Penalties for Failure to Enter into a Purchase Agreement: When a Real Estate Agency Cannot Demand Them

Quick Overview

• A real estate broker may not require a consumer to enter into a purchase agreement or a preliminary agreement.
• Therefore, a penalty for failing to enter into a purchase agreement cannot merely serve as a disguise for a fine for violating such a prohibited obligation.
• It does not matter whether the document is called a reservation agreement, an agreement, or something else. What matters is its actual content.
• Withdrawal from a reservation agreement and the right to a refund of the reservation fee always depend on the specific content of the agreement and the circumstances of the case.
• A different situation may arise with a preliminary agreement concluded directly between the prospective buyer and the seller.

Have you signed a reservation agreement, and is the real estate agency refusing to refund your reservation fee or demanding a contractual penalty? Have a lawyer review the agreement. We will assess whether the real estate agency is actually entitled to the amount demanded and how you can defend yourself.

The Real Estate Brokerage Act expressly prohibits including in a brokerage agreement (entered into by a real estate agency) a provision requiring a prospective buyer (consumer) to enter into a purchase agreement or a preliminary sales agreement. Real estate agencies may sometimes attempt to circumvent this by labeling the contract differently and claiming that the relevant law does not apply to it. However, such conduct is also impermissible.

The Supreme Court confirmed this conclusion, among other things, in a ruling, and more recent case law has followed suit. In the case at hand, the prospective buyers expressed serious interest in purchasing the property and therefore paid a so-called reservation fee pursuant to a tripartite reservation agreement between the buyer, the seller, and the real estate agent. The purchase ultimately did not take place due to the real estate agent, who failed to ensure the property’s registration in the real estate cadastre and did not resolve the issue of missing utility connections and an access road. However, this did not prevent him from retaining the “reservation fee”in the amount of 72,600 crowns after the purchase fell through.

Withdrawal from the Reservation Agreement and Refund of the Fee

The prospective buyers subsequently withdrew from the reservation agreement and demanded a refund of the 72,600 CZK they had paid. Moreover, in this case, the planned purchase was not thwarted merely by the buyers changing their minds. The real estate agent failed to ensure the property’s registration in the land registry and did not resolve the promised utility connections or access road. The Supreme Court upheld the conclusion that the real estate agency could not retain the reservation fee as a penalty for the prospective buyers’ failure to enter into the subsequent contract.

However, withdrawal from a reservation agreement is not automatically possible every time a buyer changes their mind about the purchase. It is necessary to assess the specific terms of the agreement, the reason for withdrawal, and the obligations each party has assumed.

The real estate broker argued, however, that this was not a contract under the Real Estate Brokerage Act, but rather an unclassified contract that does not fall under that law. Therefore, this is not a penalty for failing to enter into a contract, but rather a reservation fee, which is not prohibited.

However, a legal act cannot be assessed solely by its name, but primarily by its content. The Supreme Court therefore classified the reservation agreement in question under the Real Estate Brokerage Act and upheld the lower courts’ ruling that the real estate broker is obligated to refund several tens of thousands of crowns.

More recent case law is moving in the same direction. For example, in 2026, the Supreme Court reviewed a reservation agreement under which a prospective buyer paid a reservation deposit of 170,000 CZK. The court concluded that the provision effectively constituted a contractual penalty for failure to fulfill the obligation to enter into a purchase agreement. However, since such an obligation cannot be imposed on a consumer in a real estate brokerage agreement, the penalty for breaching it could not be validly agreed upon either. The real estate agency was required to return the retained deposit.

Tip from legal practice: A common mistake in reservation agreements is to focus solely on labeling the payment as a “reservation fee.” What matters is under what circumstances the real estate agency may retain it. If it is intended to function as a penalty for failing to conclude a purchase agreement, the entire provision must be assessed based on its content, not its title.

These rulings do not mean that the seller cannot obtain any legal certainty that the planned sale will take place. A different situation arises, for example, in the case of a preliminary agreement concluded directly between the prospective buyer and the prospective seller. Provided that the statutory conditions are met, they may commit to concluding a purchase agreement at a later date and secure their commitment accordingly. However, this is a different situation from one in which a real estate broker imposes an obligation on the consumer to enter into a real estate contract and imposes penalties for breaching it.

Reservation agreements are often worded in very different ways, and just a few sentences can determine whether you lose tens of thousands of crowns. Send us your reservation agreement for review before you sign it, or even if the real estate agency is already demanding a penalty from you or refusing to refund the reservation fee.

Summary

A real estate agency may not impose an obligation on the consumer in a real estate brokerage contract to enter into a purchase contract or a preliminary contract, and therefore cannot indirectly enforce this obligation through a contractual penalty. What matters is not the name of the document or the payment, but their actual content. Therefore, if the reservation fee actually constitutes a penalty for failing to enter into a purchase agreement, such a provision may be invalid or unenforceable against the consumer. However, withdrawal from the reservation agreement and the right to a refund must always be assessed based on the specific contract and the circumstances of the case.