The sources of real estate law may be broadly divided into private law regulations and public law regulations, which interact closely in practice.

Private Law Regulations

The primary source of real estate law is the Civil Code (Act No 89/2012 Coll), which governs ownership rights, rights in rem to real estate, transfers of property, easements, leases and other contractual relationships concerning real estate.

Other relevant private law regulations include, in particular, the Business Corporations Act (Act No 90/2012 Coll), which is relevant where real estate is held or transferred through corporate structures.

Public Law Regulations

Public law focuses primarily on land use, construction and the protection of public interests.

Key regulations include:

• the Cadastral Act (Act No 256/2013 Coll) and its implementing regulations, governing the land register and the registration of rights in rem;
• the Building Act (Act No 283/2021 Coll) and related regulations governing spatial planning and construction permitting;
• the Nature and Landscape Protection Act (Act No 114/1992 Coll), setting limits on land use for environmental protection purposes;
• the Environmental Impact Assessment Act (Act No 100/2001 Coll), requiring environmental impact assessments (EIAs) for certain developments;
• the State Monument Care Act (Act No 20/1987 Coll), protecting cultural heritage sites; and
• tax legislation, in particular the Real Estate Tax Act (Act No 338/1992 Coll).

Additional Sources

In addition to statutory law, other relevant sources of law include:

• secondary legislation, such as government regulations and decrees issued by ministries;
• regulations adopted by local self-governing authorities (in particular zoning plans and regulatory plans); and
• case law, especially decisions of the Supreme Court, the Constitutional Court and the Supreme Administrative Court, which play an important interpretative role in practice.

Market Recovery and Renewed Growth

The Czech real estate market has stabilised and returned to moderate growth following the slowdown in 2022–2023. Residential prices have resumed growth, driven by persistent supply shortages and renewed demand.

Structural Undersupply, Particularly in Prague

A long-term imbalance between supply and demand continues to be a key driver of price growth, mainly due to slow permitting processes and limited new construction. These issues were expected to be addressed by the adoption of the new Building Act of 2021; however, this objective has not yet been achieved.

Investment Activity and Domestic Capital Dominance

Investment volumes rebounded in 2025, with domestic investors accounting for the majority of transactions, while foreign capital remained more cautious.

Impact of Inflation and Interest Rates

Elevated interest rates in previous years reduced transaction volumes; however, gradual rate stabilisation and easing have supported a recovery in financing and market activity. Mortgage rates remain higher than pre-2022 levels but are no longer prohibitive.

Most Significant Transactions (2025)

The largest transaction of the year was the acquisition of the Palladium shopping centre in Prague by the Czech real estate fund REICO, marking the biggest single-asset commercial real estate deal in the Czech market.

In the office sector, key transactions included the acquisition of Kavčí Hory Office Park in Prague 4 by Conseq and the sale of Harfa Business Center B in Prague 9. Additional deals, such as the sale of The Square building, suggest a gradual stabilisation of the office market.

The hospitality sector also recorded strong transaction activity, most notably the acquisition of the Hilton Prague, one of the largest hotel transactions in Central and Eastern Europe, alongside additional acquisitions of high-quality hotel assets located in Prague.

In retail, besides Palladium, attention focused on the redevelopment of the Máj Národní department store and several transactions involving regional retail parks, confirming continued investor interest in the sector.

Implementation of the New Building Act

The most significant ongoing reform is the implementation of the new Building Act, aimed at speeding up permitting procedures through digitalisation and a unified authority system. Although already in force, its practical impact is still evolving, with further adjustments expected in the coming years.

Digitalisation of Planning and Permitting Processes

Digitalisation of planning and permitting is progressing, but full integration is not yet complete and will continue to develop.

Property rights are primarily governed by the Civil Code. The most important right is ownership. The law also recognises rights in rem to another’s property, such as easements, mortgage, pre-emptive rights and prohibition of alienation and encumbrance.

The Czech legal system follows the principle superficies solo cedit, under which buildings are generally part of the land, except for the right of superficies, which allows a structure to be owned separately on another person’s land for a limited time.

The transfer of real estate in the Czech Republic is governed primarily by the Civil Code, as well as by the Cadastral Act, particularly where registration in the Cadastral Register is concerned.

For standard commercial and residential properties, these are transfers for which no special rules generally apply; however, transfers involving the state, state-owned entities or municipalities are subject to stricter public law requirements, particularly with regard to transparency, approvals and pricing.

The transfer of real estate requires a written agreement under the Civil Code. The key element of the system is the Cadastral Register, a public database that records ownership and other rights. Ownership is effectively transferred only upon registration in this register.

However, not all immovable assets are registered, such as pipelines, power lines or temporary structures, and in such cases, ownership is generally transferred upon the effectiveness of the contract.

As for risk allocation, title insurance or W&I insurance is used mainly in more complex or higher-risk transactions, such as large commercial deals. It is not common in standard transactions, especially for residential units or smaller projects.

Legal due diligence primarily involves reviewing the Cadastral Register and historical title documents, usually going back at least ten years, to confirm a clear chain of ownership and identify any third-party rights, encumbrances or disputes. It also includes checking whether the property has proper legal and physical access and is duly connected to utilities.

Another key part is the public law review, focusing on compliance with zoning plans and the validity of building and occupancy permits, which determine the permitted use of the property. This also covers planning restrictions and environmental limits.

In cases where the properties are subject to lease arrangements, due diligence typically involves a review of the relevant lease agreements, particularly focusing on rent levels, indexation mechanisms and termination rights.

In parallel, buyers typically conduct technical and environmental assessments to identify structural issues, contamination risks and energy performance.

Typical Representations and Warranties (R&Ws)

In Czech real estate transactions, whether structured as share deals or asset deals, the seller provides the buyer with a set of contractual R&Ws about the real estate.

Typically, the seller confirms that:

• it has valid and marketable title to the real estate, free of undisclosed encumbrances or third-party rights;
• all building and occupancy permits are valid;
• the factual condition of the real estate corresponds to its legal and technical documentation;
• the real estate complies with zoning and building regulations;
• there is no environmental contamination (eg, asbestos);
• no litigation or administrative proceedings are pending;
• all relevant taxes have been duly paid;
• adequate access to the real estate is ensured;
• the real estate is not subject to any pre-emption rights or options to purchase; and
• if the real estate is leased, the lease agreements are valid, effective and enforceable.

Although the Czech Civil Code provides statutory warranties, these are almost always replaced by individually negotiated contractual R&Ws.

Buyer’s Remedies and Security

If a representation or warranty proves to be incorrect, the buyer is typically entitled to:

• compensation for damages;
• the right to require the seller to remedy the breach of the representation or warranty (including bringing the warranted state into conformity with reality, where possible), and if such remedy is not possible or is not effected within a reasonable period, the right to a reduction of the purchase price; and
• in the event of certain material breaches, the right to withdraw from the agreement.

Holding back part of the purchase price in escrow is not common in the Czech market. Instead, buyers usually rely on parent company guarantees (PCGs) or, less frequently, bank guarantees.

Survival Periods

General commercial and technical warranties typically survive for 12 to 36 months, while fundamental warranties (such as title to shares or property) are commonly agreed for up to ten years, and tax warranties typically for 3–5 years.

Liability Caps and Thresholds

Caps on the seller’s liability are standard. For general warranties, liability is usually limited to 10–30% of the purchase price, while for fundamental warranties (such as title) it can reach up to 100%. Claims can only be made if they exceed a minimum amount (de minimis) and, in total, pass an agreed threshold (basket).

The most important areas of law for a real estate investor are civil law governing the transaction itself, corporate law (especially in share deal structures), public law including zoning, building and environmental regulations and, in some cases, EIA requirements and foreign direct investment (FDI) screening.

The primary rule is “polluter pays”, meaning the party that caused the contamination is responsible for remediation, which is particularly relevant in the context of a share deal, where the liability remains with the target company.

However, the property owner can still face objective obligations, even without fault, such as tolerating remediation measures or, in some cases, removing waste at their own cost.

Because of this risk, buyers typically carry out environmental due diligence and negotiate contractual protections like warranties and indemnities.

Permitted use is primarily determined by the municipal zoning plan, which sets out how the land can be used and developed. For more certainty, buyers can obtain official planning information from the building authority.

In practice, developers often enter into planning agreements with municipalities, agreeing to provide infrastructure or contributions in exchange for co-operation, which helps facilitate the project alongside standard permitting procedures.

Expropriation is possible under Czech law, but only as a last resort. Under the Charter of Fundamental Rights and Freedoms and the Expropriation Act (Act No 184/2006 Coll), it is allowed only in the public interest, on a legal basis, and with fair compensation.

The process can start only if the authority fails to acquire the property by agreement. Compensation is typically based on market value. Special rules under specific legislation in the field of infrastructure and energy law may allow for faster expropriation procedures in such cases.

The Czech Republic has no real estate transfer tax, so neither asset deals nor share deals are subject to transfer tax or stamp duty; however, they are generally subject to income tax.

Only minor administrative fees payable to public authorities are typically incurred in connection with the transaction; in an asset deal, the cadastral registration fee is around EUR80, while in a share deal, a similar fee applies for updating the Commercial Register.

In practice, each party pays its own advisers, while shared costs (eg, escrow or notary fees) are typically split equally. The cadastral registration fee is usually paid by the buyer.

Foreigners can generally acquire real estate under the same conditions as local buyers, without specific restrictions.

Non-EU investors acquiring strategic real estate may require prior approval under foreign investment screening rules. All transactions are subject to anti-money laundering regulations, including the identification of the ultimate beneficial owner (UBO) and verification of the origin of funds.

In addition, compliance with applicable sanctions regimes is essential, as transactions involving sanctioned individuals or entities are prohibited.

Commercial real estate acquisitions are typically financed through a mix of equity and bank loans, with secured bank financing being the most common. Finance leasing is used less frequently. The market includes not only direct investors but also regulated fund structures, particularly real estate funds and funds for qualified investors, which are important sources of capital.

Transactions are usually structured either as asset deals or share deals. While both are common, larger transactions are often carried out as share deals.

In commercial real estate financing, the main security is a mortgage over the property, usually combined with a pledge over the shares in the company holding the property.

A mortgage becomes effective upon registration in the Cadastral Register. Similarly, a pledge over shares or ownership interests must be registered in the relevant register to be enforceable against third parties. Lenders also secure the project’s cash flow, usually through pledges or assignments of receivables, such as rent, insurance proceeds and bank account claims.

If there is shareholder or intra-group debt, it is typically subordinated to the bank financing to ensure priority repayment of the senior lender.

Loan agreements are frequently backed by notarial deeds with direct enforceability, allowing lenders to enforce claims without the need for prior judicial confirmation.

There are no specific restrictions on granting security over Czech real estate to foreign lenders. Foreign lenders can take a mortgage or other security on the same basis as Czech lenders. As described in 2.11 Legal Restrictions on Foreign Investors, all transactions must also comply with anti-money laundering regulations.

In the Czech Republic, creating and enforcing real estate security involves fees rather than taxes. There is no transfer tax or stamp duty.

The main cost is the cadastral fee (EUR80) for registering a mortgage. Additional notarial fees may apply, especially for enforceable notarial deeds, and a fee may also arise for registering a pledge over shares.

Upon enforcement, costs consist mainly of court and legal fees, with no special enforcement tax. Annual real estate tax is separate and not affected by the security.

Granting security over real estate assets is generally permissible and forms a standard part of financing transactions.

Particular attention must be paid to financial assistance rules. Where applicable, these rules impose statutory limitations and conditions, especially in situations involving the acquisition of shares in the company or its parent. To the extent required by applicable law, a whitewash procedure must be duly carried out to validate the provision of financial assistance. Non-compliance with financial assistance regulations can, in certain circumstances, result in the invalidity of the security or expose the transaction to legal challenge.

Finally, for the security to be effective and enforceable against third parties, it must be duly created, typically through registration in the relevant public register.

Enforcement Formalities and Obstacles

Enforcement of a mortgage under Czech law primarily requires the existence of a valid and duly created mortgage right over the relevant asset. Once the secured claim becomes due and remains unpaid, the creditor is entitled to satisfy its claim from the collateral.

A mortgage is typically enforced either:

• through judicial enforcement, usually resulting in a sale of the real estate via public auction conducted by a court or bailiff; or
• by way of a contractual private sale, if expressly agreed in the mortgage agreement.

Alternatively, the parties may agree on a forfeiture of the collateral, whereby ownership of the pledged asset is transferred to the creditor. Such an arrangement must comply with separate statutory requirements governing the appropriation of collateral, including limitations designed to protect the debtor against undervaluation and abuse.

Securing Priority

Priority follows a strict “first-in-time, first-in-right” rule based on registration in the Cadastral Register.

Non-Performing Loan (NPL) Market

There is an active, albeit highly consolidated, market for the sale of NPLs in the Czech Republic. It is primarily driven by specialised distressed-asset investors and qualified investor funds. However, the market is not currently experiencing any massive wave of distressed real estate sales, as major banks continue to maintain relatively healthy portfolios.

Debt may be subordinated to newly created debt by agreement, typically in a subordination agreement. Such arrangement is usually entered into by the senior creditor, the subordinated creditor and the debtor, so that the agreed payment blockage and priority mechanics bind all relevant parties. At the security level, a newly created mortgage may also be registered in second or subsequent rank over the same real estate, but this does not by itself subordinate an existing first-ranking mortgage to the new debt.

A lender is not liable for environmental damage simply because it finances real estate or holds or enforces security over it. Liability may arise only if there is a separate legal basis, not from the lender’s role as such.

The borrower’s insolvency does not invalidate existing security. However, once insolvency proceedings are started, claims must generally be enforced within the insolvency process, and individual enforcement is no longer possible.

A secured creditor is one whose claim is backed by assets belonging to the insolvency estate, based on a security right recognised by the Insolvency Act (eg, mortgage, retention right or assignment by way of security). Such a creditor has the right to be satisfied separately from the proceeds of the relevant collateral.

Security granted shortly before insolvency may be challenged by the insolvency administrator.

There are currently no rules imposing recording, stamp or similar taxes on mortgage or mezzanine financing. While some security interests may require registration in public registers, these usually involve only nominal administrative fees. Overall, the framework is considered cost-efficient for lenders, and no changes are currently expected.

In the Czech Republic, land use, development, design and construction are governed primarily by the Building Act, together with implementing regulations and a hierarchical system of spatial-planning instruments.

The key planning instruments are the Spatial Development Policy, the Spatial Development Plan, the Spatial Development Principles, the Zoning Plan and the Regulatory Plan, supported by spatial analytical documents and spatial planning studies. The Spatial Development Policy is a national strategic instrument binding on the development and issuance of spatial planning documentation, whereas spatial planning documentation is binding for lower-level documentation and, according to its type, for decision-making in the territory.

The framework is supplemented by binding construction requirements, in particular Decree No 146/2024 Coll, on Requirements for Construction, and, in certain municipalities, by special local building regulations, including the Prague Building Regulations and the Brno Building Regulations.

Development is also subject to a range of sectoral public-law controls protecting specific public interests, including environmental protection, environmental impact assessment where applicable, nature and landscape protection, heritage protection, water management, transport and technical infrastructure and public health. The system is administered at the national, regional and local level, in particular by the government and the Ministry for Regional Development, spatial-planning authorities, building authorities and affected authorities responsible for specific public interests.

In the Czech Republic, development rights are obtained through a single permitting procedure under the Building Act, which replaces the former separate zoning and building-permit stages.

Although the statutory decision periods are typically set at 30 days for simpler projects and 60 days for more complex ones, in practice these deadlines are rarely adhered to. The permitting process often takes significantly longer, sometimes extending by several months or years, depending on the complexity of the project, the workload of the authority, and the need to obtain additional opinions or complete missing documentation.

Only certain parties can participate in the process and raise objections, and only to protect their rights. These typically include, for example, owners of neighbouring properties, whose ownership rights may be directly affected, as well as relevant public authorities (such as environmental protection authorities).

Appeals are possible within the administrative system, and court review is available afterward, but under strict rules and short deadlines. If rules are breached, authorities can impose measures and fines, or even order removal of a building. In some cases, a building can be approved retrospectively.

Finally, some projects require an occupancy permit before use, while others can be used after notifying the authority.

Real estate may in principle be held through any legal vehicle capable of owning assets, including ordinary corporations and regulated fund structures. In practice, however, commercial real estate is most commonly held through a limited liability company (s.r.o.) acting as an SPV. Other vehicles often used for this purpose include the joint-stock company (a.s.) and the European company (Societas Europaea – SE) – the European equivalent of a joint-stock company.

Limited Liability Company

The s.r.o. is the most common Czech SPV for holding real estate. For individuals, a five-year holding period typically applies for a tax-exempt exit. The cost of establishing an s.r.o. is typically around EUR 800–1,000 in total (including notary, court fees and basic registrations).

Joint-Stock and SE Company

The a.s. has the same tax treatment at company level, and the same applies to an SE. For individuals, a shorter three-year time test generally applies to shares. The cost of establishing an a.s. is typically around EUR 2,500–3,000.

Participation Exemption and Abolition of the CZK40 Million Cap (2026)

For corporate investors, exits are often structured under the participation exemption, usually requiring at least a 10% stake held for 12 months. From 2026, the previous cap of EUR1.6 million (CZK40 million) on individual exemptions has been abolished if the time test is satisfied.

The Czech Republic has no REIT regime. Real estate investments are usually done through regulated funds, especially real estate funds or funds for qualified investors, with limited use of trust-like structures. The key distinction is between public funds and those limited to qualified investors, both generally accessible to foreign investors.

There is no general REIT tax exemption, but some funds may qualify for a reduced 5% corporate income tax rate.

An s.r.o. requires a minimum registered capital of less than EUR1, while a joint-stock company requires a minimum registered capital of approximately EUR80,000, and an SE requires a minimum registered capital of EUR120,000.

Limited Liability Company

The s.r.o. has the simplest governance model. Its core bodies are the general meeting and one or more executives as the statutory body, while a supervisory board is optional.

Joint-Stock Company (a.s.) and SE

Both the a.s. and the SE have more complex governance structures. An a.s. may choose between a dualistic model (general meeting, board of directors, supervisory board) and a monistic model (general meeting and administrative board).

The SE follows a similar structure but is governed primarily by European law, supplemented by national rules. A key difference is that employee involvement must be addressed before the SE is registered, which typically makes its governance framework more complex than that of a standard Czech SPV.

The level of annual entity maintenance and accounting compliance costs is not determined solely by the legal form of the vehicle, but rather by the nature and complexity of its activities.

Although, as a general observation, a limited liability company will typically involve lower ongoing costs than a joint-stock company or an SE, it would be misleading to suggest that meaningful conclusions can be drawn on the basis of legal form alone.

In practice, costs are driven by a range of factors, including the volume and complexity of transactions, the size and composition of the real estate portfolio, financing arrangements (in particular, the presence of external debt), any cross-border elements and applicable regulatory requirements, including audit obligations. As a result, annual maintenance costs may vary considerably even among entities of the same type, and no standardised benchmark can be reliably applied.

The use of real estate for a limited period may be structured through a range of legal arrangements, both contractual and proprietary in nature. The most common is a lease, under which a tenant is granted the right to use the property for an agreed purpose and term in exchange for rent. In the context of agricultural land or business undertakings, a usufructuary lease further entitles the user not only to use the asset but also to derive profits from it.

Beyond purely contractual arrangements, Czech law also recognises rights in rem recorded in the Cadastral Register. A prominent example is the superficies right, which allows a person to construct and own a building on land owned by another for a period of up to 99 years.

Finally, the use of real estate may also arise from easements, such as rights of way or usufruct rights, which may be established either in favour of another property or a specific individual.

Commercial leases are not divided into specific statutory type. By contrast, a lease of residential premises is specifically regulated and subject to a more stringent legal framework.

The regulation of lease terms differs fundamentally between residential and commercial leases.

Commercial leases are governed by the principle of freedom of contract. The parties are generally free to negotiate their rights and obligations without significant statutory limitations, and legal provisions apply only subsidiarily where the agreement is silent.

By contrast, residential leases are subject to a higher degree of regulation. The Civil Code contains a number of mandatory provisions designed to protect the tenant as the weaker party, which limit the parties’ ability to deviate from the statutory framework, particularly to the tenant’s detriment.

Length of Lease Term

Commercial leases are almost always concluded for a fixed term. Office and standard retail leases typically last three to five years, while larger industrial or logistics leases often run for ten years or more. It is also common to include an option for the tenant to extend the lease.

Maintenance and Repair

Commercial leases typically transfer most day-to-day responsibilities to the tenant. The tenant is usually responsible for routine maintenance, all internal repairs, servicing of installations and equipment and ensuring that all required statutory inspections are carried out within the leased premises. The landlord remains responsible for the structural parts of the building and common areas, while the related costs are typically allocated to tenants on a pro rata basis through service charges.

Rent and service charges are usually paid monthly or quarterly in advance.

In practice, especially in the commercial sector, rent rarely stays the same throughout the lease term. It is standard to include indexation clauses, which increase the rent annually in line with inflation, either according to the European Harmonised Index of Consumer Prices (HICP) (for euro leases) or the Czech inflation index (for Czech koruna leases).

At the beginning of a lease, landlords often offer incentives such as rent-free periods or gradually increasing rent to help tenants with initial fit-out costs. In the retail sector, particularly in shopping centres, leases often include a turnover rent mechanism, where the rent consists of a fixed base amount and a variable part based on the tenant’s revenues.

In residential leases, if no inflation clause is agreed, the landlord may still increase the rent, but only within statutory limits.

The mechanism for determining and adjusting rent is governed primarily by the provisions agreed between the parties in the lease agreement.

In commercial leases, rent is usually determined by a pre-agreed formula, such as inflation indexation or a percentage of turnover. In residential leases, the parties can also agree on how the rent will increase. If the contract does not address this, the law provides a fallback mechanism. The landlord may propose a rent increase up to the usual market level in the area, but the total increase over three years must not exceed 20%.

If the tenant does not agree within two months, the landlord may ask a court to decide. The court will then determine the new rent based on market conditions.

Under the Czech Value Added Tax Act, the lease of real estate is generally treated as VAT-exempt without entitlement to deduct input VAT.

In practice, particularly in the commercial real estate context, the VAT treatment is often driven by the specific structure of the lease and the factual circumstances of the arrangement. Subject to the relevant statutory framework being satisfied, it may be possible for VAT to be applied to rent, typically where the tenant carries on economic activities.

At the same time, the legislation provides for certain restrictions, especially in relation to premises intended for residential use, where a VAT-exempt treatment generally prevails.

Security Deposit

For commercial leases, tenants usually provide security equal to 3–6 months of gross rent (including service charges), typically as a bank guarantee or cash deposit.

First Service Charges and Utilities

In commercial leases, rent and operating costs are typically paid in advance. The tenant therefore pays the first instalment (often covering the first month or quarter) at the commencement of the lease.

Fit-Out Costs

In the context of commercial real estate, landlords commonly provide a fit-out contribution (fit-out allowance). To the extent that the actual fit-out costs exceed this allowance, the tenant bears the difference, usually payable upfront or progressively during the construction phase.

The landlord typically manages the maintenance of common areas, but the costs are borne by the tenants through service charges common area maintenance – CAM).

Tenants pay these costs in advance (monthly or quarterly), with a year-end reconciliation based on actual expenses. Costs are allocated pro rata, usually according to the size of the leased space.

In practice, tenants only cover operational costs (operating expenditure – OPEX), such as maintenance, cleaning and security. Major investments and structural repairs (capital expenditure – CAPEX) remain the landlord’s responsibility.

Costs for utilities and telecommunications are typically treated as utilities and telecommunications costs, and are allocated among the tenants on a pro rata basis, usually according to the size of the leased space. The landlord generally arranges and manages the provision of such services and subsequently recharges the relevant share of costs to the individual tenants.

Under Czech law, the legal owner of the property (the landlord) is the sole statutory taxpayer for real estate taxes. Despite this statutory framework, it is a market standard in the commercial real estate sector to contractually shift the actual economic burden of the real estate tax onto the tenant.

The landlord typically arranges and maintains the primary building insurance, including structural coverage and owner’s liability.

Tenants are responsible for securing their own insurance at their own expense. This usually covers their fit-outs, equipment, inventory, third-party liability and business interruption.

Property insurance is typically arranged on an “all-risk” basis, covering a wide range of events such as fire, flooding, natural disasters, vandalism and machinery breakdown. It is also standard for landlords to maintain loss of rent insurance, which covers lost rental income if the premises become temporarily unusable due to an insured event.

Landlords restrict how tenants can use premises through “permitted use” clauses, requiring consent for any change. Public law adds mandatory limits: premises may only be used for their approved purpose unless a change of use is officially granted.

Tenants are generally permitted to alter or improve the leased real estate (carry out “fit-outs”), but under standard commercial lease agreements, any such works are strictly subject to the landlord’s prior written consent. Minor, non-structural aesthetic changes might sometimes be exempt.

Landlords routinely impose strict, detailed conditions on approved works to protect the asset’s value and structural integrity. These typically include:

• prior approval of detailed design and technical project documentation;
• the tenant’s obligation to obtain all necessary public permits (eg, building permits);
• mandatory use of certified contractors (landlords often require tenants to use the landlord’s preferred or pre-approved contractors, particularly for mechanical, electrical and plumbing (MEP) works or structural interventions); and
• adherence to the building’s specific technical guidelines and rules of operation during the construction phase.

A market standard addresses the end of the lease term. The tenant is customarily obliged to remove all their alterations and reinstate the premises to their original handover condition at their own cost. The landlord usually reserves the right to elect that some or all of the improvements remain in the premises. If the landlord chooses to retain the improvements, market practice dictates that the tenant is not entitled to any financial compensation for the residual value of such works.

Statutory Categories

The Czech legal framework, primarily the Civil Code, does not have separate statutes for every single asset class. Instead, it creates a fundamental dichotomy between residential leases and commercial leases.

Residential Leases

The lease of apartments is strongly regulated by mandatory rules designed to protect tenants as the weaker party. These rules cannot be changed to the tenant’s disadvantage. For example, the security deposit is capped (three months’ rent), termination rights are limited to specific statutory grounds and contractual penalties are strictly controlled.

Commercial Leases

Offices, retail units and industrial/logistics facilities generally fall under a general category of commercial leases. Here, the key principle is freedom of contract. Most legal provisions are optional, allowing landlords and tenants to negotiate the terms largely as they wish.

A specific category includes hotels, agricultural land or entire operational businesses, which are often structured not as a standard lease, but as a usufructuary lease. In this case, the tenant is entitled not only to use the property but also to operate it and take its profits.

Under Czech insolvency law, the commencement of insolvency proceedings does not affect the validity or duration of a lease; the lease continues as normal.

Once a decision on insolvency has been issued, the impact depends on the method of resolution. In bankruptcy liquidation, the insolvency administrator may terminate the lease even if it was agreed for a fixed term, subject to the statutory or contractual notice period (whichever is shorter). In reorganisation, the lease generally continues without such termination right.

No Right To Continue Occupation

Upon expiry or termination, the tenant has no right to remain and must vacate and hand over the premises.

Ensuring Timely Vacating

To secure timely handover, leases commonly include holdover provisions imposing increased rent and service charges for each day of delay. The tenant is also typically liable for any damages incurred by the landlord as a result of late vacating.

Eviction Process and Order To Vacate

Self-help eviction (eg, changing locks) is not permitted; eviction must be pursued through judicial proceedings. Since 2026, landlords may use an accelerated “order to vacate” procedure: if supported by clear evidence and a prior 14-day notice, the court may issue the order without a hearing. The tenant then has 15 days to vacate or file opposition; failing that, the order becomes an enforceable title for eviction.

General Rule

Assignment and subleasing are generally allowed by law, but commercial leases usually require the landlord’s prior written consent.

Subleasing

Landlords typically approve subleases only if the tenant remains fully liable for all obligations. The sublease term cannot exceed the main lease, and the subtenant must follow the agreed permitted use.

Assignment

An assignment transfers the lease entirely to a new tenant. Landlords have broad discretion to refuse consent or require that the new tenant meets strict financial and operational criteria.

Intra-Group Exceptions

Leases often allow transfers within the same corporate group without consent, usually subject to prior notice and the condition that the new entity is at least as financially strong as the original tenant.

General Approach

Although Czech law provides default termination rights, commercial leases usually exclude them and instead define specific “events of default” that allow termination, often immediately or after a short notice period.

Landlord’s Termination Rights

Landlords can typically terminate for serious breaches by the tenant, such as non-payment (after a remedy period), unauthorised sublease or assignment, unapproved alterations, failure to top up security or misuse of the premises.

Tenant’s Termination Rights

Tenants have narrower rights, mainly if the premises become unusable, essential services are not provided or the tenant’s use is seriously disrupted.

Lease agreements are typically concluded in writing for legal certainty, although written form is not strictly required for validity. There is also no requirement for certified signatures or a notarial deed.

Registration of a lease in the Czech Cadastral Register is not mandatory, but it is possible if the owner applies or consents. In practice, registration is recommended, especially for commercial tenants, as it strengthens their legal position. If the property is transferred, the new owner is bound by a registered lease and cannot argue lack of awareness.

There are no taxes or stamp duties related to lease registration. The only cost is a one-off administrative fee of approximately EUR80, usually paid by the tenant.

A tenant may be required to vacate the premises before the agreed lease expiry if they materially breach the lease (most commonly by failing to pay rent). Once the landlord validly terminates the lease, the tenant loses the legal right to occupy the premises.

A private lease cannot be terminated directly by the state or a municipality, but it may end indirectly. If the property is expropriated in the public interest, the lease terminates automatically, and the tenant is entitled to compensation.

Similarly, if a building authority orders demolition due to safety issues, the lease effectively ends, and the tenant typically claims damages from the landlord.

Limitations

In the event of a tenant breach and lease termination, a landlord may recover actual damages and proven lost profit. In practice, this often includes the remaining rent for the unexpired term, provided it reflects a real financial loss.

Contractual Penalties

Commercial leases heavily feature liquidated damages in the form of contractual penalties for various breaches, which are enforceable under Czech law without the need to prove actual damages.

Landlord’s Lien

The Czech Civil Code grants the landlord a statutory retention right over the movable assets owned by the tenant that are physically located within the leased premises, which can be used to secure unpaid rent upon termination.

Forms of Commercial Security

These include the following.

• Bank guarantees: Institutional landlords strongly prefer bank guarantees. These are typically irrevocable, unconditional and payable on first demand, issued by a reputable bank. Their main advantage is insolvency protection, as they create a direct claim against the bank and do not form part of the tenant’s insolvency estate.

• Cash deposits and corporate guarantees: Cash deposits are typically utilised only for smaller tenants. If the tenant is a newly established SPV, the landlord will often require an additional PCG from a financially strong parent entity.

A construction contract must either set a price or define a clear method for determining it. In practice, private development projects are based almost exclusively on a lump-sum (fixed) price model, particularly where the scope of work is sufficiently defined.

Other pricing models, such as unit-price (remeasurement), cost-plus arrangements or budget-based pricing, are generally not used in this context.

The allocation of responsibility in Czech construction projects depends mainly on the contract, but also on legal roles defined by law, such as the investor, designer, contractor and site manager.

In a typical setup, the investor hires the designer and the contractor separately. The designer is responsible for the project documentation, while the contractor is responsible for carrying out the construction. In a design-build (turnkey) model, the contractor usually takes full responsibility for both design and construction. In practice, mixed setups are common, where the investor keeps control over the initial design, and the contractor handles detailed design and construction.

Under Czech law, construction risk is shared between statutory rules and the contract. The contractor generally bears the risk of damage to the works until handover and is responsible for defects. Hidden defects must be reported without undue delay, usually within five years after handover. In practice, contracts manage risk through several key tools: defect liability and repair obligations, quality guarantees, contractual penalties, indemnities, insurance, retention (withheld payments) or bank guarantees, and agreed liability caps or exclusions.

These limits are not absolute. Czech law does not clearly define terms like “indirect” or “consequential” loss, so they should be specified in the contract. Liability also cannot be excluded in advance for intentional acts, gross negligence or harm to fundamental rights, nor can it unfairly limit the rights of a weaker party.

In Czech construction projects, schedule risks are managed primarily through contractual arrangements. Agreements typically include a binding timeline with key milestones and a final completion date.

Delays are usually addressed through contractual penalties, most often calculated as a daily amount or a percentage of the contract price. Under Czech law, claiming such a penalty generally excludes the right to claim additional damages, unless the contract provides otherwise. For serious delays, contracts often allow the investor to terminate the agreement or have the work completed by a third party at the contractor’s expense. Time-related claims are also commonly secured through retentions or performance bank guarantees.

Contractors are typically required to provide security for performance. The most common instrument is an on-demand bank guarantee (usually 5–10% of the contract price), often replaced after completion by a warranty guarantee. Retention is also standard, with 5–10% withheld from each invoice and released after proper completion. Other instruments are generally not used in practice.

Czech law does not give contractors or designers an automatic right to place a lien on a property just because they have not been paid. They cannot unilaterally create a legal encumbrance over the investor’s real estate.

A mortgage over the property can only be established with the owner’s consent and must be registered in the Cadastral Register. Alternatively, a lien may arise through court or enforcement proceedings, but only on the basis of an enforceable decision. A retention right applies only to movable items in the creditor’s possession, not to real estate.

If such a right has been registered, it can be removed from the Cadastral Register, typically based on the creditor’s confirmation that the claim has been settled, or on a court or enforcement decision ordering its deletion.

Under Czech construction law, a newly completed or significantly modified building can only be used after obtaining an occupancy permit. This confirms that the building is safe and approved for its intended use.

The key requirement is that the construction must comply with the building permit, approved project documentation and zoning regulations. It must also meet all technical and safety standards, especially regarding structural stability, fire safety and health protection. In some cases, barrier-free access is also required.

During the approval process, the developer must submit documentation such as as-built plans, technical inspection reports (eg, electricity, gas) and approvals from relevant authorities like the fire department or public health office.

General Note

Please note at the outset that the following information is of a general nature only. The firm does not provide tax advisory services.

Basic Rule and VAT Rate

In the Czech Republic, the transfer of commercial real estate is generally subject to VAT at the standard rate of 21%. However, this does not apply to share deals, where no VAT is levied.

In the Czech Republic, the overall tax burden associated with real estate transfers is relatively low. The former real estate acquisition tax was abolished in 2020, and the remaining transaction costs related to registration in the Cadastre are largely administrative and relatively minor.

As a result, tax considerations in real estate transactions tend to focus primarily on VAT and corporate income tax. In larger transactions, market practice often involves considering not only a direct transfer of the property (asset deal), but also a transfer of shares in the company holding the property (share deal).

A share deal can, in certain situations, offer tax advantages, for example in relation to VAT treatment or the potential application of the participation exemption on the seller’s side, provided that the statutory conditions are met. The choice of structure, however, always depends on the specifics of the transaction and requires a case-by-case assessment.

In the Czech Republic, there is no direct equivalent to business rates or a specific municipal tax imposed on tenants. The main relevant charge is the real estate tax, which is formally paid by the property owner but is commonly reflected in service charges and thus indirectly borne by tenants.

The tax is calculated using relatively simple criteria, such as the size of the property and coefficients set by municipalities, rather than being linked to market value or rental income. While municipalities have some discretion to influence the final amount, the overall system remains predictable.

In the Czech Republic, foreign investors are generally subject to taxation on income connected to Czech sources. The specific tax treatment depends on a range of factors, including the structure of the investment, the type of income and any applicable international agreements.

Income generated from real estate is typically treated as standard income and taxed under the general corporate income tax regime. Similarly, gains from the disposal of real estate are generally included in the ordinary tax base. The availability of exemptions or reliefs is limited and highly dependent on the circumstances of the transaction and the structure used.

Overall, the tax treatment of real estate investments is fact-specific and should always be assessed individually.

Real estate ownership may involve certain tax aspects that can be relevant from an investor’s perspective, particularly in connection with how related costs are treated for tax purposes. These typically relate to the ability to reflect certain costs connected with the use, operation and financing of the property in the tax base over time.

The exact scope and impact of such deductions depend on the applicable legal framework and the specific circumstances of the investment, including how the property is held and used.

Overall, while the system does not provide broad or exceptional tax incentives specifically aimed at real estate ownership, it allows for a standard recognition of relevant costs in line with general tax principles.