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Buying a property from a developer

You no longer want to pay rent and would like to move into your own. Of the offers, you were most interested in the apartment or house from the developer you decided to buy. What should you look out for so you don’t lose your savings?

stavba bytového domu
7 minutes of reading

Chapters of the article

Special caution is required when making such an investment. One is often blinded by the vision of one’s dream house with a rose garden or a luxuriously furnished apartment on the roof of a house in the city centre. At least that’s what the colourful, appealing visuals on posters and in the developer’s brochures look like. It must be said that the advantages of such a property are certainly many. However, from a legal point of view, it is usually a much more complicated operation than a normal property purchase. A situation where we commit to investing money in an apartment or house that is not yet standing can be very risky. At the moment of purchase, it usually exists only “on paper” in the form of visualizations. Even if you go to the place, it won’t help you much. The most you will see is the skeleton of the house, the workers and the construction machinery. In the end, the construction may be delayed for various reasons or even not happen at all. Alternatively, it may not match the original contract documents.

Check the developer

Before you sign any contract, check the developer who will be carrying out the project. The best time to do this is before a personal meeting or viewing. You can find information in public registers and elsewhere on the internet. It may be suspicious if you find no information and no mention of projects already undertaken, or conversely, a connection to a negative case against the company.

Be sure to also check the property itself. For example, if there are any easements, liens or other rights that could complicate a future project. Check the owner and other information available from the land registry, which can also be accessed online. If you wish, it is also possible to have an extract issued, which is more detailed.

Ideally, then check how the project is financed, whether the developer has a loan, with which bank and how it is secured. Consideration should be given to whether to take the risk of so-called self-funded projects. This is where the developer has a number of projects from which it raises funds to build more, and if construction of one stops, construction of the others usually stops as well.

It is also advisable to require the submission of all planning permissions or building permits at the outset. If a decision is missing, there is a risk that the developer will not receive it and the project will not go ahead. These cases are by no means exceptional. Particularly for flats in an extension, it may happen that the conservation authorities intervene in the project.

Real Estate Purchase or Sale

We provide a complete package of legal services related to real estate sales and purchases, including reservation contracts and escrow services. We will also help you with all tax and land registry issues. Our work is fast and accurate, ensuring a worry-free transaction. You’re also welcome to pay after services are provided.

Pitfalls of the purchase contract

For example, Jan, a programmer, wanted to buy a flat and was in a hurry. He didn’t have much time to check all the details, or maybe just the patience. All he wanted to do was to check that the purchase contract did not contain any obvious errors, but otherwise he was eager to sign it. The apartment was not yet standing, but it was supposed to be beautiful, with a dreamy view and in a “trendy” Prague neighborhood.

However, we pointed out to him that according to the contract, the price was to be paid right at the beginning, without any tangible guarantee that the apartment would be built at all(the building permit had not yet been issued for the entire project). At first, the client considered this an inconvenience, which we were throwing a stick under his feet and spoiling his joy. But then he realized that the risk resulting from what we had pointed out to him was quite high.

However, the developer agreed to most of our client’s demands, which we recommended to him to take into account in the contract, and he gave in. After all, the price was very high, so it was worth fighting for the client and spreading the purchase price at least a little.

In the end, the dominant part was paid after the completion of the construction. The contract for the purchase of the apartment was concluded and today the apartment is almost completed and transferred to the ownership of Mr. Jan. The remainder of the escrow will be paid when the approval of all adjoining premises is completed.

All duly drawn up

The buyer should also not rely only on verbal agreements and promises about certain parameters or features of the property. Everything should be in black and white and part of the contract. Then he or she will not have to worry about something being made differently or wrong when handing over the flat. In addition to spatial visualizations and models, we recommend requiring technical drawings with precise parameters. This also applies to any modifications requested by the client compared to the “catalogue form”, so-called client changes. For example, Mr Jakub, a lawyer from Mariánské Lázně, found that his apartment was ten square metres smaller than the project indicated. Fortunately, the contract specified the exact deviation that could be tolerated and he was compensated. However, beware of such percentage deviations. We also dealt with a case of a house where the ceiling was only two metres twenty metres above the ground instead of 2.5 metres. In such a case, it is practically impossible to remove the defect and the only solution is to withdraw from the contract.

Minor faults often involve poorly seated doors or built-in wardrobes. Here, the devil is indeed in the detail.

When you hand over your flat or house, or ideally during construction, you can take along a professional who specialises in property inspection to inspect the property properly. Compared to the purchase price, this service is not expensive and can save you a lot of inconvenience. The handover is by no means a formality, so really inspect everything carefully. If you find a defect, document it, perhaps by taking a photo on your mobile phone, and record it in the handover report. You have the right to have any defects that were on the property at the time of handover removed. However, we recommend that you also explicitly include a guarantee in the contract for defects that arise after handover. These are two different legal situations.

This article was prepared for the Lidové noviny series “Law & Housing”

  1. What to look out for when buying a property
  2. How to get a mortgage
  3. What to check before buying a property
  4. Who pays the property transfer tax and how?
  5. What should be included in a property purchase contract
  6. The most common mistakes when drafting a proposal to the Land Registry
  7. Buying a property from a developer
  8. Keeping the purchase price when buying a property
  9. The difference between a condominium and a freehold
  10. What is an annuity?
  11. How to properly gift a property
  12. What is the purpose of an easement or servitude?
  13. Making a will and settling an estate
  14. What is a collation
  15. What shouldn’t be missing in a lease agreement
  16. When rent increases can be made
  17. Termination of the lease
  18. Agreement to end the tenancy
  19. How to draw up a work contract with a tradesman
  20. Hidden defects and cancellation of a work contract
  21. When do you need planning permission to renovate a property?
  22. Home Rules
  23. What does serving on a condominium board entail?
  24. Why not underestimate the bylaws in a condominium
  25. Common areas in a block of flats
  26. What is involved in refurbishing a block of flats
  27. Can a condominium or housing association go into debt?
  28. How to renovate a house or cottage
  29. What to watch out for when dealing with a construction “company”?
  30. Building a house on a “green field”
  31. How to remove land from the agricultural fund

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Author of the article

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

Education
  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

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