Legislation to make it easier for foreigners to buy real estate in the Czech Republic has still not been implemented.
Foreign investors are advised to show caution when buying property in the Czech Republic, due to inconsistencies between current Czech and EU laws and low awareness of EU law among the state authorities.
EU law requires freedom of movement of capital between EU member states and other countries (including other EU member states). However, the Czech Republic negotiated two transitional periods on joining:
- a five-year period expiring on 1 May 2009 allowing restrictions on the purchase of second homes
- a seven-year period expiring on 1 May 2011 allowing restrictions on purchases of agricultural land and woodland
Legislation to end the restrictions on the purchase of second homes was proposed several months ago (and reported by Law-Now here) but has yet to be passed.
Even allowing for the transitional periods, Czech laws on property ownership have arguably been stricter than is permitted by EU law. One of the draft bills was intended to rectify this but Parliament has been unable to agree on it since 2007. The other bill, to allow unrestricted purchases of real estate apart from agricultural land and woodland, failed to be passed by only one vote in summer 2009.
This means that EU laws on the freedom of movement of capital now take precedence over (non-compliant) Czech law as regards foreign purchases of real estate (apart from agricultural land and woodland). It also means that:
- the European Commission could decide to bring formal proceedings in the ECJ, which could result in substantial penalties being imposed on the Czech Republic
- individuals affected by the non-compliance of Czech laws may, in certain circumstances, claim damages in the Czech courts
Although the Cadastral offices are understood to have been instructed not to apply the non-compliant Czech law, there is a risk they will not do so in individual cases.
Parliament is now debating a new bill, identical to the one already rejected. Given the length of the standard legislative process, it is likely that Czech law will not conform to EU law for several months to come.
Law: Act No. 219/1995 Coll., Foreign Exchange Act
Articles 56 and 226 of the Treaty establishing the European Community
Annex V to the Act on Accession (short title)
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 12/11/2009.