Buying Czech property has a gap in it that catches foreign buyers out. You sign the contract. You pay. And then you wait — because ownership does not pass on signature or on payment, but on registration in the Land Register (katastr nemovitostí), and that takes weeks.
The question nobody wants to face is the obvious one: who is holding your money during those weeks, and what happens if the registration is refused?
Why the gap exists
Czech law separates the contract from the transfer of title. The purchase contract binds the parties; ownership changes only when the Land Register office enters it, and the entry takes effect retroactively to the date the application was filed. Between the two moments sits a period in which the seller is still the registered owner and you have already paid.
The register office can also refuse the application — a defect in the contract, a missing consent, an encumbrance nobody disclosed, a discrepancy in the description of the property. The refusal is not rare enough to ignore.
What escrow actually does
In an attorney escrow (advokátní úschova) the purchase price is not paid to the seller. It is paid into a separate escrow account held by the attorney and released only when a defined, verifiable event occurs — in practice, when the transfer of ownership is entered in the Land Register in your favour.
If the entry is refused, the money goes back to you. That is the whole point, and it is why the release conditions in the escrow agreement matter more than any other paragraph in the transaction.
Czech attorneys hold escrow funds on accounts separate from their own assets and are subject to the supervision of the Czech Bar Association, with mandatory professional indemnity insurance. A bank escrow and a notarial escrow are the alternatives; each has its own cost and speed profile, and the right choice depends on the deal rather than on habit.
The clauses that decide whether escrow protects you
- The release condition — is it registration in your favour, or merely the filing of the application? These are not the same thing
- What happens on refusal or withdrawal of the application, and who bears the cost
- Whether existing charges are discharged from the escrowed funds before the balance reaches the seller
- The deadline after which the funds return to you if nothing has happened
- Who may give instructions to the escrow holder, and in what form
An escrow arrangement whose release condition is “filing of the application” gives you far less than it appears to. The application can be filed and then refused.
Where foreign buyers most often come unstuck
Three patterns recur. Paying a deposit directly to a seller or an agent before any escrow exists, on the assumption that a reservation agreement protects it. Accepting the developer’s or agent’s standard escrow terms without reading who the escrow holder acts for. And leaving an existing mortgage on the property to be discharged after completion rather than out of the purchase price.
None of these is exotic. All three are avoidable by reading the release mechanism before money moves.
How we handle it
We act as escrow holder and we also review escrow arrangements drafted by the other side, which is the more common instruction. In either case the work is the same: establish what the register shows about the property, make sure the release conditions match what you actually want to be protected against, and check that the charges and the timing line up.
We advise buyers from abroad and are used to a transaction where the client never physically attends. Dr. Tomas Mach is admitted in the Czech Republic, Slovakia and Germany and is a court-appointed expert for legal relations with foreign countries.
Frequently asked questions
Can I just use the estate agent’s escrow?
You can, but read who the escrow holder acts for and what triggers release. An escrow held by someone remunerated by the seller is not neutral by default.
What if the property has a mortgage on it?
That is standard and manageable — provided the discharge is paid out of the escrowed price and the release mechanism is built around it. It becomes a problem when it is left to be sorted out afterwards.
How long does registration take?
There is a statutory waiting period before the entry can be made, and the office’s own processing time on top. Plan in weeks, not days, and make sure the escrow deadline reflects that.
Do I need to be in the Czech Republic to complete?
Not necessarily. Much can be handled under a power of attorney with certified signatures, though the formal requirements depend on where you sign.
Get in touch
Send us the draft purchase contract and the escrow agreement, and an extract for the property if you have one. You will get a clear answer on what the escrow protects you against and what it does not.
More on our practice: Czech law for English-speaking clients