Czech property deposits and escrow: where your money sits, and when

The costly mistakes in Czech property deals tend to happen at two moments: when the reservation deposit is paid, and when the price is. Both involve money changing hands before ownership does, because in Czechia ownership arrives only with the entry in the land registry, weeks after the signing. Two tools manage that gap: a carefully written reservation agreement, and an escrow arrangement.

Neither is glamorous. Both are the difference between a deal that survives a surprise and one that ends in a dispute about who holds whose money.

What a reservation agreement does

A reservation agreement (rezervační smlouva) is a short contract in which the seller promises to hold a property for a buyer for a set time, in return for a deposit. It is common in broker-led sales, and it is not required by law. A buyer can walk into a purchase contract without one, and a private sale between two individuals may never have one.

With no mandatory template, the content varies widely. A good one identifies the property precisely (unit number, building, cadastral area), states the price, the length of the reservation and the size of the deposit, says who holds the money, and spells out what happens to it in each outcome. A bad one is a page and a half that says the flat is reserved and the deposit is paid.

The clause that matters

Read the deposit clause as if you were about to lose the sale. It should say whether the deposit comes back in full if the legal checks turn up a problem, if the lender refuses financing or if the seller withdraws. It should also say whether the deposit counts towards the price if the sale goes ahead.

Czech law distinguishes between a simple deposit and a contractual penalty, and the wording decides which you have. If the document says the deposit is non-refundable in every case, assume it is, and ask yourself whether you accept that. A deposit paid into a broker's own account rather than into escrow deserves a question as well: who holds it, and what happens to it if the brokerage runs into trouble?

What escrow is

Escrow (úschova) means a neutral party holds the money until agreed conditions are met. In a property sale the usual condition is that the buyer has been entered as owner in the Cadastre of Real Estate, or at least that the application has been filed and no obstacle has appeared.

The logic is simple, and it is the same logic that governs the whole Czech process. The buyer does not pay the seller before owning the flat, and the seller does not hand over the flat before being paid. The money waits in the middle. Our guide to the land registry explains why the wait exists.

Who can hold it

A notary can take funds into custody (notářská úschova) under rules set by law, and pays out when the agreed conditions are met. The fee follows a regulated tariff, which makes it predictable.

A lawyer (advokát) can hold client money in a dedicated account, kept apart from the firm's own funds under professional rules. The price is agreed with the lawyer, and it is reasonable to ask how the account is protected and what insurance the firm carries.

A bank offers escrow accounts for property sales, usually on a standard form, with conditions and fees set in its terms. It is predictable and has less room for custom conditions.

A broker may offer to hold the money too. Ask what protects you if the brokerage runs into trouble, and weigh whether one of the independent options is safer.

The escrow agreement

Escrow runs on a three-party agreement between buyer, seller and the holder. It sets out how much is held, the release conditions (for example, proof that the transfer was entered in the register), the deadline and what happens if the sale collapses. Parties often split the price, releasing part on filing and the rest on registration and handover.

This is where deals are won and lost, so do not accept a generic text unread. A condition that cannot be proved in practice, or a deadline shorter than the registry's real processing time, can freeze the money. The holder works from the agreement and the registry's decision, not from what the parties remember agreeing.

What escrow does not do

Escrow protects the payment. It does not check whether the seller owns the property, whether a mortgage sits on it or whether the flat matches its description. Those are separate legal checks, and a lawyer's escrow account does not mean the lawyer has carried them out unless you have asked for that as well.

Nor does it remove every risk. A mistake in the contract or an error in the filing can delay release. If the registry rejects the application, the money goes back according to the agreement, and the parties start again, with the time and the fee that implies.

Common mistakes

Paying the whole price to the seller on signing "because everyone does it". Paying a deposit to a person rather than to an account named in the contract. Accepting a deposit clause in a language you do not read. Treating a broker's assurance as an escrow. Setting a release deadline that the registry cannot meet.

Costs

The fee depends on the holder and the amount, and the parties agree who pays. Check current amounts with the provider (as of 2026; check the official source). Ask for the figure in writing before choosing, because the cheapest option on paper is not always the cheapest once conditions are added.

A worked example without numbers

Picture a buyer who reserves a flat on Monday, with a deposit paid to the broker's account. On Wednesday the lawyer finds an enforcement note against the seller on the ownership sheet. If the reservation agreement says the deposit is returned when the legal checks reveal a problem, the buyer asks for the money back and moves on. If it says the deposit is kept in all cases, the buyer has bought a lesson. Same flat, same facts, and the only difference is one clause that cost nothing to read.

Now picture the price. The buyer signs the purchase contract on Friday and the price goes into a lawyer's client account. The application for entry is filed on Monday. If the registry then finds a defect and rejects the filing, the agreement tells the lawyer what to do with the money. Nobody has to chase anyone, and nobody has paid for a flat they do not own.

Why sellers like escrow too

Escrow is often presented as a buyer's protection, but sellers have their own reasons to want it. A seller who hands over keys before payment is exposed, and a seller who waits for a transfer from a buyer's foreign account has no proof it is coming. Money in escrow is visible and committed, which is why a serious seller rarely objects to it. A seller who resists escrow and insists on cash at signing is telling you something about how the deal is expected to go.

A first step

Before paying any reservation deposit, ask for the draft agreement in writing and have a Czech lawyer review the deposit clause. Ask the seller or broker who will hold the deposit, and where the account is. Then ask the same question about the purchase price.

This is a general explainer, not legal, tax or mortgage advice.