Czech Republic: Acquisition of Real Estate
Transfer of ownership
Pursuant to the Czech civil law, the acquisition of real estate is a strictly formalised process. That is, the acquisition title must have a written form and the signature of the seller must be officially verified. In order to successfully transfer ownership rights to real estate, aside from concluding a written agreement, the parties must apply for the registration of the transfer in the real estate cadastre. Afterwards, the competent district office examines the application and, unless it contains any errors or deficiencies, it issues a decision on the registration of the transfer of ownership.
Pledges, easements, pre-emptive rights
The abovementioned process also applies to the establishment of pledges, easements and “in rem” pre-emptive rights. Moreover, please note that under the Czech civil law, not all pre-emptive rights shall be registered in the real estate cadastre. The parties have the right to choose if the pre-emptive right over a particular real estate shall be binding for the legal successor of the pre-emptive right grantor. If the pre-emptive right is agreed as “in rem”, it is established by its registration in the real estate cadastre and it does not cease even if the pre-emptive right grantor transfers the real estate to a third party by breaching the pre-emptive right. Otherwise, the pre-emptive right is “in personam” and it does not have to be registered in the real estate cadastre. If the “in personam” pre-emptive right is breached by the grantor, the pre-emptive right ceases and the beneficiary of the pre-emptive right shall merely be entitled to compensation.
Real Estate Cadastre
As mentioned above, the ownership rights, pledges, easements and “in rem” pre-emptive rights must be registered in the real estate cadastre. The real estate cadastre is an information system containing all data on all land plots and buildings in the Czech Republic, except for the buildings that are not registered in the real estate cadastre e.g., advertising construction, utilities etc. The data registered in the cadastre is considered credible unless proven otherwise. However, in light of the most recent judicial decisions of the highest judicial authorities, one cannot unconditionally rely on the real estate cadastre´s information regarding the ownership right to the real estate. Therefore, the potential buyer shall conduct a comprehensive due diligence on the existence of the seller´s title to the real estate prior to the acquisition.
Restrictions
When contemplating a possible acquisition of real estate in the Czech Republic, it is necessary to assess possible legal restrictions. Under the Czech civil law, there is no prohibition on the acquisition of real estate by foreigners. However, there are some restrictions that apply generally, e.g., the prohibition of fragmentation of agricultural and forest land outside the municipality´s built up area, restrictions on the acquisition of real estate under the Act on State Monument Care, as amended, etc. In many cases the breach of such legal provisions could lead to the transfer agreement´s invalidity or ineffectiveness. In order to eliminate such risks, it is recommended to carry out a due diligence process prior to the transaction.
Superficies solo cedit
In the Czech Republic the principle superficies non solo cedit was historically used. Pursuant to this principle, the owner of the land plot is not necessarily the owner of the building constructed on said land plot. Consequently this principle was replaced (since the new Civil Code entered into force) by the principle of superficies solo cedit i.e. “the building is part of the land” the ownership was gradually unified and cannot be transferred separately. However, due to this, it is always important to inspect whether the land plot to be acquired is encumbered by a building and if so whether it is in the ownership of the seller, since there was no unification in all cases.
