When selling real estate, the laws impose certain obligations on you. If you do not fulfil them, you risk both sanctions and the provision of an additional discount to the buyer.
Income tax related to the real estate sale
This tax is regulated by Act 586/1992 Coll. about income tax. On January 1st 2021, an amendment to the Income Tax Act took effect, extending the “time test” for exemption from income tax on the sale of real estate from the original 5 to 10 years. However, this increase in the “time test” to 10 years only applies to properties acquired by the owner after 1st of January 2021. If you sell a property acquired before January 1st 2021, the time test for income tax exemption remains 5 years from the acquisition of the property.
You will state income tax from the sale of real estate in your income tax return, which you must submit to your relevant tax office by March 31st for the past calendar year. You must also pay income tax by this date.
Certificate of energy performance of the building (CEP)
§ 7a of Act No. 406/2000 Coll. on energy management imposes on the seller the obligation to hand over to the buyer a certificate of the energy performance of the building (CEP). The obligation applies to the seller when selling an apartment or house (i.e. the building as a whole). If you sell the property as a natural person, you risk a fine of up to CZK 100.000 for not delivering the building’s energy efficiency certificate. In case of sale as a legal person, a penalty of up to CZK 200.000 may be imposed for non-delivery of PENB.
§ 125 paragraph 1 of Act 183/2006 Coll. on spatial planning and building regulations (Building Act) imposes on the seller the obligation to hand over to the buyer documentation of the construction. This obligation applies to you if you are selling the house as a whole. Citations from the law:
The owner of the building is obliged to keep verified documentation corresponding to its actual execution according to the issued permits for the entire duration of the building. In cases where the construction documentation was not created at all, has not been preserved or is not in proper condition, the building owner is obliged to obtain documentation of the actual execution of the construction.
When ownership of a building changes, the current owner hands over the documentation to the new owner of the building. At the same time, it is worth mentioning that even if the seller is obliged to provide this documentation to the buyer, the law does not stipulate any penalty for failure to fulfil the obligation. However, failure to submit construction documentation, or handing it over in an out-of-date state is considered defective performance. And this is precisely what opens up space for buyers to obtain an additional discount from the property for the defective performance. In the same way, the buyer can claim a discount for defective performance if it is found that the condition of the property does not correspond to the submitted construction documentation.
Reporting obligation to the Tax Office when selling an apartment in a cooperative ownership
If you are selling a cooperative apartment worth more than CZK 5.000.000, you are obliged to notify the tax office of this fact. Even if you are exempt from income tax.
For failure to submit the Notification, you risk a fine of 0.1% of the amount of unreported income if you fulfil this obligation after the deadline without being prompted by the tax administrator.
You risk a fine of 10% of the amount of unreported income if you file a Report after prompted by the tax administrator.
A fine of 15% threatens those who do not respond to the summons of the tax authority. You can find more information on the website of the Financial Administration.
Real estate tax deregistration
When selling real estate, you are required to deregister from real estate tax by January 31 of the following calendar year. If January 31st falls on a Sunday like this year, you will deregister from the tax on Monday February 1st. As for the opt-out process, the opt-out law does not specify the form of submission, nor has a special form been issued. The said fact can be communicated to the locally competent tax administrator by an informal submission, usually a letter, from which it is clear that the tax subject has ceased to be a taxpayer of real estate tax.
If you have sold one property and in the territorial district of the tax administrator you have other properties that are subject to real estate tax, then in this case it is a change of circumstances decisive for determining the tax. Pursuant to Section 13a, Paragraph 1 of the Real Estate Tax Act, you are required to file a tax return, in which you take the change into account, by January 31 of the tax period following the year in which you lost ownership of the real estate.
The technical report informs the seller and the buyer about the technical condition of the property and describes its deficiencies. So the seller knows what (s)he is selling and the buyer knows what (s)he is buying. This greatly reduces potential disputes in the future. With the technical report, the seller protects himself from the claims of the buyer, sometimes even unauthorized ones, which could be demanded as satisfaction for so-called hidden defects sometime in the future. Thanks to the technical report, the buyer cannot say that he did not know about the defects. On the contrary, it is the seller who bears responsibility for hidden defects on the property for a period of 5 years from the sale. This is a long enough time for defects that were hidden at the time of sale to surface.
The technical report drawn up by an authorized civil engineer refers to the construction part of the building and usually does not contain assessments of e.g. electrical installation, electrical appliances, gas equipment, flue gas routes and lightning conductors. These reports are the subject of separate review reports from review technicians with a given specialization.
The technical report minimizes disputes between sellers and buyers. However, it is not possible to exclude them 100%. A certain risk must always be taken into account. If you wanted an authorized engineer to protect you 100% from disputes, (s)he would have to carry out survey probes and de facto dismantle the property for you. The costs of such an assessment and the damages from its preparation would then significantly exceed its benefits. For this reason, you must always expect some risk. However, the risk with a technical report is significantly lower than if you don’t have one.
Revision of electrical installation
An inspection report is always drawn up for newly installed distribution systems, because without it the electricity supplier will not connect your electricity meter. At the same time, however, it is appropriate to have a revision report drawn up even if a change has been made to the electrical installation, which occurs, for example, during the renovation of an apartment or in connection with the installation of a new electrical system. boiler, boiler, etc. This report is drawn up by a certified inspection technician. If it is handed over to the buyer during the sale, you thereby declare that the electrical installation is in accordance with the standards. The requirements for the initial revision are governed by the standard CSN 33 2000-6 ed. 2.
Control revision of the electrical installation
Along with the use of the property, the electrical installation also wears out. Neglected maintenance can lead to catastrophic situations, namely fire. That is why it is definitely not appropriate to underestimate the control revisions of the electrical installation. And that’s even if you didn’t start any reconstruction. Control revisions are governed by the standards CSN 33 1500 and CSN 33 2000-6 ed. 2. Residential and office buildings should be inspected every 5 years.
Electrical appliances audit report
Are you going to sell the property including electrical appliances? In such a case, it is worth considering to draw up an inspection report of the electrical appliances before the sale. It is especially important for those cases where the property also has an electric boiler, heat pump, air conditioner, electric sauna stove, swimming pool, solar collectors, etc. The revision of electrical equipment is governed by the CSN 33 1500 standard.
Revision of electrical appliances that are in a basic (i.e. dry) environment is carried out every five years, in a hot or humid environment every three years, and in a wet or extremely corrosive environment every year.
Revision report of flue gas routes
The flue gas path inspection is carried out by a flue gas path inspection technician. The revision is defined by Decree No. 34/2016 Coll. on cleaning, checking and revising the flue gas path.
According to § 3 of the decree, the revision of the flue gas path is carried out:
Before putting a new flue pipe into operation or after any construction modification of the chimney.
When changing the fuel type of the connected fuel consumer.
Before connecting the fuel appliance to the unused flue gas path.
Before replacing the fuel appliance, with the exception of the replacement of an appliance of the same kind, type, design and performance, provided that the suitability of the flue gas path is confirmed by a report on the cleaning and inspection of the flue gas path.
After a chimney fire.
In the event of cracks in the used flue pipe, as well as in the case of reasonable suspicion of the occurrence of cracks in the used flue pipe.
Control report of flue gas paths
The deadlines for flue gas inspection are determined by Annex No. 2 of Decree No. 34/2016 Coll. on cleaning, checking and revising the flue gas path. The deadlines for regular inspections are once a year. Where appliances with a power of more than 50kW are connected to solid fuels, checks are prescribed twice a year. A chimney sweep will draw up an inspection report for you.
Gas equipment inspection report
Inspection of gas equipment is carried out in accordance with § 3 of Decree No. 85/1978 Coll. of the Czech Occupational Safety Office on inspections, revisions and tests of gas equipment. once a year. The inspection is carried out by a technician appointed by the manufacturer of the appliance.
Risks of failure to prepare a technical report and/or audit reports
The purpose of inspection reports, as well as technical reports, is to inform the buyer about the actual condition of the electrical installation, electrical equipment, flue gas routes, gas equipment and, where applicable, about their defects. If you have these reports available, then the seller knows what they are selling, while the buyer knows the condition of the property they are buying. The most important fact is that this reduces the risk of future disputes between the seller and the buyer. And last but not least, it is worth mentioning that in the absence of audit reports, according to regulations, the insurance company will refuse to pay for the damage. Such an event can be very expensive for the seller.
When selling an apartment or a house, the seller must take into account that (s)he is responsible to the buyer for factual defects of the property. Thus, the entire sale of the property does not have to be completed for the seller by the transfer of ownership. There is always a chance that the buyer will claim back from the seller his claims from liability for defects. The matters described above, which it is advisable to pay attention to, then noticeably reduce such chances, although they never eliminate them 100%.
By law, the seller is responsible for defects within 5 years of the sale. If a situation arises where technical defects appear on the property within 5 years from the sale, which were hidden at the time of sale and are not identified by the technical report or inspection reports, the buyer can request a discount for defective performance.
We divide defects into obvious defects and hidden defects. We consider an obvious defect to be a defect that the buyer should have noticed during a normal inspection of the property with the usual attention. Typical cases of obvious defects include, for example, a broken window, an obvious crack in the wall, etc. On the other hand, hidden defects are defects that cannot be detected during a normal inspection of the property and only appear later after the purchase of the property and its handover. Typical examples of hidden defects include, for example, odors from leaking sewers, mold on walls covered by plasterboard, leaks into the property, moisture and falling tiles, structural defects, etc.
It happens that the seller tries to avoid liability for defects already in the contracts, in which the parties then encounter formulations such as “the property is transferred to the buyer as it stands and lies” or the buyer had the option detect all defects of the object of purchase in advance”. However, any such or similar statements shall have no effect whatsoever and shall not exclude or limit the seller’s liability. The exclusion of the seller’s responsibility cannot be inferred even from the general statement contained in the contract that the buyer was informed of the technical condition of the property, etc. Even the fact that (s)he did not know about the defect does not relieve the seller of his responsibility. If the selling party wants to secure themselves and essentially get rid of responsibility for the defect, it must explicitly notify the buyer of specific defects, and if there were legal proceedings, it would still have to prove this fact.
The law also allows for an agreement between the seller and the buyer to exclude the seller from liability for defects. In this way, responsibility can also be excluded for individual parts of the property or its components (e.g. heating system, etc.). However, such an exclusion of liability requires the consent of the buyer and in practice it will be problematic to obtain it. Therefore, if the buyer does not agree to such a provision in the contract, the rights from defective performance cannot be abridged in any way. source: