The purchase of real estate offers expatriates and investors a wonderful opportunity to enjoy the benefits of living, and profiting, in the Czech Republic. But this decision involves much more than an assessment of investment potential and net worth. Below are the basic points to consider.

THE CONTRACT
Regardless of citizenship status, a purchase agreement must always include several details: the subject of the sale and municipality, with a parcel number, along with the building and Ownership List numbers. It also needs to list the purchase price, as well as payment method.

Good legal draftsmanship will also include a number of other contract points. For example, there should be no doubt about the identity of the parties. Everyone – whether people or “legal entities,” such as businesses or corporations – should get identified precisely. The contract should also include all “representations” that the seller makes during negotiations – the promises and disclosures about the property, as well as acknowledgements from the buyer that he’s aware of them.

These will almost always include assurances that the seller is the property’s exclusive owner, without any outstanding legal challenges or defective rights; or, if unsettled questions exist, that the buyer is aware of them. The contract will also usually affirm that the property has no encumbrances, such as a lien, or will clearly spell out what they are.

Additionally, the contract should specify how the seller will pay the real estate transfer tax (which is the seller’s responsibility, by law; but a tax office may ask the buyer to pay the tax if the seller does not do so). There are also expenses for recording the property on the tax register (called the “Cadastral Register”); purchase contracts will routinely make clear who’s responsible for this payment.

And, finally, it is necessary to execute the contract in a sufficient number of originals (six originals are standard), and to authenticate all signatures. The above precautions can save countless hours of trouble and expense if a legal dispute arises. The final step involves legally registering the new ownership. The contract gets filed with an application to the Cadastral Register, and once approved, you are the owner of the land, flat or building.

CO-OP FLATS
Housing cooperatives, however, require special attention. The name itself is misleading, since in the Czech Republic, it’s not individual parties who own the property, but a legal entity – the “cooperative”, made up of the “owners” of the flats. These owners technically only lease the property from the cooperative.

Thus, a contract for the “sale” of a co-op flat really just refers to a transfer of membership in the cooperative. Membership includes both rights and obligations; for example, the right to lease a flat, and the obligation to pay appropriate fees.

Generally, co-ops have no authority to approve or deny transfers, though they can require in general that transfers be in harmony with their by-laws. Czech laws have no set regulations about membership of foreign nationals in co-ops, since co-ops have their own by-laws on the question.

REAL ESTATE OWNERSHIP FOR FOREIGN NATIONALS
Czech law divides potential owners into two groups: Natives and foreign nationals. “Natives” have permanent residence in the Czech Republic, or are legal entities with a registered seat in the country. (This category can also apply to asylum seekers, since asylum laws designate them as permanent residents.) The term “foreign national”, meanwhile, is more easily defined as any person or legal entity that does not qualify as a native.

Ordinarily, Czech law remains quite strict on whether ordinary foreign nationals can own real property here; the short answer is: They can’t. The short answer, however, isn’t the only answer. Foreign nationals can still own real estate under certain qualifications – if the expat has a foreign residency permit, for example, or was granted asylum in the Czech Republic. Merely possessing a residence permit, rather than a permanent residency permit, however, won’t qualify.

If you don’t have a permanent permit, the law offers several possible, though more limited, alternatives. These include acquiring property through inheritance; in a “tenancy by the entirety” (a variation on joint ownership that can occur between a husband and wife); from a relative in direct succession (such as parent to child), or from a sibling or spouse; or by exchanging it with another real property already owned here, so long as the new property does not exceed the value of the original.

There are also a few more technical or unusual ways to qualify – such as if Parliament passes special legislation, or if you’re a diplomat, under certain conditions – so make sure to consult with an attorney if you think you might qualify. For many foreign nationals, the preferred ownership option for both living and investment is to own real estate through the formation of a limited liability company (s. r. o.). It requires basic capital of CZK 200,000, and functions as a corporate legal entity on behalf of the foreign national. The company must have a “seat” and a legal executive (Jednatel), and conform to all legal and tax requirements under Czech Law.

Disclaimer: No legal advice herein is offered or implied. Pay detailed attention to all aspects of any transaction, including establishing chain of ownership and inspection by qualified experts. Have a qualified attorney review all documents before any transaction.