Procedure for purchasing Historic property in Czech republic (for example)
Czech republic is a member state of European Union and lies within the Schengen zone. Yet, it enforces its own laws regulating purchase and sale of historic properties. As a matter of fact, same laws and regulations apply to other types of properties be it an apartment or any other commercial facility.
So, let’s take a closer look into this matter and start with who is allowed to purchase. In Czech republic, a historical property i.e. Castle, Villa, or a Chateaux can be purchased by any private individual, even if he/she isn’t a resident of Czech republic or EU, as such. For instance, if you are a citizen of USA, Canada, UK or any other country, you are entitled with a right for purchase of all kinds of properties such as monuments, lands, fields or even forests, and this with no limitaion/s. The purchase procedure itself consists of few steps.
Having decided to purchase a property in Czech republic, one shall, first of all sign an Agreement for Reservation. After signing this Agreement, potentional buyer has 3 days for transferring the reservation deposit to bank account of an intermediary (real estate) agency. The sum of reservation deposit is always agreed upon, however as a general rule it is not less than 10% from the total price of the property. US Dollar is an allowed currency for the reservation deposit.
The reservation deposit is part of the total price for the property. As a result, one shall pay only the price of the property, nothing in addition. From this point, potential buyer shall remember that the reservation deposit is not returned even if he/she decides not to go on with the purchase. Usually, once signed this Agreement has 30 days duration period.
2. Consideration of Purchase / Sales Contract
Right after signing the Reservation Agreement there is a 30 days period given for consideration of Purchase / Sales Contract. After having completed the negotiation of Purchase / Sale Contract there is another document to be signed and that is so called Agreement for Legal Deposit. Legal Deposit shall include the total purchase price of the property (excluding the earlier provided reservation deposit) and is sent to an independent party i.e. bank account of a Lawyer. This additional step with a Czech Lawyer shall ensure the security of provided assets both for the buyer and the seller. In such a way, Lawyer keeps the money (purchase price) for the property until the whole process is completed and buyer becomes a new owner of the property.
3. Signing of Purchase / Sale Contract
Worth noting that upon the execution of Purchase / Sale Contract Signature of the buyer shall be certified by a Notary. You may certify an English version of the Contract at your Notary Office, or sign the Czech version of the Contract at the embassy or consulate of Czech republic in your country.
Link to details on Czech diplomatic missions abroad can be found below: http://www.mzv.cz/jnp/en/diplomatic_missions/missions_of_the_czech_republic_abroad_1.html
After certifying Purchase / Sale Contract shall be sent to Czech republic, where seller/s complete signing procedure by putting their signatures. Within 3 days after signing of the Purchase / Sale Contract (by both parties), buyers shall provide with full amount for the Legal Deposit. As soon as the amount will be transferred, the lawyer will forward the documents to the Cadastral Registry of Czech republic to change the ownership of the property. Here ends the 3rd step and starts fourth.
4. Changing of Proprietary Rights
Matters related to changing of proprietary rights in Czech republic lie under the supervision of Cadastral Registry. There are two main documents handed in: the Application Request letter for changing of proprietary rights and finalized Purchase / Sale Contract. The Cadastral Registry has 21 days for reviewing each case. They have right to request more information and/or documents and give additional time for us to fulfill, and complete the process for a new owner.
After 21 days Cadastral Registry informs all involved parties of changed status for proprietary rights with an official confirmation letter. This shall be the day, which grants a new owner with a legal ownership for the purchased property.
Last but certainly not least important point is related to the purchase tax, which in Czech republic is as low as 4% fro the appraisal (price). An estate appraisal is a necessary step made by specialized assessors. As a general rule, the price of appraisal varies. It can cost anywhere between 200EUR and 1000EUR. However, this service shall be taken care by the party in covering the property sales tax. In Czech republic, the seller covers Sales tax. This however, can be different, once agreed upon and given in the Purchase / Sales contract.
The property ownership taxes in Czech republic are relatively low. In case of a Castle this tax is around 1000EUR/year. If given property is considered a Ruin, then it’s much lower. Our accountant would be glad to make an individual calculation based on a property, as well as prepare and fill in the Declaration Form.