What Happens to a Mortgage or Charge on a Building When You Sell Units Individually

What Happens to a Charge When a Building Is Divided into Separate Units

A charge (zástavní právo) typically remains on the property even after its division, affecting individual units too. Units are created by the owner's declaration (prohlášením vlastníka) under § 1169 et seq. of the Civil Code No. 89/2012 Coll., but the creditor does not lose their security merely because the property's legal status has changed.

In practice, this means a buyer would acquire the unit with the charge in favour of your bank, which no reasonable buyer—or their lender—would accept. The charge must therefore be removed and cancelled for each unit being sold. Charges are regulated under § 1309 et seq. of the Civil Code No. 89/2012 Coll.; registrations at the Czech Land Registry (katastr nemovitostí) are governed by the Land Registry Act No. 256/2013 Coll.

The exact impact on your building depends on the wording of your charge agreement. Therefore, the first step is always to read it carefully, ideally with a solicitor.

What to Establish Before You Sign Anything

The foundation is a complete overview of all charges on the building and the terms agreed with the creditor. Without this, you cannot reliably plan price or sales schedule.

1. Property register entry (list vlastnictví) – identify all charges (zástavní práva), easements (věcná břemena) and notes, including any execution charges (exekuční zástavy, regulated under Enforcement Procedure Act No. 120/2001 Coll.).
2. Loan and charge agreements – look for restrictions on disposal of the charge, requirement to seek consent, early repayment terms and penalties.
3. Current debt amount – request from the creditor a written summary of principal, interest and any fees.
4. Other creditors – for debts outside the main loan, check whether enforcement proceedings or insolvency (Insolvency Act No. 182/2006 Coll.) are underway; in such cases, the process has special rules and the owner may not be free to deal with the property as they wish.

This analysis is part of the legal phase of the project. General procedure is described on the page How it works.

Refinancing Before Conversion or Resolving It During Conversion

There is no universally better option; it depends on the debt-to-value ratio, the agreement terms and the creditor's willingness. Both approaches have advantages and disadvantages.

Specific costs and terms are always set by the agreement and creditor's offer; they cannot be forecast in this article.

How a Charge Is Removed from Sold Units

A charge is removed from a unit with the creditor's consent, typically simultaneously with partial repayment of the debt from the purchase price. To protect the buyer, payment is usually made electronically via an escrow account held by a solicitor.

1. The creditor and owner agree on the amount at which the creditor will release the unit.
2. The purchase price is deposited into escrow; cash payment is limited to CZK 270,000 per day under Act No. 254/2004 Coll., so reputable sales proceed electronically.
3. The solicitor pays the agreed amount to the creditor from escrow, and the creditor issues consent for the charge to be removed.
4. An application for registration of ownership and removal of the charge is filed with the Land Registry Office (katastrální úřad).
5. Once the registration is completed, the remainder of the price is paid to the seller.

Ownership transfers only upon registration at the Czech Land Registry. Under the Land Registry Act No. 256/2013 Coll., the office cannot decide earlier than 20 days after notice to the owner, and average processing time is around 22 days. This must be factored into cash-flow planning and agreed timelines with the creditor.

How Banks View This

A bank primarily assesses whether the remaining debt will be adequately covered by the remaining charge after a unit is released. As units are sold one by one, the value of remaining security decreases, so creditors often require that their proportionate share of each sale proceeds be applied to reduce the debt.

Creditors typically appreciate having:

• the owner's declaration (prohlášení vlastníka) and a breakdown of floor areas and ownership shares,
• professional valuations of the units and a substantiated sales plan,
• a schedule and budget for refurbishment and permissions under the Building Act No. 283/2021 Coll.,
• a clear process for disbursement from escrow.

The advantage is that the project passes through three gates (legal, permit, sales gate) and progresses only with confirmed figures. The creditor then sees a substantiated plan, not an estimate. The typical value uplift between selling the building whole and selling units individually is 20–40%; the exact figure is determined by feasibility analysis, and this uplift is often the argument for an agreement on releasing charges.

Risks to Watch For

The greatest risk is selling or promising a unit without the creditor's consent. Breach of contract can trigger acceleration of the loan and complications at registration.

• Execution and court-ordered charges – these arise independently of your bank agreement and have their own removal process; in forced sales, the minimum bid is two-thirds of the final price (§ 336e of the Code of Civil Procedure No. 99/1963 Sb., applied proportionally to enforcement), so forced sales tend to be disadvantageous for the owner.
• Timing mismatch – the loan maturity or fixed-rate period may expire before the units are sold.
• Taxation – sale proceeds may be subject to income tax under the Income Tax Act No. 586/1992 Sb. (factors include the holding period and residential use); verify details with the Tax Administration (Finanční správa) or a tax adviser.

Transfer tax (daň z nabytí nemovitých věcí) was repealed by Act No. 386/2020 Sb., so buyers do not bear this cost.

What to Do Now

First verify the status of charges and contract terms, only then plan the sale.

1. Download the current extract from the Czech Land Registry and gather all loan and charge agreements.
2. Request from the creditor the current debt amount and terms for early repayment or release.
3. Prepare a summary of rental agreements and income from the building.
4. Estimate the potential using the potential calculator.
5. Choose your level of engagement: paid Audit and Plan delivers within 6 weeks, or end-to-end implementation.

Further answers can be found in frequently asked questions. You can obtain a non-binding quote or property assessment via the form below the article.