer thoroughly monitors the state of the property which is the subject of the transfer and the opening balances of utilities (hydrometer and electricity meter) and possible defects not preventing the unit from being used are written in a protocol. The buyer is also acquainted with the operation of the house and with the rules to which he/she accedes on the basis of the Facility Management Contract.
What is Real Estate Tax?
Real estate tax is a property tax. This tax taxes the ownership of real estate every year. Municipalities are the sole recipients of tax revenues, while the state administers the tax through tax authorities.
The taxpayer of this tax is the property owner.
The subject of the tax are real estate (land, buildings, units), which are located in the Czech territory and which are registered in the real estate cadastre.
A calendar year is calculated for the tax period and the taxpayer is obliged to file a tax return with the competent authority by 31 January for the tax period (ie if real estate tax is paid for 2018, the tax return must be filed by 31 January 2018). The decisive period for calculating the tax is 1 January of the relevant year. If the return was filed in previous years and there has been no change since then, the return is not filed. The tax is paid regardless of the taxpayer's income level. The place determined by the tax revenue are the budgets of the towns and municipalities in whose territorial district the taxed real estate is located.
What are the rules of acquiring property in the Czech Republic in case of foreigners?
Since 1 May 2009 both the citizens of the European Union member states and the foreigners from the countries of the former Commonwealth of Independent States (which came into being after the Soviet Union had ceased to exist) have been allowed to acquire and transfer properties with no limits in the Czech Republic. At the Land Registry it is no more necessary to prove residency, to submit the European Union Identification Card or to conclude a contract as a legal entity.
What is "property" or "immovable thing" ?
The new Civil Code–Act No.89/2012Coll. (hereinafter referred to as NOZ – an abbreviation widely used in Czech and corresponding to the Czech term "Nový občanský zákoník" – New Civil Code) has brought new determination ofimmovable things. The term"property" is replaced by the term "immovable thing"and immovable thingsarenow definedin §498 of NOZ. As immovable things are always classified pieces of land, buildings on a piece of land forming a part of this concrete piece of land (this provision, however, is always to be examined in a concrete case as there are many exceptions), underground buildings with an independent purpose specificationandproperty rightsto them(e.g.metro), furthermorethings(buildings) that cannot be transferredfromone place to anotherwithout breakingtheir nature(e.g. utilities,temporarybuildings, roads, highways), units (apartments ornon-residential premisesandco-ownershipshare in abuildingand in a piece of land) as well as property rights declared bylaw(e.g. the rightto build)andbuildings under Act No.40/1964Coll., Civil Code valid until 31 December 2013, that have not become a part of the piece of land in compliance with the transitional provisions of NOZ.
What is a lien and a Security Agreement?
A lien comes into being on the basis of a written agreement. A Security Agreement has to include the description of the pledge and of the receivable, which is secured by the pledge. Both the pledge and the receivable have to be specified clearly (i.e. the day and reason of the receivable´s coming into being, its subject and monetary amount, payment terms, interest rate and late interest rate). The agreement is concluded by the pledgee (as a rule a bank providing the mortgage) and the pledgor (the owner of the object in pledge, as a rule the debtor, but it can also be a different person). The Security Agreement is usually submitted to the relevant Land Registry before the Purchase Contract, but the incorporation at the Cadastre can be executed independently too. The lien is, after the incorporation by the Land Registry, marked in the relevant Property Sheet.
What is a proposal of entry?
A proposal of entry is generally understood as a proposal to start the procedure of the registration of ownership rights, lien, right corresponding to easement or right of first refusal, submitted to the Cadastre, or a proposal to delete such right. The procedure for the authorization of the entry is started on the day of the delivery of the written proposal of the procedure´s participants (or some of them) to the Land Registry and it usually lasts several weeks or even longer. However, the legal effects of the entry come into being retrospectively as of the day of the submission of the proposal to entry to the relevant Land Registry. Nowadays this act is commonly considered to be decisive for the settlement of the purchase price (and also for drawing a mortgage).
Can a foreigner buy a property in the Czech Republic?
Since 1 May 2009 both the citizens of the European Union member states and the foreigners from the countries of the former Commonwealth of Independent States (which came into being after the Soviet Union had ceased to exist) have been allowed to acquire and transfer properties with no limits in the Czech Republic. At the Land Registry it is no more necessary to prove residency or to submit the European Union Identification Card. The same is valid for concluding a contract as a legal entity – it is not necessary either.
What is an ownership title?
As an ownership title is generally understood a document on the basis of which a person acquired the ownership of the property, e.g. a Purchase Contract, Transfer Contract, Heritage Contract, Deed of Gift etc. These documents are deposited at the Land Registry.
How are the documents related to energy deliveries transferred to the new owner of the property?
The transfer from the original owner to the new one is to be carried out at the Customer Centre of the concrete energy provider (such as PRE, ČEZ, RWE, Pražská plynárenská etc.). The transfer is – as a rule – made by filling in a form, a written approval of the original owner is usually required too.
What is an escrow account?
An escrow account (also called a trust account) is a special bank account serving above all to settle the purchase price between the seller and the buyer, while the bank as the third party guarantees the payout of money in compliance with the preset terms. These accounts can be opened both by individuals and legal entities. Within the framework of project funding, our clients always send their money to an escrow account.