Escrow Accounts in Czech Republic - How to Use Them for a Property Sale or Purchase

http://www.czechpoint101.com/en/buy_property/ An escrow account managed by an independent trustee is a critical part of buying or selling real estate and property in Czech Republic. This video explains how it functions and who can be the trustee of the escrow account.

Let's look briefly at an escrow account and how it functions in the purchase and sale of real estate in Czech Republic.

The reason it exists is because of the needs of both the buyer and the seller. The seller wants to be sure that he will get the purchase price for his property when he transfers ownership to the buyer. The buyer, on the other hand, wants to be sure that the property will really be transferred to him when he pays the purchase money.

Because of this it is common to use and it's recommended to use an escrow account which is administered by an independent party. A three-part agreement is concluded between the buyer, the seller, and the independent third party.

Let's look at an example of how this works. The buyer and the seller agree on a purchase price for the property. They conclude a three-part agreement with the trustee regarding the escrow account. The buyer sends the purchase price for the property to the escrow account. The escrow account administrator then informs both parties that the agreed amount of money is on his account. They, at this point, conclude a purchase contract and register it to the land registry. After it's evident that the buyer is the new owner of the property, the trustee releases the purchase price to the seller.

This can be done a little bit different order but this is the basics of it.

It's very important in Czech Republic to make sure that the seller pays the 3% transfer tax so this is often withheld by the trustee until there's evidence that the seller pays it because otherwise it becomes the obligation of the buyer to pay this.

Who can work as a trustee?

First of all it can be a public notary, it can be a bank, it can be a solicitor, or really it can be any one who works as an independent third party.

Generally speaking, the notary charges the most but his exact fees are determined by Czech law.

Banks charge less than the notary, their fees are typically around 0.2% of the deposited amount with a minimum fee of $4000 to $9000.

With a solicitor you can usually negotiate the price of the escrow. Sometimes real estate companies offer to act as escrow agent; you'd have to be really careful in this case because they're not governed by law and it would be very hard to recover your money in case it was taken.

So I hope this explains the basic use of an escrow in Czech Republic.

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