Concluding a reservation contract is a standard step before buying a property. However, it is never worth rushing into signing it. Even if you really like the property, don’t rush to respond and especially don’t sign anything on the spot. Allow yourself time to think about it and discuss the purchase at home.
A reservation contract is not a statutory type of contract, but is governed by the Civil Code.
It may contain a contractual penalty for failure to conclude a contract of sale.
The reservation fee often amounts to CZK 50,000-200,000.
Without termination conditions, you risk losing the full amount.
Escrow can only be provided by a real estate agency under legal conditions.
Not sure what your reservation contract contains? Have it checked by a solicitor before signing – it takes less time than a court case over the reservation fee.
When dealing with a real estate agent, imagine you are in a Persian market where everything is haggled. The more you show willingness to buy in the beginning, the higher the price you will end up paying for the apartment. That’s why, in this article, we’ll advise you on how to proceed when dealing with a real estate agent to get the best price and explain why it doesn’t pay to rush into signing a reservation contract.
What do you do when you arrive at an apartment you really like? Do you immediately let your emotions run away with you and say “I want that one”?
That’s not a good position to start negotiating. Even if buying a home is a matter of the heart for you, for a real estate agent it’s a deal like any other. If they find out that you really like the apartment, they usually immediately follow up with the information that there is a lot of interest in the apartment, that there are three serious buyers after you, and that if you really want the apartment, you need to sign a reservation contract as soon as possible. And now the real estate agency has you in its sights, from which it is not easy to escape.
We provide comprehensive legal services related to the purchase or sale of real estate, including reservation agreements and escrow services. We can also assist with land registry and tax matters. We can handle everything within 48 hours, even when purchasing from a developer.
“It’s a standard contract, that’s what everyone signs here”, you’ll hear from estate agents. Signing a reservation contract right away when viewing a property is one of the biggest mistakes a buyer can make. By signing a reservation contract, you are not only reserving an apartment, you are also committing to buy the property. If you change your mind about buying, there will be extensive consequences.
The purpose of a reservation contract is to ensure that the buyer actually buys the property and that the seller does not sell the property to anyone else, even if they get a much better offer. The contract also includes a reservation fee to ensure that the buyer does not back out of the purchase.
If he does back out, the reservation fee will act as a penalty and the buyer will therefore lose it. Otherwise, it serves as a down payment on part of the property price.
In practice, the amount of the penalty in reservation contracts is most often between 3-5% of the purchase price. However, the courts assess reasonableness on an individual basis and in some cases may reduce an unreasonable penalty. Each contract is therefore assessed according to its specific wording.
A reservation contract does not have a statutory content, but there are parts that it should always contain. These are:
In practice, we often deal with cases where a client has signed a contract without legal control and subsequently lost the entire reservation fee. A short consultation before signing usually costs a fraction of this amount.
Tip: Disagreements over the loss of a booking fee can take you all the way to court. In this case, please contact us. We will assess your chances of success and propose a solution that will lead to the desired outcome.
A reservation contract signed on the spot is a common and humanly understandable mistake, because in practice it is often the case that whoever signs the reservation contract first buys the property. But you should not be hasty and sign anything on the spot because:
Tip: Read what to look out for when buying a property.
Peter bought a package of services from us to buy or sell a property. We started as usual with the reservation contract, which included a penalty clause for Peter of CZK 60,000 if he changed his mind about buying the apartment. We learned from Peter that he was a freelance graphic designer and did not have a steady income each month.
We therefore incorporated the usual set of termination conditions into the reservation agreement, one of which gave Peter the option to cancel the reservation agreement if the bank did not approve Peter’s mortgage. And what didn’t happen? The bank did not actually approve a mortgage in the amount Peter needed, and so he did not have sufficient funds to purchase the apartment.
However, because we modified his reservation contract, Petr did not have to pay a single penny to the real estate agency as a result. This is a good result compared to the situation at the beginning, when he would have had to pay 60,000 CZK if he had signed the reservation contract directly at the inspection.
Tip: Read also the story of our other client, Jindřich Krčmář, in which the real estate agency promised him something in the booking contract that it could not deliver.
A reservation agreement is a common step before purchasing a property, but it can create a significant legal obligation for the buyer and risk losing the reservation fee if the purchase agreement is not ultimately concluded. It is not a separately regulated type of contract, it is governed by the Civil Code and, where a real estate agent is involved, the Real Estate Mediation Act, and its specific implications always depend on the exact wording. It usually contains the specification of the property, the purchase price, the method of payment, the reservation period and the conditions for cancellation; it often includes a contractual penalty, which in practice is in the order of a percentage of the purchase price, but its reasonableness may be subject to judicial review. The biggest mistake is signing on the spot without thinking and without legal scrutiny – the buyer may not be aware of defects in the property, financing problems or unfavourable terms that can be negotiated or adjusted in advance, for example by adding a break clause in case the mortgage is not approved.
Yes, if the contract allows it and it is not unreasonable. In some cases, the penalty can be reduced in court.
Only if the contract expressly allows it or if a condition precedent is met (e.g. mortgage disapproval).
Not always. It depends on the specific content of the contract.
Most often 50,000 to 200,000 CZK or 3-5% of the purchase price.
Yes, if it serves as a real estate agency contract, the law requires a written form.
Lawyer, notary, bank or real estate agency under legal conditions.
We provide comprehensive legal services related to the purchase or sale of real estate, including reservation agreements and escrow services. We can also assist with land registry and tax matters. We can handle everything within 48 hours, even when purchasing from a developer.
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.
In person and online. Just choose the appropriate service or opt for an independent consultation when you are unsure.
