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Selling a property without risk or the necessity of a lawyer’s escrow

Are you selling a property and want to make sure you get paid for it? Then, first of all, you must contractually arrange the mechanism for payment of the purchase price.

3 minutes of reading

The transfer of ownership of a property that is registered in the Land Registry does not take place immediately after the signing of the contract from hand to hand. The Land Registry examines the accuracy of the information in the purchase contract and other circumstances of the entire property transfer and has about a month to do this. However, if there is a problem, the registration of the ownership of the property can drag on for several months. Until then, the buyer is not the owner of the property.

The longer the procedure before the Land Registry takes, the more the risk increases that the whole real estate transaction will not be carried out to the full satisfaction of both parties.

But how to insure against the risks?

Quite simply. There is a so-called attorney’s escrow of the purchase price, which is beneficial for both parties – the buyer and the seller.

The solicitor opens a special bank account with a money institution, where the buyer deposits the purchase price. This account must be segregated from the lawyer’s other funds to avoid confusion with other clients’ money or even with the lawyer’s own money.

Upon signing the purchase contract, the buyer shall transfer the amount of the purchase price for the property to the account described above. When the purchase price is deposited with the attorney and the seller is assured that he will be paid for the property, the attorney will file a petition to register the title in the Land Registry. The money is held in escrow until the title in favour of the buyer is actually registered in the Land Registry.

Once the title is registered in favour of the buyers, the lawyer releases the amount of the purchase price to the seller. On the other hand, if anything goes wrong, the registration of the title in favour of the buyer does not take place and the whole real estate transaction fails, the lawyer will return the purchase price to the buyer and the seller will keep his property.

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.

The process of paying the purchase price from the attorney’s escrow

1. the lawyer opens a special bank account

2. the buyer and seller sign a purchase contract for the property (or a contract for future purchase contract) and sign an escrow agreement with the lawyer

3. the buyer deposits the purchase price into the special escrow account

4. after registration of the title to the property in favour of the buyer , the lawyer releases the purchase price to the seller, otherwise the money is returned to the buyer and the property is retained by the seller.

In addition to the attorney’s escrow, escrow with a notary public or a money depository can be used, but generally both are more costly alternatives than the attorney’s escrow.

Attorney’s custody can also be highly recommended in the case of a transfer of a cooperative apartment, as the transfer is only effective against the cooperative when the purchase contract is delivered to the housing cooperative. Again, there is an intermediate period and therefore a similar risk as in the case of registration of the ownership right in the Land Registry.

Please note that the real estate acquisition tax has been abolished and the effective date in this respect is 31 March 2020. For more information, see the article Abolition of real estate acquisition tax.

Download the free e-book 5 tips on how to buy or sell a property without risk and go through the process of selling or buying a house, apartment and land smoothly.

Are you solving a similar problem?

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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.

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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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