CZECH REPUBLIC Law and Practice Contributed by: Matěj Manderla, Jan Wagner, Ivo Hartmann and Aleš Malach, Tenacta, advokátní kancelář, s.r.o.
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 transac - tions, such as large commercial deals. It is not com - mon in standard transactions, especially for residen - tial units or smaller projects. 2.4 Real Estate Due Diligence Legal due diligence primarily involves reviewing the Cadastral Register and historical title documents, usu - ally 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 plan - ning 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. 2.5 Typical Representations and Warranties 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 war - ranties, these are almost always replaced by individu - ally negotiated contractual R&Ws. Buyer’s Remedies and Security If a representation or warranty proves to be incorrect, • the right to require the seller to remedy the breach of the representation or warranty (including bring - ing 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 war - ranties (such as title to shares or property) are com - monly agreed for up to ten years, and tax warranties typically for 3–5 years. the buyer is typically entitled to: • compensation for damages;
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