Pledge agreement (zástavní smlouva)
A contract between the bank (pledgee) and the property owner (pledgor) that establishes a lien to secure the mortgage (§ 1309 et seq. of the Civil Code). For property recorded in the land registry, written form is enough, but the lien arises only once it is entered in the land registry (katastr nemovitostí) on the basis of an application for entry (návrh na vklad). The pledgor need not be the borrower.
Example
The buyer signs a loan agreement for CZK 4,000,000 (5.00 %, payment CZK 23,384) together with a pledge agreement over the flat. Once the application for entry is filed (fee CZK 2,000), a “seal” (plomba) appears on the title extract (list vlastnictví), and the registry may make the entry no sooner than 20 days after notifying the owner. Banks often pay out as soon as the filed application is documented.
In practice
In a purchase, either the seller signs the pledge agreement while still the owner, or the lien is created only after the transfer. The bank decides which, and the procedure has to dovetail with the lawyer's escrow. Signatures on the pledge agreement are usually officially certified. Check whether the agreement bars you from letting or further encumbering the flat without the bank's consent.
How it differs
The lien (zástavní právo) is the resulting property right recorded in the land registry, and the pledge agreement is the document that creates it. The debt itself is set out in the loan agreement; without a pledge agreement, the mortgage would be an unsecured loan. Both are usually signed on the same day.
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