Property reservation agreements in the Czech Republic: losing…

A reservation agreement can secure a property purchase, but a badly drafted one can cost you hundreds of thousands of crowns. We look at the reservation fee, escrow, risky clauses, and how to proceed if you are buying with a mortgage or from abroad.

A reservation agreement (rezervační smlouva) guarantees the buyer that neither the seller nor the agent will offer the property to anyone else for an agreed period. In return, the buyer usually pays a reservation fee. You lose the fee if you withdraw from the purchase for a reason the agreement does not expressly allow, and the penalty has been agreed with the seller. According to the Supreme Court, a real estate agency may not keep the fee as a penalty for failing to sign the purchase contract if the buyer is a consumer. Only ever send money to an escrow account held by a lawyer, notary or bank, and make sure the agreement states exactly when it will be returned.

What a reservation agreement is for, and when you don't need one

The Czech Civil Code does not regulate reservation agreements specifically. They are what is known as an innominate contract (nepojmenovaná smlouva), whose content the parties set themselves. In practice, a reservation agreement does three things: it takes the property off the market for a set period, gives the buyer time to carry out checks and arrange financing, and records the price and main terms of the deal in writing for both parties.

It is important to distinguish between two-party and three-party agreements. If the buyer signs only with the real estate agency, it is usually only the agency that is bound. An owner who has not signed the agreement is free to sell the property to someone else. Genuine certainty comes only from an agreement that the owner has signed as well. A reservation agreement is often unnecessary when both sides are ready to sign the purchase contract within a few days and financing is in place. In that case, it is better to go straight to preparing the purchase contract and an escrow agreement.

If a real estate agency is brokering the deal, Act No. 39/2020 Coll., on Real Estate Brokerage, applies. Among other things, the agency must provide you with an up-to-date extract from the Land Register (katastr nemovitostí). Before you sign anything, always check for yourself who the owner is and whether the property is encumbered by a mortgage (zástavní právo), enforcement proceedings (exekuce) or a pre-emption right (předkupní právo).

Reservation fee, advance payment and contractual penalty

These terms are often used interchangeably in practice, but they have different legal consequences:

A reservation fee is a payment for having the property held for you for a certain period. What happens to it depends primarily on the wording of the agreement. It is usually credited against the purchase price or the agent's commission when the purchase contract is signed.
An advance payment (záloha) is part of the purchase price paid upfront. If the purchase does not go ahead, it is returned, because there is no longer any legal basis for the payment – unless the agreement expressly provides otherwise.
A contractual penalty (smluvní pokuta) is a sanction for breaching a specific obligation (Civil Code, Section 2048 et seq.). According to the Supreme Court's interpretation, it can be agreed between the parties to the future purchase contract – that is, between the seller and the buyer – but not in favour of the agent. A court may reduce a penalty that is disproportionately high.

A contractual penalty does not apply automatically. It must be expressly agreed in the contract, and it must be clear which obligation it secures. If the agreement refers only to a 'reservation fee' without stating what happens to it if the deal falls through, disputes over it can drag on for years.

When the fee is forfeited and when you can claim it back

The landmark ruling is Supreme Court decision ref. no. 33 Cdo 1507/2022 of June 2023. In it, the court held that a three-party reservation agreement involving a real estate agency is a real estate brokerage contract. Under Section 14 of the Real Estate Brokerage Act, such a contract cannot impose on a prospective buyer who is a consumer an obligation to enter into a purchase contract. The agency therefore cannot keep the fee as a contractual penalty because the buyer changed their mind. If it has done so, it must return the fee.

Penalties can, however, be agreed between the buyer and the seller. The fee may therefore be forfeited to the seller if the buyer fails to sign the purchase contract by the agreed deadline without a contractual reason. Conversely, you can claim the fee back in the following situations: the seller sells to someone else or refuses to sign; due diligence reveals a defect or legal encumbrance you were not aware of; the bank does not approve your loan and the agreement lists this as grounds for a refund; or a contractual provision turns out to be invalid.

Agreement on a future contract: when it is the better choice

If you need more time between reaching an agreement and the purchase itself – for example, because a new-build is being completed, an inheritance is being settled, a plot is being divided or a mortgage is being removed from the register – an agreement on a future purchase contract (smlouva o smlouvě budoucí kupní) under Sections 1785 to 1788 of the Civil Code offers better protection. In it, the parties undertake to enter into a purchase contract upon request within an agreed period or, if no period is agreed, within one year.

Its main advantage is enforceability. If the other party fails to sign the purchase contract, you can apply to the court under Section 1787 to determine the content of the contract. This claim must be brought within one year of the expiry of the period in which the contract was to have been concluded. The courts accept that such an agreement need not be in writing, even for real estate. For evidential purposes, however, always conclude it in writing, with certified signatures and with the content of the future purchase contract set out in as much detail as possible, ideally as an annex.

Lawyer, notary and bank escrow: differences and costs

Never send the reservation fee or the purchase price directly to the seller. Section 4 of the Real Estate Brokerage Act also stipulates that an agency may offer escrow only through a bank, notary, lawyer or court enforcement officer. It may provide its own escrow only at the written request of the client, in a separate document and under strict conditions.

Lawyer escrow (advokátní úschova) is flexible, and the fee is negotiated with the lawyer. The lawyer must record the escrow in the Czech Bar Association's electronic escrow register and keep the money separate from their own assets. At the client's request, the Bar Association will send confirmation that the lawyer has duly registered the escrow. Since 2026, the Bar Association has also operated a guarantee fund that supplements the lawyer's insurance. Check the lawyer in the Bar Association's register and ask for confirmation that the escrow has been registered before you send any money.

Notary escrow (notářská úschova) is governed by the notarial tariff, so it costs the same with every notary. The fee is calculated using a sliding scale based on the amount held, and VAT is added. If the notary has also drafted the purchase contract, you pay only a fraction of the standard escrow fee. Bank escrow is mainly suitable if you are buying with a mortgage from the same bank. However, it tends to be less flexible when it comes to setting the conditions for release of funds, and prices are set by the bank's fee schedule.

The most common risky clauses

When reading a draft agreement, be on your guard if you find:

an agreement signed only with the agency, without the property owner,
a fee payable to the agency's operating account or directly to the seller,
forfeiture of the fee 'in all circumstances', even if the seller causes the deal to fall through or a defect comes to light,
a reservation period too short for the bank to complete its valuation and loan approval,
no mortgage clause and no condition that legal and technical due diligence must be satisfactory,
a contractual penalty for the buyer with no equivalent sanction for the seller,
a vague description of the property, its appurtenances or the furnishings included in the price,
consent for the agency to offset the fee against its own claims.

How buyers with a mortgage or from abroad should approach it

If you are buying with a mortgage, set the reservation period according to the bank's realistic timeline: valuation, approval, signing the loan agreement and drawdown. Under the Czech National Bank's (ČNB) recommendations, the upper LTV limit for owner-occupier loans is 80%, or 90% for applicants under 36. For buy-to-let mortgages on a third or subsequent property, the ČNB has recommended a maximum LTV of 70% and a DTI of 7 since 1 April 2026. In addition, the bank works from the valuation price if this is lower than the purchase price. The agreement should therefore provide for the fee to be refunded if the loan is not approved or the valuation comes in significantly lower.

Buyers from abroad often find reservation agreements unusual, because in their own country they either do not exist or work differently – for example, as a refundable deposit held by a notary. We recommend preparing a bilingual agreement, arranging a power of attorney with an officially certified signature in advance (with an apostille if needed), allowing for identification under anti-money laundering rules and providing evidence of the source of funds. Bear in mind, too, that international transfers and currency exchange can take several days, and choose an escrow service that will accept payment from a foreign account.

Frequently asked questions

How much is the reservation fee? The law does not set an amount; it is a matter of agreement between the parties. What matters is that the amount reflects the risk and the length of the reservation, and that it is clear how the fee will be credited against the purchase price or commission.

Do I have to sign a reservation agreement if the real estate agency asks for one? No. You can propose an agreement on a future purchase contract directly with the seller, or go straight to a purchase contract with escrow. If you do sign a reservation agreement, insist that the owner signs it too.

Will the real estate agency return the fee if I change my mind about buying? If you are a consumer and the agency is keeping the fee as a penalty for not signing the purchase contract, the Supreme Court has held that it must return it. A penalty agreed directly with the seller is a different matter. It therefore depends on the exact wording of the agreement and on who signed it, so have it checked by a lawyer before you sign.

This article explains the general rules and is not a substitute for legal advice. Always consult a lawyer about a specific agreement and a tax adviser about tax matters. DALILE LIVING can help you prepare the transaction, arrange due diligence on the property and coordinate the process with your lawyer, the escrow provider and the bank.