It depends on the type of easement (věcné břemeno). Banks routinely accept a utility servitude (electricity, gas, water) or a right of way, and these lower the valuation (odhad) a little or not at all. A lifelong right of residence (věcné břemeno dožití), meaning someone else's right to live in the property for life, is different.
Most banks will not take such a property as collateral, and those that do have the valuer cut its value sharply, which cuts the loan with it.
Easements are listed in part C of the title sheet (list vlastnictví, LV), and their exact scope is in the deed held in the land registry's collection of deeds (sbírka listin). A right of residence can be cancelled by agreement with the beneficiary before the sale, or registered after the bank's lien with the bank's consent.
Which easements will a bank accept?
Utility servitudes and rights of way, as a rule; a lifelong right of residence, mostly not. The Civil Code distinguishes servitudes (služebnosti), where the owner must tolerate something or refrain from something (§ 1257 et seq.), from real burdens (reálná břemena), where the owner must give or do something. For a mortgage, the question is how far the easement limits the use of the property and the chance of selling it:
| Type of easement | Banks' stance | Effect on the valuation |
|---|---|---|
| Utility servitude (ČEZ, gas and water companies) | accepted | none to small; larger if the line restricts building on the plot |
| Right of way, footpath, vehicle access | accepted | small; more noticeable for a house with other people's cars passing through |
| Lifelong right of residence (servitude of a dwelling, right of use or usufruct) | mostly rejected; some banks accept with a deduction | significant, depending on scope and the beneficiary's age |
| Výměnek (retirement arrangement: housing + care, provisions) | similar to a right of residence | significant |
| Pre-emption right (předkupní právo) registered as a right in rem | want to know the beneficiary will not exercise it | affects saleability more than price |
Strictly speaking, a pre-emption right is not an easement, but it sits in the same part of the LV and banks look at it in much the same way. Besides contractual pre-emption rights there are statutory ones, for instance between the owner of a plot and the owner of a building on it, where these are different people.
How to find and read an easement
- Part C of the title sheet (“Rights in rem encumbering the property”) shows the type of easement, the beneficiary (a person or a benefiting plot) and a reference to the deed.
- Part B1 shows the reverse: rights that your property enjoys over neighbouring plots, such as an access road. That is a plus the valuer should count.
- The collection of deeds (sbírka listin) holds the contract that created the easement, and only the contract tells you the scope. Is the right of residence “to the whole house” or “to one room and shared use of the kitchen”? How wide is the cable strip? Is the easement paid for?
- A geometric plan (geometrický plán) shows where a utility line or road runs when a servitude covers only part of a plot.
Then think about what the LV does not show. Servitudes for power lines can arise directly by law (protection zones), and a lease is not entered in the land registry yet still binds a buyer. Have the seller declare in the purchase agreement that the property carries no rights other than those on the LV. More in Purchase agreement and attorney escrow.
Why do banks dislike a lifelong right of residence?
If things go wrong, the bank must be able to sell the collateral at a fair price. Few people will buy a flat in which someone else has a lifelong right to live, since the new owner can neither use it nor let it. A forced auction would raise little, and even that is uncertain.
So the valuer starts from the market value and deducts the value of the right the beneficiary keeps. The deduction grows with the scope (the whole house or one room) and with the expected duration: the younger the beneficiary, the bigger the deduction. Many banks keep it simple. They will not lend against a property with a right of residence at all, and suggest additional collateral (dozajištění) with another property instead.
For a senior, selling with a lifelong right of residence is one way to get money out of a flat and keep living there. The other is a reverse mortgage, where the flat stays theirs but the debt grows with interest; we compare both, with their costs, in a separate article.
Buying your parents' house when they want to stay
The Nováks sell to their son
The parents are selling their house to their son for CZK 5,000,000, while the market valuation without any easement is CZK 6,000,000. They want to live there for life. The son has CZK 1,000,000 and needs a mortgage of CZK 4,000,000 (5.00 %, 25 years).
- Option A: no right of residence. Banks usually calculate LTV from the lower of the two values, here the price, so it comes to 80 % (67 % of the valuation). That is still within the ČNB limit, and the payment is CZK 23,384. The parents' housing is settled another way, through a gratuitous-use agreement (smlouva o výprose) or a lease, which the bank does not treat as an encumbrance on the collateral.
- Option B: the right of residence is registered before the lien. Most banks refuse. If the bank cut the value with the easement to, say, CZK 4,000,000 (an illustrative assumption), it would lend at most 80 % = CZK 3,200,000 with a payment of CZK 18,707, leaving the son CZK 800,000 short.
- Option C: the right of residence is registered after the bank's lien. Some banks accept this, with their written consent, and the lien then ranks first. Negotiate the terms before you sign the loan agreement.
- Option D: additional collateral. A lien on another property (the son's flat, for example) makes up the value the right of residence takes away.
Selling within the family below market value is legal, and the property acquisition tax (daň z nabytí nemovitých věcí) was abolished in 2020. Think about the other siblings and possible inheritance claims, though.
How to remove an easement
| Situation | Procedure | Watch out for |
|---|---|---|
| The beneficiary agrees | agreement cancelling the easement + application for registration of the deletion in the land registry | certified signatures; registration usually with an administrative fee |
| The beneficiary has died (right of residence, right of use) | a personal servitude ends on death; deletion on the basis of the death certificate | until deletion the easement is visible on the LV and the bank treats it as existing |
| The easement was agreed for a fixed term | it ends when the term expires; deletion on request | check the date in the contract establishing it |
| A utility line or road nobody needs | agreement with the operator or the owner of the benefiting plot; exceptionally a court | energy companies agree only to a relocation that you pay for |
If you are buying a property where a right of residence is due to be cancelled, agree that the price leaves escrow only after the easement has been deleted, exactly as you would with the seller's lien. How priority works in the land registry is explained in A lien on property.
What to ask before you sign a reservation
- Which easements are in part C, and what exactly does the deed in the collection of deeds say?
- Who is the beneficiary, and are they willing to cancel the easement (and for how much)?
- Does the bank accept this particular easement? Ask before the valuation, not after it.
- Has the valuer reflected the easement in the value, and does the purchase price match?
- Is the deletion, or a waiver of the pre-emption right, a condition for releasing the purchase price from escrow?
Sources
- Act No. 89/2012 Coll., Civil Code, § 1257 et seq. (servitudes) and § 1303 et seq. (real burdens)
- Act No. 256/2013 Coll., on the land registry (title sheet, collection of deeds, registration of deletion)
- ČNB – LTV limit 80 % (90 % under 36)
- ČÚZK – Nahlížení do katastru nemovitostí (land registry viewer)