Can you sell a property with a lien without the bank's consent?

What a lien on a property means

The lien (zástavní právo) is governed by the Civil Code, Act No. 89/2012 Coll. (Section 1309 et seq.). It secures the creditor's claim: if the debtor does not pay, the creditor can recover the debt from the value of the pledged property. For real estate, the lien is recorded in the Czech Land Registry (katastr nemovitostí) and is visible on the ownership sheet (list vlastnictví).

The important point is that the lien is attached to the property, not just to you personally. If the property were sold and the lien remained registered, the buyer would acquire it encumbered. For that reason, no sensible buyer will purchase a property if it is unclear how the lien will be dealt with.

When creditor consent is needed and when it is not

The law itself does not generally provide that every sale of a pledged property requires the consent of the lienholder. What matters, however, are the arrangements you made with the creditor. Look in particular at:

• the loan agreement and the lien agreement – they may require you to inform the creditor or to ask for consent before selling or further encumbering the property,
• a prohibition on disposal (zákaz zcizení) – if one has been agreed and registered, a sale without the creditor is problematic,
• early repayment terms – these determine how and when the debt can be repaid and whether fees apply.

So the creditor does not need to be asked for permission where the debt is repaid from the sale price and the lien is deleted. In practice, though, you will deal with the creditor anyway, because it issues the confirmation of the amount owed and the consent to deletion. The specific conditions depend on your contract and cannot be promised in advance.

A mortgage lien versus a lien securing another debt

Mortgage

A bank is usually a clearly identified creditor with a fixed procedure. Typically you request the current outstanding balance, the bank states the amount needed for full repayment, and once it is paid the bank issues consent to the deletion of the lien. You can find more on this situation on the page buying a property with a mortgage.

A lien securing another debt

A property may also be pledged for a private loan, a debt owed to a company or a third party, or even for someone else's debt. The procedure here tends to be less standard: the creditor may have no clear internal process, may dispute the amount of the debt with you, or may be harder to reach an agreement with. If the debt is also subject to enforcement (exekuce) or insolvency proceedings, special rules apply (Enforcement Code No. 120/2001 Coll., Insolvency Act No. 182/2006 Coll.) and a sale becomes considerably more complicated. A general overview is on the page buying a property with a lien or debt.

How the lien is repaid from the purchase price, step by step

The most common procedure, and the safest for both parties, looks like this:

1. Find out the amount of the debt. Ask the creditor for the sum needed for full repayment, including accessories (interest, fees and so on).
2. Agree terms with the buyer. The purchase contract states that part of the purchase price will go towards repaying the lienholder.
3. The purchase price is paid into a lawyer's escrow account. The money is thus not handled in cash and the process can be monitored. Cash payments are also limited by Act No. 254/2004 Coll. to CZK 270,000 per day.
4. An application for registration is filed. The buyer acquires ownership only upon registration (vklad) in the Czech Land Registry (Land Registry Act No. 256/2013 Coll.).
5. The debt is paid from escrow. The lawyer pays the creditor as agreed and sends the rest of the price to you.
6. The lien is deleted. On the basis of a document from the creditor, the Land Registry deletes the lien.

If the purchase price is lower than the debt, the difference must be dealt with separately with the creditor. Without its consent to a smaller payment, the lien could remain.

How long it takes

The Land Registry office may not decide on a registration earlier than twenty days after notifying the owner (Land Registry Act No. 256/2013 Coll.); the average registration time is roughly 22 days. In our process, the signing of contracts and the deposit usually take place within 1–3 days, registration in the Land Registry takes roughly 3–4 weeks, and the balance of the purchase price is released from the lawyer's escrow account within 5 days of registration. The actual time depends on the Land Registry and on how quickly the creditor supplies the documents.

A detailed description of the process is on the page how a property purchase works.

What to watch out for

• Do not sell blind. Before signing, obtain a current Land Registry extract and a statement of the debt.
• There may be more than one lien. Each has its own ranking and each creditor must be dealt with.
• Co-owners and spouses. When selling a share, or property in joint marital ownership, their cooperation is needed. The general pre-emption right of co-owners has been abolished; after an inheritance it lasts only six months from the creation of the co-ownership (Section 1124 of the Civil Code).
• Taxes. Real estate acquisition tax (daň z nabytí nemovitých věcí) was abolished (Act No. 386/2020 Coll.). Income tax on the sale is governed by Act No. 586/1992 Coll. and depends, for example, on the time test and on whether the property was your home; consult the Financial Administration or a tax adviser.
• If an auction looms, act in good time. In an auction the minimum bid is two thirds of the estimated price (Section 336e of the Civil Procedure Code No. 99/1963 Coll., applied accordingly to enforcement). More on the page quick sale before an auction.

How to proceed in practice

Start by reading your contract with the creditor and finding out the current amount of the debt. Then have your situation assessed without obligation; we prepare an offer within 24 hours, in writing and non-binding. The lawyer's escrow and legal service are free of charge. Answers to further questions can be found in the frequently asked questions. Whether, and on what terms, the creditor will allow the sale always depends on your contract and on its decision.