Gift of property (darování nemovitosti)
Transfer of ownership of a property by a gift agreement (darovací smlouva, § 2055 et seq. of the Civil Code). It must be in writing, and ownership passes only on registration in the land registry (katastr nemovitostí). A gift between relatives in the direct line, siblings, spouses and other close persons is exempt from income tax (§ 10(3)(c) of the Income Tax Act). A pledged property can be given away; the bank's lien remains.
Example
Parents give their son a flat valued at CZK 4,500,000, unencumbered and with a reserved lifelong right of residence. The son takes a CZK 1,000,000 mortgage over 30 years at 5.00 % for renovation, with a payment of CZK 5,368, and pledges the flat. The LTV is only 22 %, so the bank usually offers its best rate. Registering the gift agreement and the lien costs CZK 2,000 each.
In practice
An attorney or notary draws up the agreement, and the donor's signature is officially certified for the land registry. If the property is pledged, the pledge agreement usually prohibits a transfer without the bank's consent, so ask for it in advance. A lifelong right of residence (věcné břemeno dožití) reduces the collateral value, and the bank lends less. Giving a flat instead of paying out a sibling, with nothing in writing, invites trouble: a gift can be revoked for ingratitude (§ 2072).
How it differs
With a gift only the thing itself passes, together with any lien on it; in probate proceedings the deceased's debts pass to the heirs as well. Unlike a purchase agreement, a gift costs the recipient nothing, so there is no “purchase” for a purpose mortgage to finance either.
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