Presentation on real estate transactions and its regulations in CZ

1. Real Estate
Transactions
Svetlana Puchkova
Sabina Tashbulatova
Agon Ukaj

2. A bit of history
Communist regime - no ownership rights of real
estate (decree);
1989, Velvet Revolution - opened up the opportunity
to sell and buy property for individuals; for foreigners
only through establishing a CZ company;
2004, Czech Republic joined EU - EU citizens were
allowed to buy property as individuals, later other
nationalities were allowed as well.

3. Sale contract
• Ownership of lands
• Subject of agreement ,purchase price
• Payment of purchase price
• Warranties and conditions of lands

4. Sale contract
• Entry of ownership right
• Parties
• Withdrawal of agreement
• Final provision

5. Escrow agent
..is a third party not related to the
transactions, typically is a notary, lawyer or
bank;
Holds funds or documents until certain
conditions of a contract are completed;
Various items held by escrow agent are
released once conditions are fulfilled.

6. Financial institutions
Banks typically reviews:
Sales contract - the contract between the buyer and
seller of a property;
Appraisal - an inspection of the property by the bank
to control if the information about the property is
correct and the value is fair;
Lien - legal statement (security interest) showing the
buyer is obligated to repay the bank. Shown in the
property abstract.
Once the sales contract is signed, the bank and buyer send funds
to the escrow agent to be held until the ownership transfer is
completed.

7. Ownership transfer
Cadastral office, is the city’s land registry. Historical
record of property ownership is kept there.
Property abstract, is the property record typically
includes the property location, size, building up area
and the obligations on the property.

8. Ownership transfer
Copies of sale agreements are submitted to
the Cadastral office to change the owner’s
name of the property and to record any
obligations that change such as a bank lien.
Takes several weeks if all the documents are
correct. (but could be up to 6 months
depending on various factors)

9. Property Transfer Tax
3% the sale price or
3% appraised value – an estimated value
prepared by an certified state appraiser which
is usually ordered by the seller.
Paid within 3 months by the seller after the property
has been sold. Escrow agreement usually insures
the payment is made.

10. Final Transfer
• After the registration at the Cadastral office is
completed and the evidence is provided by the
seller to the escrow agent, the agent releases
funds and documents and the buyer then
assumes possession of the property.

11. Buying a company
Buying shares of the company.
All assets and liabilities are transferred to the
buyer.
For own (personal) use
For investment purposes

12. Share contract
Subject of agreement and Purchase price - what
is being sold and for how much;
Payment of the Purchase price - specific steps
outlined of how the transaction will be completed
including any funds that will be withheld to pay third
parties;
Warranties and Conditions - seller states they are
the legal owner of the company and that all
financial, third party obligations or legal actions will
be removed at the times of the share sale.

13. Share contract
Withdraw from agreement - outlines the
events that can occur which allows the buyer to
withdraw from the transaction such as: the
seller is not the legal owner of the
property, there are existing obligations in the
company that were not announced or the seller
provides false information about the company
shares, etc.

14. Share contract
Final Provisions - stays that all changes and
additions should be in written form and outlines the
number of documents that should be provided to the
commercial court.
Exhibits - all additional documents are attached to
the contract to make it complete.
So, contract is prepared, reviewed by the buyer, seller
the bank (if financing is required), escrow agent and the
legal representatives; changes and comments are
made (if there are any); all parties agree; contract is
ready to be signed once a due diligence is completed.

15. Due diligence
• Review of all company’s legal and financial
documents; typically completed by lawyers and
accountants; ordered by buyer
• Due diligence will allow the buyer to understand legal
and financial obligations of the company and
determine if there are any hidden risks that the owner
may not have discussed or disclosed.
• After due diligence the contact could be changed by
the buyer to increase their protection against
potential liabilities found.
•

16. Buying a company
Escrow agent – used in the same manner as
described above
Financial institutions - similar steps that
outlined before; to be emphasized - banks
require the removal of any liens (financial
obligations) from the property or company
before funds will be released by the escrow
agent

17. Company Ownership
Transfer
Records of the ownership change are submitted to
the commercial court (submitted by the seller after
the payment has been received by the escrow
agent);
Changes are recorded in the commercial court
Note: the buyer assumes possession of the
company once contracts are signed.

18. Summery of a deal
Contract prepared, reviewed, agreed;
Funds are sent to the escrow agent account;
Contract signed;
Changes made by the commercial court;
Funds released.

19. Advantages of buying
company’s shares
No 3% transfer tax to pay;
No need to renegotiate new rental and supplier
contracts;
If land has certain construction approvals they
remain with the company otherwise they may
not be lost

20. Disadvantages of buying the
company’s shares
Risk is taken with possible unknown
obligations
Additional accounting required
Decreased depreciation value (as a reduction
of tax base)