Less common real estate contracts

Thousands of pages and many articles and books have been written about buying, selling or renting real estate. But real estate can also be handled in many other ways that are less written about. You may have come across property leasing, but such land swapping has become rather rare. We will discuss both transactions in more detail and also add a land use agreement and a land division agreement.

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Exchange of real estate

A contract of exchange for land or other real estate occurs when the parties to the contract undertake to transfer to each other the title to the property specified in the contract. In addition to land, we also sometimes encounter the exchange of flats.

A practical application in the case of flats can be imagined, for example, when an older couple of neighbours who live in a large three-room flat agree to exchange with other neighbours who are expecting a family and live in a 1+1 flat. The intended exchange would very likely be accompanied by a consideration. Theoretically, an exchange of more than two flats can be arranged, but then it is more likely to be referred to as a Ball Lightning.

In the case of a land exchange, it may be, for example, a situation where we urgently need to acquire a certain piece of land (e.g. adjacent to ours, with which we have other plans) and its current owner wants to merge his land again and ours is suitable for this purpose.

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As suggested, in the case of exchanging two unequal sized flats or plots, the idea of paying a part of the value is automatically suggested. However, this need not be the rule. On the one hand, the value of an apartment is not based solely on its size; the level of renovation of the apartment and, on the other hand, the wear and tear of the apartment may also play a role. The subjective relationship to the property can also be an important factor. For example, in the aforementioned case of land consolidation, a situation may arise where one of the owners urgently needs a particular piece of land for his purpose and it has a special subjective value for him. Therefore, he may be willing to exchange it for a much larger and objectively more valuable piece of land.

Tip: Another not-so-common option for disposing of real estate is to donate it. We have discussed this in detail in our article.

What should the contract for the exchange of land or flat contain?

A contract of exchange is similar to a contract of sale. However, the consideration for the transaction is not money, but another thing. In our case, real estate. Nor do we find a seller and a buyer here, because both parties are simultaneously giving and receiving a thing. As indicated above, consideration may also occur here, and this is in a situation where the value of the two things is not the same.

The contract of exchange should, of course, properly identify both the parties and the things exchanged. The parties must then express their intention to transfer ownership of the goods. The ownership itself is acquired by both parties at the time of registration in the Land Registry. It is also advisable to wait until this date to take possession of and use the property in real life.

If you are impatient and would like to agree on an earlier handover, it is also advisable to stipulate the obligations arising from this in the contract (settlement of payments connected with the apartment, or the possibility of using the land including the fruits and benefits arising from it – e.g. cutting the grass for animals)

A written form is necessary for the exchange of real estate. As with other real estate contracts, it is not recommended to use templates from the internet, which often do not think of all the details or are even incorrect. Errors can even occur at the land registry. A lawyer or attorney who is proficient in such transactions and thinks “around the corner” are more than helpful in these cases.

Tip: We will help you with the drafting of the application for entry into the Land Registry so that everything is in order the first time and you do not miss important deadlines or lose money.

Contract for the use of land or apartment

Of course, we do not have to sell or exchange the property we are not using immediately. If we want to use it, we can choose one of several types of property use agreements.

First, we should consider whether or not we will ask for any money for the use of the property. For contracts for consideration, a lease is usually chosen. If we want to give the property for use free of charge, we can choose a loan agreement.

A special contract for the use of real estate is then a lease contract. Unlike a lease, this allows the tenant not only to use the property, but also to enjoy it and thus take the fruits of it. Typically, this type of contract is used for the use of agricultural and forest land where crops can be harvested.

Tip: if you are considering renting out your property, take inspiration from our detailed analysis and process, which you can find on our blog

Mladá žena půjčuje své příbuzné byt

Real Estate Loan Agreement

With a contract for the loan of an apartment or land, you are transferring the property to the borrower free of charge and temporarily. While it is not legally required to be in writing, as with anything involving real estate, we would recommend it. To choose the right form, just follow common sense. It is certainly neither common nor very practical to enter into a contract with, say, your own sister if you let her the flat for the weekend and go away for a cottage. But if you are going abroad and leaving the flat to a friend for six months, it is certainly better to put a few things down on paper together.

Thetemporariness of the contract can be fixed by a specific date, for example, or by a certain event that will occur but it is not known exactly when (until my return from England). The contract should also define the purpose of the loan.

The basic right of the borrower is to use the item. But he should use it as agreed and, for example, not pass it on to another person without your permission. He should also pay the costs associated with the use of the property and return the flat or land at the end of the agreed period (or when the agreed purpose has been fulfilled).

The lender should instruct the borrower on the use of the property and then provide it to the borrower for use. The lender must not demand it back earlier. Of course, it is possible to get out of such a disadvantageous position by negotiating various exceptions (e.g. if a planned trip abroad is terminated early for reasons set out in the contract).

Tip: The terms borrowing and lending are often used interchangeably, but they are two quite different things. Did your neighbour lend you a lawnmower? Then it is a loan. But if he has lent you a plate of eggs, it is a loan. Find out exactly how the two differ and when you might encounter them in our next article.

Land division agreement

The intention of the owner to use the newly created land, for example as a building plot, usually leads to the division of the land into smaller parts. If we have similar intentions with our own land, we should first check whether its purpose is unified, because only then can it be divided.

It is also not a bad idea to find out what other plans the municipality has for the location of the land in question. Whether it can be assumed that further development is envisaged there. This is, of course, only an indication, not a guarantee of future success with the actual development.

Application for a decision

You start the land division process by submitting an application for a land division decision to the relevant building authority. You will provide information about the land and the owner. It also includes a brief description of the planned division, the areas of the new land to be created and your reasons for the division. In the case of joint ownership of the land with other persons, their consent is required.

Tip: Have you inherited a share in a house or cottage? Do you own part of the land together with the rest of the family? Or have you bought a share of the property at auction and are thinking about settling the co-ownership? We will prepare a quick and efficient co-ownership settlement for you, so that it is as advantageous as possible for everyone involved, and especially for you.

Zoning decision

On the basis of the submitted application, the building authority may issue a zoning decision. This will set out the conditions for the new division of the land and graphically illustrate the new boundaries and access from the public road.

If the building authority does not lay down any conditions for the division of the land, it shall only give notice of this fact by means of a communication approving the proposed plan.

You can have a geometrical plan drawn up on the basis of the decision or communication. This requires a survey by a surveyor and preparation by a qualified person. The final approval of the geometric plan then depends on the cadastral office, which also assigns the parcel numbers to the newly created land.

Once you have obtained the approval of the building authority and the cadastral office has approved the geometric plan, you can apply for the new land to be registered in the land register.

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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.

  • 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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