What to Check Before Buying a Property

Quick Overview

Before purchasing a property, first verify that the seller actually owns the apartment, house, or land and that there are no legal defects associated with the property. Check the title deed, easements, liens, foreclosures, insolvency proceedings, lease agreements, debts owed to the homeowners’ association or housing cooperative, as well as the technical condition of the property and the building. Do not send the purchase price directly to the seller—it is safer to use an attorney’s, notary’s, or bank escrow account.

The greatest risks when buying real estate are usually:

• the seller is not authorized to transfer the property or it is encumbered by third-party rights,
• there are easements, liens, or restrictions on disposal registered in the land registry,
• the apartment is burdened by debt owed to the homeowners’ association, the housing cooperative, or suppliers,
• the purchase agreement does not address defects, deadlines, handover, or withdrawal,
• the buyer pays the purchase price before the transaction is protected by a land registry entry.

Do you need assurance that the property you’re buying is free of legal defects? Let us review the purchase agreement and title deed for you before you sign. When it comes to real estate, a single overlooked sentence can mean a risk amounting to hundreds of thousands.

In addition to the condition of the apartment itself, it’s a good idea to familiarize yourself with the overall condition of the building—including the elevator, risers, plumbing, basements, and other common areas. It’s also important to determine exactly what is included with the apartment and what condition it’s in. This often includes a garage, which may, however, be a separate property.

Legal Status of the Apartment or Building

It’s definitely worth thoroughly verifying the legal status of the property you’re buying. Find out who owns it and whether there are any encumbrances, leases, or liens on the apartment.

For example, Mr. Štefan found a plot of land outside Prague where he wanted to build a Canadian-style log cabin. According to the zoning plan, the plot was indeed suitable for such a project. However, several obstacles emerged in the land registry. The property was encumbered by more easements than is customary.

These included the standard easements for water and gas utilities, but several neighbors also had easements registered. They had the right of way across the property, and one of them even had the right to let his flock of sheep pass through.

In legal terms, this could be described as a situation that would be incompatible with peaceful coexistence among neighbors. Simply put, Mr. Štefan would not have had much peace and quiet in his log cabin. However, he backed down from his plan in time and chose a more suitable plot of land, just a short distance from the original one.

It is absolutely crucial to set the terms of the purchase agreement, including the option to withdraw from it. When transferring the purchase price, one should not overlook the intermediate step of escrow. The money is transferred to the account of an attorney, real estate agency, or notary, and the seller does not receive it until the new owner is registered in the real estate registry. This prevents a situation where the money arrives in the seller’s account, but you are not yet the owner of the property.

In our practice, we repeatedly encounter situations where buyers do not address the legal status of the property until after they have already signed a reservation agreement or paid a deposit. By then, it is too late. It is precisely in the land registry, in the bylaws of the homeowners’ association or housing cooperative, and in previous contracts that restrictions often appear—ones you won’t be able to identify from a tour of the apartment or from the listing.

Not sure exactly what to look for in the title deed? Send us an extract from the land registry and the purchase documentation. We’ll check whether there are any encumbrances on the property that could complicate your purchase or make it significantly more expensive.

Type of Ownership

There’s a difference between buying a privately owned apartment and one owned by a housing cooperative. While a privately owned apartment belongs to you and you can essentially do whatever you want with it, in a cooperative you’re effectively just a tenant. Your options are therefore quite limited.

So always find out what your rights and obligations are. You can find this information in the bylaws. They will answer questions such as whether you can sublet a cooperative apartment without permission, what the fees are, and what other obligations you’ll have to fulfill. For example, you might be responsible for keeping a section of the hallway clean and will have to mop it once a week.

The situation is similar for privately owned apartments. Again, it’s good to know the basic information, such as how much you’ll pay monthly into the repair fund and for other expenses. Also check who owns the other apartments in the building. If they all belong to one person, there’s a high risk that they’ll outvote you at meetings and push through whatever suits them.

You may also be unpleasantly surprised by outstanding payments to the repair fund, tax debts, or debt collection proceedings against the owner. You can obtain this information from a lawyer, directly from the seller, by informally speaking with another resident of the building, or from members of the committee or the cooperative’s governing body. However, people may not be very willing to share information about life in the building with you. Therefore, you can request the minutes from building meetings or review public sources.

The reason why the owner is selling the apartment, the relationships among neighbors, the demographic makeup of the residents, or the problems weighing on the residents can reveal a lot. It’s also useful to know what construction plans are in the area around the building. If trains or thousands of cars are going to be passing right under your windows in a few years, that won’t make you very happy.

What We Need from the Seller

First and foremost, request from the seller the information about the property necessary to draft and subsequently sign the purchase agreement. You must submit this agreement—or a certified copy of it—to the Land Registry. Although signatures on the purchase agreement do not have to be notarized, it is preferable to do so, as the Land Registry will verify the authenticity of any non-notarized signatures. In certain specific cases, additional documents may be required if mandated by law.

Documents written in a foreign language (with the exception of Slovak) must be submitted by the party to the proceedings in their original version and, at the same time, in an officially certified translation into Czech.

Also, request the documents necessary for transferring utility services from the seller of the apartment or house. If you are handling the transfer yourself, make a note of the meter readings; you will also need a power of attorney. This essentially involves registering you as the new customer and deregistering the former owner. Currently, most such transfers can be handled online.

Don’t forget to deregister from the location where you’ve been receiving utilities until now. Alternatively, the new owner can do this in the same way.

Preparing for the Transaction

Even before signing the actual purchase agreement, it’s common to first enter into a preliminary purchase agreement. This usually happens when we want to buy some time. For example, so that an expert can inspect the property or so that we can thoroughly “check out” the apartment, as well as the conditions in the building and so on. We then have the opportunity to fine-tune the actual purchase agreement with a lawyer to prevent potential problems and unexpected pitfalls.

Theoretically, an unexpected event could occur before the actual purchase agreement is signed—such as a flood or fire that damages the property. Do we still have to sign the purchase agreement? According to the Civil Code , under such a change in circumstances, we cannot be required to enter into the contract; that obligation ceases to exist.

Purchase Agreement

The purchase agreement itself directly obligates the parties to the purchase of the property, the transfer of ownership, and the registration of the transfer in the real estate registry. The buyer is therefore obligated to take possession of the property and pay the agreed-upon purchase price. The seller, on the other hand, must hand over the property and accept the payment.

In addition to the purchase agreement, an escrow agreement is also drawn up. This means that the purchase price is deposited with a lawyer, notary, or bank into an escrow account, after which an application for an update in the land registry is filed. Only after the entry has been made in the land registry is the money paid out to the seller. This is because it typically takes the authorities about 30 days to process the change in the land registry. Without an escrow arrangement, a situation would arise where the seller has your money in their account, but you are still not the owner of the property. If, for some reason, the transfer did not go through, it could be difficult to get your money back.

To sum it up—don’t let your emotions get the better of you or give in to the fear that someone will beat you to it and snatch your dream apartment away. Think carefully about buying your own home, and don’t sign any documents until you’ve had them reviewed.

Don’t transfer the purchase price directly to the seller; instead, use an escrow account. That way, you won’t end up with neither the money nor the apartment.

Download our free e-book , “5 Tips for Buying or Selling Real Estate Risk-Free,” and navigate the process of buying or selling a house, apartment, or land smoothly.

Don’t sign a real estate purchase agreement based solely on a template from the internet. We’ll tailor it to your specific situation, check for risks in the land registry, set up escrow for the purchase price, and ensure that each step is legally aligned with the next.

Summary

Before purchasing a property, always verify not only its technical condition but, most importantly, its legal status. Check the title deed, the seller’s background, easements, liens, leasehold rights, foreclosures, insolvency, debts owed to the homeowners’ association or housing cooperative, planned repairs to the building, and construction projects in the surrounding area. For a cooperative apartment, carefully review the bylaws and the terms and conditions for transferring the cooperative share. Do not sign the purchase agreement without verifying that it is linked to the escrow of the purchase price and the application for registration in the real estate cadastre. The safest approach is to proceed with the purchase only once you have verified the documents, clearly defined deadlines, handover conditions, and the option to withdraw from the transaction in the event of a major problem.

We prepared this article for the Lidové noviny series “Law & Housing.” Be sure to check out other articles in the series:

1. What to Watch Out for When Buying Real Estate
2. How to Get a Mortgage
3. What to Check Before Buying a Property
4. Who Pays Real Estate Transfer Tax and How?
5. What a real estate purchase agreement should include
6. The Most Common Mistakes When Drafting a Land Registry Application
7. Buying a Property from a Developer
8. Escrow of the Purchase Price When Buying Real Estate
9. The difference between a cooperative apartment and a privately owned apartment
10. What is an annuity?
11. How to Properly Donate Real Estate
12. What is the purpose of an easement?
13. Drafting a Will and Settling an Estate
14. What is a collation?
15. What Should Be Included in a Lease Agreement
16. When Can Rent Be Increased
17. Termination of a lease
18. Agreement to Terminate a Lease
19. How to Draft a Contract for Work with a Tradesperson
20. Hidden Defects and Withdrawal from a Contract for Work
21. When Do You Need a Building Permit for Property Renovation?
22. House Rules
23. What Does a Position on an Apartment Building Committee Entail?
24. Why You Shouldn’t Underestimate the Bylaws of an Apartment Building
25. Common Areas in an Apartment Building
26. What Is Involved in Renovating an Apartment Building?
27. Can a homeowners’ association or housing cooperative go into debt?
28. How to go about renovating a house or cottage
29. What to Watch Out for When Dealing with a Construction “Company”?
30. Building a house on a “greenfield site”
31. How to Remove Land from the Agricultural Land Fund