April newsletter not only for brokers

Attorney escrows are the most commonly used type of real estate escrow. On 1 April 2025, an amendment to the Advocacy Act came into force, which changes the rules for their implementation. The aim of the amendment is to strengthen the protection of clients and increase their confidence in the management of the money entrusted to them. What are the changes?

Newsletter authors: ARROWS (Mgr. Robert Dürrer, Mgr. Jiřina Šlesingerová, office@arws.cz, +420 245 007 740)

Prohibition of cash deposits and withdrawals in escrow accounts by attorneys

It is prohibited for a client to entrust a lawyer with cash for the purpose of depositing it into an escrow account or for the lawyer to withdraw cash from the account. The aim is to eliminate the risk of unauthorised handling of the money, for example embezzlement. The client makes the deposit in principle - either by depositing the cash with a money institution and then transferring it to the escrow account, or directly by wire transfer.

The bank's obligation to inform the client in advance of any transaction on the custody account

The bank must inform the customer of any planned movement in the account before the transaction is executed. If the transaction does not conform to the contractual arrangement, the customer can prevent unauthorised withdrawals in a timely manner.

New Guarantee Fund for compensation for damage caused to the victim

As of January 1, 2026, a guaranty fund is to be established to compensate clients injured by an attorney's criminal activity in connection with the custody of money. In the case of escrow related to the sale of residential property, the compensation should amount up to CZK 5 million.

How do we do it at ARROWS?

At ARROWS Law Firm, LLC, we had the protection of client money as a priority long before the amendment required it. That's why we had already developed our own web application, mojeuschova.cz, which allows our clients to monitor the movements in their business case escrow account in real time.

All transactions are visible as soon as money is credited or debited from the account. Clients thus have their funds under constant control - without unnecessary waiting and unpleasant surprises.

Court decision: electronic signatures of contracts

With the increasing use of online contracting tools, real estate agents are also increasingly relying on electronic signing of documents. But what to do in a situation where a client refuses to pay the commission after signing, claiming that they did not validly enter into the contract? The Municipal Court in Prague dealt with just such a case.

The client concluded a real estate agency contract with a real estate agency. The contract was signed electronically via DocuSign - the client received the document by e-mail, opened it via a unique link and confirmed his will by entering a code sent to his mobile phone.

The broker then procured the client an interested party who was willing to buy the property. Although the broker was entitled to a commission, the client refused to pay it. Among other things, he claimed that the contract was not valid because it was not signed with a so-called guaranteed electronic signature.

The court disagreed with this view. It confirmed that even a so-called simple electronic signature - i.e. confirmation of a document via e-mail and SMS verification - is sufficient under Czech and European legislation for the valid conclusion of a contract. The decisive factor is that the identity of the signatory and his or her will to conclude the document can be proven in this way.

This decision is important for anyone working with electronic signatures. It confirms that even an electronic form of contract is a fully fledged legal act that can give rise to an obligation to pay commission - just like a signature on paper.