Legal Services for Foreign Nationals Buying or Selling Real Estate in Czechia

Real estate transactions in the Czech Republic for foreign nationals involve specific legal pitfalls, from AML obligations to cadastral proceedings and tax regulations. This article summarises what legal services it makes sense to expect from attorneys, and how the lawyers at ARROWS, a Prague-based law firm, protect the interests of foreign nationals at every stage of selling or purchasing real estate in the Czech Republic.

Real estate transactions involving foreigners in the Czech Republic require a combination of client protection and compliance with the obligations of a real estate broker under the Real Estate Brokerage Act, AML regulations, and cadastral law. Even a minor mistake in the purchase agreement may result in the cadastral registration being rejected, delays of weeks to months, or the entire transaction falling through.

In addition, a foreigner faces further practical obstacles, such as unfamiliarity with legal terminology, the Czech Cadastral Register, the tax regime, frequent signing of documents abroad, and the need to document the source of funds as part of AML checks. The attorneys of ARROWS, a Prague-based law firm, can join the process alongside the broker, or act entirely independently, and provide the client with comprehensive legal due diligence, secure contractual arrangements, communication with the bank, the Cadastral Office, or the homeowners’ association (SVJ), as well as handling cross-border aspects thanks to the ARROWS International network.

Introduction: Why a foreigner needs a strong intermediary and an attorney

A foreign buyer can generally acquire ownership of apartments and houses in the Czech Republic without special restrictions, whether for their own housing or as an investment. Restrictions typically apply only to specific categories, such as agricultural land, or situations arising from international sanctions regimes.

This relative “openness” of the market leads foreigners to often underestimate the legal and procedural side of the transaction and rely exclusively on the broker or the developer. This can be a problem especially when the real estate agency uses one-sided template agreements that favor the seller or the agency itself.

From a foreigner’s perspective, it is essential to understand the role of the real estate broker and the attorney: the broker typically finds the counterparty and coordinates the deal, while the attorney is responsible for the legal certainty of the transaction, the correctness of the contractual documentation, and the secure settlement of the purchase price. The Czech legal system is based on the principle that ownership of real estate arises only upon registration in the Cadastral Register, not merely by signing the purchase agreement or paying the purchase price.

Without understanding this logic, a foreigner can easily end up in a situation where they pay but are not yet formally the owner, or where the Cadastral Office rejects the registration due to an error in the purchase agreement. The complexity is further increased by strict requirements for client identification and verification of the source of funds under the AML Act, which affect real estate agencies, attorneys, and banks financing mortgages.

In recent years, requirements for real estate brokers have tightened significantly, including the obligation to appoint and register an AML contact person and to carry out ongoing monitoring of risky transactions. This often comes as a surprise to foreigners—they must submit bank statements, tax returns, or other evidence of the origin of the money, and the transaction may be delayed.

In practice, the attorneys at ARROWS, a Prague-based law firm, commonly encounter situations where a foreigner enters the process at a point when they have already signed a reservation agreement, paid a reservation fee, and received a dictated version of the purchase agreement from the real estate agency or developer. At this stage, the room for fundamental changes is limited, and every amendment means renewed negotiations and the risk of losing the property or the reservation fee. For a foreign investor, it is therefore often more efficient to involve attorneys from the very beginning—they can help set up the relationship with the broker, prepare or amend the brokerage and reservation agreements, and structure the transaction so that it complies with Czech law as well as the internal rules of banks and investors.

Legal framework for real estate brokerage and the protection of foreigners

The Real Estate Brokerage Act and the broker’s position

The key regulation governing real estate brokerage is the Real Estate Brokerage Act No. 39/2020 Coll., which sets out the conditions for providing real estate brokerage services, mandatory elements of the agreement, and the information duties of real estate brokers towards clients. This act requires, among other things, a written real estate brokerage agreement and imposes a duty on the broker to inform the client about material facts relating to the property.

It also prohibits combining the real estate brokerage agreement with the purchase agreement into a single document. A foreigner should therefore insist that all arrangements with the real estate agency are transparent and structured as separate documents. Real estate brokerage is now a regulated trade, which means that brokers must meet certain qualification requirements and their activities are subject to supervision by the Trade Licensing Offices. For foreigners, it is practical to verify whether the broker in question actually holds a valid authorization, has appropriate experience and education, and continues professional training in legal and tax changes.

In practice, this can be done both by checking public registers and by simply asking the broker; a professional should be able to provide evidence of their licenses and experience. The attorneys at ARROWS, a Prague-based law firm, can verify for a foreign client not only the broker, but also their business terms, professional liability insurance, and any disciplinary or court disputes.

The Real Estate Brokerage Act also introduces limits for certain contractual arrangements, for example regarding the duration of exclusive brokerage agreements or the conditions for their termination. A foreigner should understand whether they are committing to exclusive cooperation with one agency, how long the commitment lasts, and what penalties may apply if the cooperation is terminated early.

An improperly drafted exclusivity clause may lead to a situation where a foreigner pays commission to two different brokers, or where the real estate agency prevents them from approaching other interested parties or brokers.

Brokerage agreement with a foreigner: What to expect and what to watch out for

• Roles and obligations of the parties: The broker must actively seek interested parties for the property, provide information, and act in the client’s interest. The client (a foreigner in the role of buyer or seller), in turn, is obliged to provide truthful information and full cooperation.

• When and how the commission is paid: It is crucial to monitor the moment when the broker becomes entitled to the fee. The attorneys at ARROWS recommend linking the commission to the actual success of the transaction (e.g., registration in the Cadastral Register or transfer of funds into escrow), rather than merely to a formal “introduction to the counterparty”.

• Clear scope of services: The agreement must precisely define what the intermediary will arrange. It is necessary to clarify whether it is only about contacting interested parties, or also about coordinating technical steps, and whether any legal services are already included in the commission.

• Limits of a real estate agent: An agent must not provide comprehensive legal services reserved for attorneys. They often work only with template contracts that do not reflect a foreigner’s specific needs, the international context of the transaction, or their tax position.

• System set-up for investors: For development groups and investors, it makes sense to set these relationships up conceptually. This means unifying contracts with multiple agencies, clearly defining due diligence standards, and obligating the agent to mandatory cooperation with the client’s legal team.

The role of an attorney in brokerage for foreigners

Independent legal counsel vs. the “real estate agency’s lawyer”

In practice, we often encounter a situation where a real estate agency recommends “its” attorney, who prepares the purchase agreement, escrow, and the application for registration in the Land Registry. From a foreigner’s perspective, this model may seem convenient – everything is handled “under one roof” and communication runs through the agent. The problem arises when the parties’ interests diverge or when the contractual documentation significantly favors one party, typically the seller or the developer.

Czech legal ethics recognizes the concept of conflict of interest, and an attorney must not represent two parties with opposing interests if it cannot reasonably be expected that they will act impartially. In more complex transactions involving a foreigner—where, for example, yield guarantees, renovations, development projects, or financing in another currency are addressed—it is therefore often more appropriate for the foreigner to have their own attorney independent of the real estate agency. Attorneys from ARROWS, a Prague-based law firm, commonly step into transactions where a “contract attorney” of the real estate agency is already involved and act exclusively as advisors and representatives of the foreigner—whether on the buyer’s or the seller’s side.

An independent attorney for a foreigner has several advantages. They can review the reservation agreement and the purchase agreement, point out unreasonable provisions on contractual penalties, unilateral termination options, unbalanced defect provisions, or unclear payment terms. They can also recommend amendments to the contract so that it reflects the client’s tax residency, their financing, the structure of an SPV or an investment fund, and potentially even the future planned sale of the property.

If the transaction becomes complicated (e.g., bank financing gets stuck, a legal defect in the property is discovered, the seller is in insolvency proceedings), the foreigner has “their” lawyers who protect their interests and can negotiate firmly but constructively with the other side.

ARROWS, a Prague-based law firm, is insured for professional liability up to CZK 400,000,000, which is an important parameter for foreign investors and development groups—especially in large transactions and portfolio acquisitions. In addition, thanks to the ARROWS International network, the firm’s lawyers have experience coordinating cross-border aspects, whether it involves aligning Czech and foreign tax regulations, banking regulations, or obligations under the investor’s domestic law.

Who can you contact?

Attorney escrow and secure settlement of the purchase price

For foreigners, the most sensitive issue is often the secure payment of the purchase price—especially when they come from a country where a comparable land registry system or attorney escrow arrangements do not exist. Czech practice is based on the buyer not sending the purchase price directly to the seller, but into an attorney, notarial, or bank escrow account, from which it is released only after contractually defined conditions are met.

Experts in real estate law and the protection of foreigners consistently warn that paying the seller directly before registration in the Land Registry is highly risky—the buyer may lose the money without becoming the owner, and subsequent recovery is complex and costly.

Attorney escrow is regulated in detail by the professional regulations of the Czech Bar Association, which impose an obligation to hold escrow funds in separate bank accounts designated as “attorney escrow” and prohibit cash handling. Funds must always be received and released cashlessly via the escrow account. An attorney is required to record each escrow in the so-called Electronic Register of Escrows, and reporting the receipt of funds into escrow in this electronic system under the Advocacy Act has been a long-standing obligation.

For each reported escrow, a contribution is paid into the Guarantee Fund. This increases transparency and oversight of escrows, which is a welcome safety feature for foreigners. If, despite these rules, an attorney were to handle the escrow unlawfully, the client may be compensated from the Guarantee Fund of the Czech Bar Association, up to CZK 2.5 million, or CZK 5 million in the case of escrow of the purchase price for a residential property. These limits apply to one specific escrow and represent another level of protection for the buyer—including foreigners, who are otherwise more vulnerable in the Czech legal environment.

From the perspective of a real estate intermediary, cooperation with a law firm in Prague that provides escrow services is practical also in terms of reputation—clients perceive that the agency works with vetted professionals and minimizes transaction risks. For foreigners, it is also valuable that attorney escrow can be set up in detail according to their requirements—for example, splitting the purchase price into multiple tranches depending on the achievement of construction milestones in a development project, or tying the release of part of the purchase price to the removal of specific legal defects (deletion of a mortgage lien, termination of a lease agreement, etc.). In this area, ARROWS, a Prague-based law firm, can provide a full service—from drafting the escrow agreement wording, through maintaining the escrow account, to communication with the bank, the Land Registry Office, and the counterparty.

Why a foreigner needs their own legal team

Potential issues	How ARROWS can help (office@arws.cz)
Unbalanced contracts : the reservation agreement and purchase agreement significantly favor the seller or developer and do not address the specifics of a foreign buyer	Contract review and negotiations: we will thoroughly review the contractual documentation, propose amendments, and negotiate balanced terms with the counterparty, including the language version and choice of law.
Risky escrow : the escrow is handled by a person without sufficient regulation, or the buyer pays the seller directly	Secure settlement: we will arrange attorney escrow in accordance with Czech Bar Association (ČAK) regulations, set the release conditions, and ensure coordination with the land registry proceedings and bank financing.
AML complications : the bank, broker, or attorney refuses the transaction due to an unclear source of funds of the foreign buyer	AML advisory: we will prepare a strategy for evidencing the source of funds, assist with documentation and communication with the bank, broker, and authorities, including for clients from high-risk countries.
Rejection of registration in the Land Registry : formal errors in the purchase agreement, inconsistencies with the Land Registry data, missing requirements	Preparation and filing of the application for registration: we will prepare an error-free agreement and the application for registration, verify the Land Registry data, and continuously monitor the proceedings to avoid unnecessary delays.
Tax and energy obligations : late or incorrect fulfillment of income tax or real estate tax obligations, missing energy performance certificate (PENB)	Comprehensive tax and compliance advisory: we will structure the transaction with regard to the foreign buyer’s tax residency, monitor tax return deadlines, and oversee the PENB, occupancy approval, and the property documentation.

AML and compliance: Specific obligations when dealing with foreign nationals

AML obligations of real estate intermediaries and attorneys

Real estate brokers, attorneys, and banks in the Czech Republic are so-called obliged entities under Act No. 253/2008 Coll., on certain measures against the legalization of proceeds of crime and the financing of terrorism (the AML Act). This means they must identify and verify clients, monitor transactions, assess risks, and report suspicious transactions to the Financial Analytical Office (FAÚ).

A real estate intermediary is required to identify every seller and buyer (including their representatives acting under a power of attorney) and, in the case of legal entities, to determine their beneficial owner. These requirements were significantly tightened with effect from 1 January 2021; brokers must not only identify the client but also continuously update the client’s data, implement internal control mechanisms, and mandatorily report suspicious transactions. If the client is a politically exposed person or comes from a high-risk country, the broker and often the attorney must carry out enhanced due diligence regarding the origin of assets and sources of financing.

From 1 January 2021, all real estate agencies must appoint and register an AML contact person with the Financial Analytical Office within 10 business days of the appointment. Any change of the contact person or their details must be reported within five business days. Failure to comply with these obligations may lead to high administrative fines, suspension of the agency’s activities, and in extreme cases even criminal liability, especially if it knowingly assisted in the legalization of proceeds of crime. Lawyers from ARROWS advokátní kancelář can help real estate companies set up internal AML policies, train staff, and provide practical assistance in resolving problematic cases.

Attorneys are also obliged entities under the AML regime, and if they provide escrow services or prepare agreements for the transfer of real estate, they must identify the client and carry out appropriate due diligence of the client and the transaction. For foreign nationals, this often means verifying the passport, residence permit, corporate ownership structure, and the source of the purchase price, including foreign income or proceeds from the sale of other assets.

The legal reality here is complicated – sometimes the AML regime results in an attorney or bank refusing the transaction if the lawful origin of funds cannot be proven or doubts cannot be removed.

How AML affects foreign nationals in practice

From a foreign national’s perspective, the AML process can feel unpleasant: they must provide sensitive financial information, translate foreign documents, submit tax returns, and explain transactions that no one cares about in their home country. Moreover, if they come from a country that banks and authorities consider “high-risk,” they may face stricter internal rules of the bank or the law firm in Prague.

They may also encounter longer approval processes and sometimes even a refusal of the transaction. In practice, we often see that a foreign buyer plans for a specific date to sign the purchase agreement or draw down a mortgage, but the bank’s compliance department requests additional documents, shifting the entire process by weeks. If the reservation or purchase agreements are set without regard to these real timelines, the foreign buyer may face contractual penalties for delay, forfeiture of the reservation fee, or the seller’s withdrawal from the agreement. 

In case of doubts, both the broker and the attorney must request evidence of the source of funds, for example through loan agreements, inheritance decisions, purchase agreements for other real estate, income confirmations, or other relevant documents. If the client does not provide cooperation or the documents do not match, the obliged entity must refuse the transaction and, if applicable, file a report with the Financial Analytical Office. A foreign buyer often only at this stage understands that it is not enough to have “money in the account,” but that they must prove its lawful origin.

Lawyers from ARROWS advokátní kancelář can help foreign nationals already at an early stage – assess the risk level of their situation from an AML perspective, prepare a set of documents that banks and attorneys will require, and explain the timeline that needs to be taken into account. For more complex structures such as foreign trusts, holding structures, or funds, they help clarify the chain of beneficial owners and prepare supporting documents for Czech banks and intermediaries.

Related questions

1. What documents may the broker, bank, and attorney request from me for AML purposes?
Typically, this includes an identity document, proof of residence in the Czech Republic (if applicable), an employment contract or tax return, bank statements, and possibly agreements and decisions evidencing the origin of the money (sale of other real estate, inheritance, gift, loan agreement, etc.). Lawyers from ARROWS advokátní kancelář will help you prepare a document package that best meets the requirements of banks and intermediaries and minimizes delays.

2. Can a transaction be refused solely because I am from a “high-risk country”?
Nationality alone is not a reason for automatic refusal, but clients from certain countries are assessed more strictly by banks and obliged entities and must expect more extensive checks. ARROWS advokátní kancelář encounters these situations regularly and can advise you on how to structure the transaction and documentation from the outset to maximize the chances of successful approval.

3. I am concerned about sharing my financial documents – is it safe?
Attorneys are bound by a duty of confidentiality and handle your documents on a confidential basis; real estate agencies and banks are subject to similar personal data protection and AML documentation regimes. If you want to be sure that your sensitive data is secure and that you share only the strictly necessary minimum, it is advisable to consult the specific requirements with the legal team at ARROWS, a Prague-based law firm, who will help you set up a process appropriate to your needs.

The property purchase process from a foreigner’s perspective

Reservation agreement and its pitfalls for foreigners

In Czech practice, a reservation agreement is a common step between the initial interest in a property and the conclusion of the purchase agreement. Under it, the seller undertakes not to offer the property to others for a certain period of time, and the buyer pays a reservation fee, which is usually credited towards the purchase price. As a rule, if the buyer ultimately refuses to enter into the purchase agreement for reasons on the buyer’s side, the reservation fee is forfeited in favour of the seller or the real estate agency.

For foreigners, it is critical to whom the reservation fee is paid and under what conditions it is refundable. A safer option is to deposit the fee into an attorney escrow, ideally with the attorney who will subsequently administer the escrow of the purchase price as well. If the fee is paid directly to the real estate agency or the seller, there is a risk of difficult recovery in the event of a dispute or if the transaction falls through for reasons on the seller’s side. A foreign buyer should also insist on clear language wording – the reservation agreement should be either bilingual or supplemented with a binding translation that they understand.

The reservation agreement should precisely define the next steps: who will prepare the draft purchase agreement, by when, how long the buyer has to secure financing, how the signing schedule is set, and when the application for registration in the Cadastral Register will be filed. Missing or overly general wording often leads to disputes over the refund of the reservation fee, uncertainty as to responsibility for delays, and a loss of the foreign buyer’s negotiating position. Our attorneys in Prague at ARROWS therefore recommend that clients do not sign a reservation agreement without a legal review, especially if it includes a high reservation fee or aggressive contractual penalties.

get in touch with us,
we’ll take care of it for you

We respond within 24 hours!

office@arws.cz

245 007 740

ARROWS

Law firm
for business and real estate

Schedule a consultation

Purchase agreement, certified signatures, and the application for registration in the Cadastral Register

A purchase agreement for real estate must always be in writing in the Czech Republic; otherwise, the transfer of title is absolutely invalid. The agreement must precisely identify the transferred property according to the data in the Cadastral Register (plot numbers, unit number, title deed, cadastral area) and clearly specify the parties and the purchase price. A foreign buyer should ensure that the identification details match their travel document and that the agreement also includes provisions reflecting their status as a tax resident or non-resident.

Although Czech law does not mandatorily require officially certified signatures on the purchase agreement, cadastral offices in practice verify the authenticity of signatures and official certification is the standard. For foreigners signing abroad, the certification must be carried out either at a diplomatic mission of the Czech Republic or by certification before a local notary supplemented with an apostille or superlegalisation, depending on which international treaties apply to the given country.

Incorrect signature certification may lead to the rejection of the application for registration or the need to sign the agreement again, which is logistically and time-consuming for foreign persons. After signing the purchase agreement, an application for registration of title in the Cadastral Register is filed on the prescribed form, with the purchase agreement and, where applicable, other documents attached (consents, mortgage agreements, powers of attorney, etc.).

The application may be filed by any party to the proceedings; often it is filed by the attorney representing the buyer or the seller. Filing is possible in person, by post, or electronically via a data box. The administrative fee is CZK 2,000 for each application for registration, regardless of the method of filing.

After the application is filed, the cadastral office marks the title deed with so-called “plombas” and initiates the proceedings; the affected persons are informed and have the opportunity to comment. If the cadastral office finds defects in the purchase agreement or other supporting documents, it will reject the registration and the transaction will be delayed or complicated. The most common errors relate to inconsistencies between the agreement and the cadastral data, missing signatures, insufficient specification of the transferred unit, or ignoring existing easements or liens. Our attorneys in Prague at ARROWS therefore recommend having both the purchase agreement and the application for registration always prepared, or at least reviewed, by an attorney experienced in Czech cadastral law.

Legal due diligence of the property: What needs to be verified

1. Review of the Cadastral Register

• It is necessary to verify ownership and the existence of legal defects (liens, easements, enforcement proceedings, pre-emption rights, or notes on pending proceedings).
• The Cadastral Register is available online free of charge, but for detailed extracts and correct interpretation of the data, it is advisable to use an attorney.

2. Checking hidden legal risks and other registers

• Not all encumbrances have to be recorded in the Cadastral Register (e.g., lease agreements, family home rights, court disputes).
• A lawyer therefore checks the Insolvency Register, the enforcement (bailiff) records, the Commercial Register, and requests certificates of no arrears (from the tax administrator or the owners’ association (SVJ)).
• In a sale “below market price” or between related parties, if the seller later faces financial difficulties there is a risk that the transfer will be challenged in insolvency proceedings as an avoidable transaction.

3. Building and technical condition

• It is necessary to verify the occupancy approval status, building permits, compliance with the documentation and the zoning plan.
• For apartments, it is crucial to determine the condition of the common areas, the management rules, the amount of contributions to the repair fund, and planned renovations (future costs).

4. Energy performance (PENB)

• The seller must present the building energy performance certificate to the buyer before signing the agreement.
• Failure to comply with this obligation may result in a fine for the seller (up to CZK 50,000 for individuals, up to CZK 100,000 for legal entities/entrepreneurs), and the buyer may challenge the agreement.

5. Comprehensive approach (ARROWS law firm in Prague)

• For foreigners, it is ideal to combine a legal review with a technical inspection by construction experts.
• This approach provides a complete overview of the real value, repair costs, tenants’ claims, and the risks of future disputes.

Related questions

1. When do I, as a foreigner, become the actual owner of real estate?
You become the owner only at the moment the Cadastral Office permits the registration of the ownership right in the Cadastral Register and this registration is recorded; the purchase agreement itself and payment of the purchase price are not sufficient. ARROWS law firm in Prague will ensure the correctness of the purchase agreement, the application for registration, and the course of the proceedings so that the risk of rejection or delay is minimal.

2. Is it safe to pay the full purchase price before registration in the Cadastral Register?Paying directly to the seller before registration is considered highly risky, and professional practice always recommends using an attorney, notarial, or bank escrow, where the release of funds is tied to the registration of the ownership right and other conditions. The attorneys at ARROWS law firm in Prague will set up the escrow agreement for you so that it protects both your money and the timely acquisition of ownership.

3. Do I, as a foreigner, have to come to the Czech Republic in person to sign the agreements?
It is not always necessary; you can use a power of attorney with an officially certified signature and an apostille or superlegalisation, or sign the agreements at a Czech diplomatic mission in your country. ARROWS law firm in Prague will prepare the power of attorney for you, ensure the correct certification procedure in the specific country, and then arrange all formal steps in the Czech Republic on your behalf.

Specifics of selling real estate to foreigners: Contractual arrangements, language, jurisdiction

Contract language, translations, and signature certification abroad

In transactions involving a foreign party, the language issue is key not only from a practical but also a legal perspective. The purchase agreement and other documents may be concluded in a foreign language if the parties agree, but for the purposes of cadastral proceedings the Czech version or an officially certified translation is usually submitted.

A foreigner should insist that the text they sign is either in a language they understand, or that a binding translation is available and has been reviewed by a lawyer. Otherwise, there is a risk that they will not understand the scope of their rights and obligations, and any defence in court will be more complicated.

Signature certification abroad has its own specific procedural rules. If there is a bilateral treaty on legal assistance between the Czech Republic and the relevant state, signature certification abroad may be directly recognised in the Czech Republic. In other cases, the signature must be certified by a notary in the foreign country and subsequently affixed with an apostille under the Hague Convention or so-called superlegalisation, which is a higher level of authentication involving the Ministry of Foreign Affairs and the Czech diplomatic mission. For transactions involving foreigners, it is therefore essential to allow sufficient time for these formalities.

The attorneys at ARROWS law firm in Prague can prepare precise guidance for a specific country on how to arrange signature certification, which institutions to visit, and how long the process usually takes. Thanks to the ARROWS International network, it is also possible to use contacts with foreign attorneys who will guide the client through local formalities and ensure that the documents meet the requirements of Czech authorities.

Choice of law and dispute resolution

For transfers of real estate located in the Czech Republic, Czech substantive law applies as a rule—ownership and property rights in rem are governed by lex rei sitae, i.e., the law of the place where the real estate is located. This does not mean, however, that the contracting parties cannot regulate procedural aspects in the purchase agreement, such as the choice of court or an arbitration clause, and other related obligations (e.g., warranties, additional payments, or ancillary services) may be subject to the agreed law.

In the case of lease agreements involving foreigners, the situation is even more flexible—the parties may expressly agree on the choice of Czech law and the jurisdiction of Czech courts, which is often a practical solution from the perspective of both landlord and tenant, especially if the apartment is located in the Czech Republic and it is logical to resolve any disputes here. The agreement may include a provision such as: “The Parties have agreed that disputes arising out of this agreement and in connection with it will be resolved by the locally competent Czech court under Czech law.” The attorneys at ARROWS law firm in Prague routinely draft such provisions so that they comply with conflict-of-law rules and are subsequently enforceable in the Czech Republic and abroad.

For investors and funds with a foreign structure, it may be appropriate to combine Czech law for the transfer of real estate with the law of the home jurisdiction for intra-group relationships (shareholders’ agreement, financing documentation, etc.). In such cases, it is important for foreign investors to have lawyers at their side who understand not only Czech real estate law, but also private international law and the tax implications – which is a typical area of expertise of ARROWS, a Prague-based law firm.

Tax, energy and administrative obligations associated with the transaction

Income tax, real estate tax and VAT

1. Abolition of the acquisition tax and the current status

• A separate real estate acquisition tax no longer exists (it was abolished in 2020).
• The main tax implications now relate to income tax (upon sale) and the annual real estate tax.

2. Income tax and tax residency

• Residents in the Czech Republic are taxed on their worldwide income, while non-residents are taxed only on income from sources in the Czech Republic, which includes the sale of Czech real estate.
• For individuals, income from a sale falls under “other income” (Section 10 of the Income Taxes Act) unless exempt (e.g., by meeting the ownership time test or by use for one’s own housing).
• Individual income tax is progressive: 15% up to the statutory tax base threshold and 23% above this threshold.
• International implications for foreigners must be assessed under the relevant double taxation treaty; Czech tax is typically credited in the home state.

3. Annual real estate tax

• The buyer (a foreigner as well as a Czech citizen) must file a tax return by 31 January of the year following the acquisition of ownership.
• The tax is paid annually and depends on the size, type and location of the property; in large cities it may gradually increase based on municipal decisions. In international comparison, it is relatively low.

4. VAT rules (new and refurbished buildings)

• VAT applies to the transfer of new or substantially refurbished properties sold by developers or entrepreneurs.
• The standard rate is 21%; however, for so-called social housing (apartments up to 120 m², houses up to 350 m² intended for permanent residence), a reduced rate of 12% applies.
• The sale is exempt from VAT after 10 years from final approval, first use, or completion of a substantial change.

5. The importance of tax structuring (ARROWS advokátní kancelář)

• Incorrect VAT setup or failure to meet tax obligations may lead to penalties and significantly reduce the return on investment.
• ARROWS links legal and tax services, enabling investors to structure transactions optimally (e.g., using holdings or funds) with regard to both the Czech and foreign markets.

Energy performance certificate, occupancy approval and other documents

When selling real estate, the seller is obliged to provide the buyer with an Energy Performance Certificate of the Building (PENB) if the property falls within a category to which the obligation applies. Typically, this concerns residential buildings with an area over 50 m² and certain commercial premises; exemptions apply, for example, to recreational properties, historic buildings or industrial halls.

The seller must state the building’s energy class already in the advertisement and submit the certificate to the buyer before signing the purchase agreement; otherwise, the seller faces a fine of up to CZK 50,000 (for legal entities and self-employed individuals up to CZK 100,000) and the buyer may challenge the agreement.

Foreigners often do not know that this document exists and what it means – the PENB provides information on the building’s energy efficiency and the costs of its operation (heating, cooling, water heating, etc.). From both a legal and economic perspective, it is therefore advisable to actually review the certificate and, in the event of any discrepancy with the condition declared in the agreement, address liability for defects. Attorneys from ARROWS advokátní kancelář often point out that the absence or outdated nature of the PENB may also be a signal of other omissions on the seller’s side.

In addition to the PENB, it is important to verify the building’s occupancy approval status, i.e., whether the building is approved as an apartment building, a family house, non-residential premises, etc., and whether any construction proceedings are pending regarding the building or neighbouring properties. A mismatch between the factual and legal status (e.g., an apartment officially registered as non-residential premises) can have fundamental implications for use and for mortgage financing. Developer projects additionally require a review of documentation relating to utility networks, connections, easements and the future management of common areas.

Obligations towards the owners’ association (SVJ) and the building manager

For apartment units in buildings with an owners’ association (SVJ) or another building manager, the new owner is obliged to notify the manager of the change of ownership, provide their contact details and state the number of persons who will use the apartment. The Civil Code imposes on the unit owner the obligation, without undue delay, to notify the person responsible for the management of the building of their name and address and, in the case of a lease relationship, also details of the persons using the apartment.

At the same time, the owner must contribute to the management of the building and the land in proportion to their share in the common parts and comply with the rules for building management and the use of common areas. When transferring an apartment, it is advisable for the seller to provide the buyer with confirmation of no outstanding debts towards the SVJ to avoid disputes over who is obliged to pay arrears from previous periods.

ARROWS, a Prague-based law firm, therefore routinely includes provisions in purchase agreements on the allocation of the obligation to pay underpayments and overpayments, as well as the seller’s obligation to ensure the handover of documents from the building manager. For foreigners, it is important to understand that conflicts within the owners’ association (SVJ) may even lead to a court-ordered sale of the unit of an owner who repeatedly breaches their obligations over the long term and significantly interferes with the rights of the other owners.

Setting up cooperation between a foreigner, an intermediary, and ARROWS, a Prague-based law firm

Vetting the intermediary and setting the mandate

For a foreigner entering the Czech market for the first time, it is difficult to distinguish a professional real estate agency from entities that lack sufficient experience or comply with legal obligations only formally. The first step should be to verify whether the broker holds a valid regulated trade licence and the relevant qualification, which can be checked in the Trade Licensing Register and from submitted certificates.

A foreigner may ask about the number of completed transactions, specialisation in foreign clients, knowledge of English or another language, and experience with mortgages for foreigners.

Attorneys from ARROWS, a Prague-based law firm, can carry out a quick “background check” of the real estate agency the foreigner wants to work with, including verification of the trade authorisation, litigation history, and market reputation. They will then help set the mandate—i.e., the brokerage agreement—so that it clearly defines the scope of services, exclusivity, commission, warranties, and cooperation when working with attorneys. For foreign investors planning repeated purchases, it makes sense to create a standard master agreement with several vetted real estate partners.

Long-term cooperation for investors and developers

Foreign investors and development groups often do not enter the Czech market as a one-off, but plan a portfolio of transactions—from individual apartments to entire projects. In such cases, it is efficient to establish long-term cooperation with the attorneys at ARROWS, a Prague-based law firm, who will oversee all transactions and set a uniform standard for contractual documentation, due diligence, and compliance processes. This significantly reduces transaction costs, the risk of inconsistencies, and delays or refusals by the Cadastral Office or banks.

ARROWS, a Prague-based law firm, can also act as an outsourced legal department for Czech subsidiaries or SPVs of foreign investors—from preparing internal guidelines for working with real estate agencies, through training brokers and asset managers, to representation in court disputes and dealings with authorities. Thanks to a high professional liability insurance limit and an international network, the firm is able to cover even large and complex transactions, including cross-border acquisitions or financing.

Final summary

For a foreigner buying or selling real estate in the Czech Republic through a real estate intermediary, the legal reality is significantly more complex than it may seem at first glance. It involves the Real Estate Brokerage Act, a strict AML regime, formal rules of the Real Estate Cadastre, tax regulations, energy-related obligations, and internal rules of banks and real estate agencies.

A seemingly “standard” reservation or purchase agreement may contain provisions that expose a foreigner to disproportionate risk—from forfeiture of a high reservation fee, through contractual penalties, to the transaction failing due to refusal of the registration in the Real Estate Cadastre. However, real legal certainty and protection of a foreigner’s interests is ensured only by an experienced legal team that can structure the transaction from the brokerage agreement, through reservation and purchase documentation, attorney escrow, and cadastral proceedings, to tax and compliance impacts. The attorneys at ARROWS, a Prague-based law firm, have long specialised in this area, understand the needs of foreign clients as well as real estate intermediaries, and can connect the legal, tax, commercial, and international aspects of transactions.

If, as a foreigner, you do not want to risk mistakes, unnecessary contractual penalties, delays in registration in the Real Estate Cadastre, problems with the bank, or tax sanctions—and at the same time you want cooperation with the real estate intermediary to run smoothly and professionally—it is sensible to entrust both the setup and execution of the transaction to experts. ARROWS, a Prague-based law firm, will prepare a tailored solution for you, whether you are an individual buyer, an investor, a development group, or a real estate company serving foreign clients. For a non-binding consultation or a specific query, you can contact the attorneys at ARROWS, a Prague-based law firm, at office@arws.cz at any time.

FAQ

1. Do I, as a foreigner, need my own attorney if the real estate agency already has “its” lawyer?
Formally, you do not have to, but from the perspective of protecting your interests we strongly recommend it—the “real estate agency’s lawyer” typically sets up contracts to protect the agency and the seller and cannot fully represent two parties with conflicting interests. Your own attorney from ARROWS, a Prague-based law firm, will focus exclusively on your needs, tailor the contracts to your situation, and ensure that the transaction is safe also in the context of your country of origin; for a detailed assessment of your situation, contact us at office@arws.cz.

2. What key steps should an attorney handle for me when purchasing real estate in the Czech Republic?
Typically, this includes legal due diligence of the property, review or drafting of the brokerage, reservation and purchase agreement, preparation of the escrow agreement, the application for registration in the Czech Land Registry, and, where applicable, coordination of bank financing and tax aspects. The attorneys at ARROWS, a Prague-based law firm, can manage the entire process for you end-to-end, including communication with the real estate agency, the bank and public authorities; you can start with a brief consultation at office@arws.cz.

3. How long does a standard apartment purchase in the Czech Republic take for foreigners, and where can it be delayed?
For a typical resale apartment, the process from offer acceptance to handover of the keys takes approximately 4–8 weeks; for new developments it takes longer depending on completion of construction and final approval (occupancy permit). Delays usually arise when arranging a mortgage, supplementing AML documentation, errors in the purchase agreement or the Land Registry registration proceedings, as well as due to technical or legal defects of the property; the attorneys at ARROWS, a Prague-based law firm, will help you identify the critical points and address them contractually so that the risk of delays and contractual penalties is as low as possible – contact us at office@arws.cz.

4. What are the most common mistakes foreigners make when working with real estate brokers?
Typically, these include signing a reservation agreement without legal review, paying a high reservation fee directly to the real estate agency or the seller, relying on one-sided purchase agreement templates provided by the agency, underestimating AML requirements and tax implications, and, last but not least, ignoring legal defects recorded in the Land Registry (pledges, easements, enforcement proceedings). ARROWS, a Prague-based law firm, can help you avoid these mistakes by getting involved at an early stage of negotiations and setting up cooperation with the real estate agent and the contracts so that they reflect your situation – schedule a consultation at office@arws.cz.

5. Can I use one legal team to handle other matters as well, e.g., leases, tax optimisation or a future sale?
Yes, and it is actually practical – real estate transactions always overlap with tenancy law, tax planning, corporate structuring and sometimes also employment law (e.g., company apartments for employees). ARROWS, a Prague-based law firm, provides comprehensive real estate, tax, corporate and employment law advice, and thanks to the ARROWS International network can also cover cross-border matters; if you are planning a longer-term presence in the Czech Republic, we will be happy to set up a long-term cooperation with you – contact us at office@arws.cz.

6. I am a real estate agent working with foreigners – can ARROWS, a Prague-based law firm, help me as well?
Absolutely – the attorneys at ARROWS, a Prague-based law firm, assist not only foreigners on the buyer’s or seller’s side, but also real estate agencies with setting up contracts, internal AML processes, amending reservation and brokerage agreements, and representation in inspections or disputes. If you want to be sure that your documentation and practice will stand up to scrutiny by authorities as well as demanding international clients, get in touch at office@arws.cz and we will discuss cooperation options.

get in touch with us,
we’ll take care of it for you

We respond within 24 hours!

office@arws.cz

245 007 740

ARROWS

Law firm
for business and real estate

Schedule a consultation

Notice: The information contained in this article is of a general informational nature only and is intended for basic guidance on the topic under the legal framework as of 2026. Although we take the utmost care to ensure accuracy, legal regulations and their interpretation evolve over time. We are ARROWS, a Prague-based law firm, an entity registered with the Czech Bar Association (our supervisory authority), and for maximum client protection we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of regulations and their application to your specific situation, it is necessary to contact ARROWS directly (office@arws.cz). We accept no liability for any damages arising from the independent use of the information in this article without prior individual legal consultation.

Read also:

• Transaction Management for Development Projects: Escrow, AML and Cadastre Filings:
• Legal Challenges and Compliance for Real Estate Brokers in 2026:
• Renting Out Apartments in 2026: Legal, Tax and Accelerated Eviction Rules:
• Czech Eviction Order from 1 January 2026: Faster Removal of Non-Paying Tenants:
• Green buildings in the Czech Republic What legal requirements must investors meet?: