A real estate agency contract is a contract that real estate agents (estate brokers) encounter on a daily basis, however, most of us will likely encounter it over time. Since its entry into force in 2020, the Real Estate Brokerage Act (hereinafter the “RBA“)[1] imposed stricter rules on the content and particularities of such a contract. Nevertheless, many real estate brokers still do not reflect these statutory requirements in their daily business practice, or completely disregard them, despite the fact that the potential negative consequences of non-compliance are certainly not negligible.
Therefore, the purpose of this article is to clearly present and draw attention to the essential topics that a real estate broker should always keep in mind when drafting and concluding a real estate brokerage contract with his client.[2]
General information about the real estate agency contract and its requirements
A real estate agency contract is generally defined as an agency contract by which the real estate agent undertakes to arrange for the conclusion of a real estate contract for the interested party. According to the Real Estate Contract Act, a real estate contract is a contract facilitating the acquisition of the ownership right to immovable property (typically a purchase contract, a gift contract or a contract of exchange), as well as a contract for the acquisition of a right which includes, or is connected with, the right to use or enjoy immovable property, a flat, or non-residential premises, unless it is an accommodation contract (i.e., typically a lease contract or a tenancy contract).
Unlike other contracts concluded in ordinary business dealings, real estate brokerage contracts must satisfy both the general requirements of the Civil Code (hereinafter the “CC“),[3] and the special rules and requirements set forth directly in the Real Estate Brokerage Act.
The real estate brokerage contract must be in writing; simple signatures are sufficient and do not need to be officially certified. Even simple electronic signatures (e.g., using DocuSign, Signi, etc.) are now sufficient for the validity of a real estate agency contract.[4] If the real estate brokerage contract is not concluded in writing, it can be invoked as relatively invalid, however, this right belongs only to the interested party and not to the real estate broker (Section 9(2) RBA).
The real estate brokerage contract may not be contained in the same document as the brokered real estate contract, and again, only the interested party may challenge the validity of a defectively concluded contract, however, the rights and obligations of the contracting parties under other provisions of the document, i.e., the particular real estate contract, are not affected by the objection raised regarding the validity of that contract.
Furthermore, the real estate agency contract must contain (i) the designation of the object of transfer or the object of use or enjoyment (e.g., a flat or non-residential space) – i.e., the subject property, (ii) the purchase price, rent or other consideration or the manner of its negotiation (if the real estate agency contract is a fee-based contract), as well as (iii) the amount of the real estate agent’s commission, or at least the manner of its determination. If the details of the property or the purchase price, rent or other consideration are not known at the time of conclusion of the real estate agency contract, they must be stated at least in general terms. If the contract omits the required information above, such a real estate agency contract will again be relatively invalid. Even in this case, only the interested party, not the real estate agent, can raise a question of validity (Section 10(3) RBA).
The real estate brokerage contract is in principle a contract of consideration, i.e., the real estate broker performs the agreed activity for a commission. According to the RBA, the commission is due earliest on the date that the real estate contract is signed but may be agreed to be due earlier than that or before a suspensive condition is met (e.g., payment of the purchase price). However, such an arrangement is permissible only if the real estate agency contract contains an instruction to the prospective buyer that the commission is not due upon the conclusion of the real estate contract or upon the fulfilment of a condition precedent to the real estate contract, and once the real estate broker has secured the opportunity for the client to conclude the real estate contract. Certain other restrictions apply to contracts concluded with consumers, which are dealt with in a separate passage below.
It is important to mention that the RBA potentially reverses the standard form of the obligation to prove one´s claims by stating that if the prospective buyer has declared (typically in the contract) that he has read the documents referred to in the real estate agency contract, but the circumstances raise serious doubts as to whether this has actually occurred, the real estate agent must instead prove this fact (Section 13 RBA).
Extract from the land registry
In the case of concluding a contract with an interested party for the acquisition of the ownership right to immovable property, or a right which includes or is connected with the right to use or enjoy the immovable property (i.e., a flat or non-residential premises) the real estate broker is obliged to provide the interested party with an extract from the public registry relating to the real estate in question, most often an extract from the ownership certificate of the land registry, no later than on the day of signing the real estate brokerage contract. This extract must not be older than 3 working days before the conclusion of the real estate brokerage contract. The law expressly provides that the extract may also be obtained by remote access to the land registry and attached to the real estate agency contract by simply printing it out.
The consequences of any failure to comply with the legal obligations described above are potentially serious for the real estate broker. In the event of failure to provide an extract from the public registry (land registry), the prospective buyer has the right to withdraw from the real estate brokerage contract within 14 days from the date of conclusion of the contract (Section 11(3) RBA).
If the real estate property is not yet defined at the time of conclusion of the real estate brokerage contract, the real estate brokerage contract may be validly concluded even without the submission of this extract. However, the real estate broker cannot avoid this obligation even in such a case, as it is obligatory to provide the extract from the land registry to the interested party within 14 days from the date when the specific property is known (Section 12(2) RBA). In case of failure to fulfil this obligation, the law allows the interested party to withdraw from the contract without a deadline.
Real estate brokers are therefore advised to always attach the required extract from the land registry, ideally as an annex to the real estate brokerage contract. Should the property not be known at the time of conclusion of the agreement, and the real estate agent therefore only hand over the extract subsequently, it is recommended that the future handover of the extract is always duly documented and confirmed by the signature of the interested party.
However, we remind you that the obligations described above apply only to the situation where the interested party is the buyer or the interested party for the use of the property. In the case of brokerage for the property owner as a seller, landlord or, for example, a lessor, the real estate agent is not obliged for logical reasons to submit any statement.
Information on defects and restrictions
The real estate broker is also obliged to inform the prospective buyer of the ownership right to immovable property or the right which contains or is connected with the right to use or enjoy the immovable property, flat or non-residential premises about specific defects and restrictions which are contained in public registries or those which the real estate broker knew of or should have known about due to his professional competence (Section 12(1) RBA). This information obligation is again imposed on the real estate agent only if the client is the buyer or prospective user of real estate property. Conversely, it does not make sense for a real estate agent to provide information about defects and limitations of the property to its owner.
The relevant information obligation applies to legal defects of the property which are identifiable from the public registry as well as to factual defects of the property or other defects and limitations which are not registered in the land registry, provided that the real estate agent knew or should have known about them.
Legal defects include liens, easements, tenancy or lease rights, pre-emption rights or a notice of disputability or the commencement of foreclosure proceedings. Some of the legal defects are entered in the public registry obligatorily (lien, commencement of execution by sale of the property), others only facultatively (lease or leasehold right). Factual defects are typically defects in the construction of the property or mould in the apartment. If there are hidden defects in the property, the real estate agent is obliged to inform about these defects only if he actually knew or should have known about them due to his professional competence.
From a practical point of view, it may be recommended that the real estate broker should indicate all known defects and limitations directly in the text of the real estate brokerage contract itself, possibly using the attached extract from the land registry.
Again, this information obligation also applies to the fact that if a specific property is not yet identified at the time of negotiation of the real estate agency contract, the real estate agent is obliged to inform the prospective buyer about defects and limitations, as well as to provide him with an extract from the land registry within 14 days from the date when the specific property is known (Section 12(2) RBA).
Failure to comply with the described information obligations within the aforementioned deadlines (depending on the circumstances, either at the latest at the conclusion of the real estate brokerage contract or within 14 days from the date on which the specific real estate property is known), the law again potentially sanctions the real estate broker with the possibility for the interested party to withdraw from the contract without setting a deadline.
In view of the above, the utmost caution can therefore be advised. If a real estate agency contract is negotiated with a prospective buyer for the purchase, lease or leasehold of a property, the real estate agent should approach the imposed information obligation consistently and not only indicate in the text of the contract the defects and limitations arising from the land registry (if any) and attach an extract from the land registry to the contract, but also indicate all other known defects and limitations.
Information on additional commission
As part of the real estate broker’s broad information obligation towards the prospective buyer, the Act also imposes an obligation on the real estate broker to inform the prospective buyer, no later than when concluding the real estate brokerage contract, of the amount or method of determining the commission that the real estate broker in question has negotiated with a third party for the same property before concluding the real estate brokerage contract with the current prospective buyer (Section 12(3) RBA).
It can be deduced from the explanatory memorandum to the RBA that the law does not a priori prohibit a real estate broker from concluding a real estate brokerage contract for the same property with several parties, where a commission will be agreed with each of them (i.e., also with the seller and the buyer for the same apartment); however, it is still necessary to respect the possible obstacle of a conflict of interest of the real estate broker and other general protections contained in the CC.
If the real estate agent does not inform the prospective buyer of the commission already agreed with another person (and of its amount or the method of its determination) at the latest when concluding the real estate agency contract, the prospective buyer is again entitled to withdraw from the contract without setting a deadline.
The Act, through this particular provision, purposely protects the interested party and seeks to ensure the highest possible transparency of real estate brokerage. This can be understood to a certain extent, especially in relations with consumers, however, according to the text of the law, this obligation also applies to relations between entrepreneurs. It is in these relationships that the fulfilment of this obligation is often very sensitive and problematic (e.g., in terms of protecting the commercial confidentiality of the real estate broker or in terms of its competitiveness on the market).
Insurance of the estate agent
An estate agent must be insured throughout the entire period of his/her activity against the obligation to compensate the interested party for damage caused in his professional capacity, at least within the statutory limit of insurance benefit.[5] If the prospective buyer requires a certificate of insurance, the real estate agent is legally obliged to comply with such a request and to provide the prospective buyer with the relevant insurance policy (i.e., a certificate of insurance, not necessarily the entire insurance policy).[6]
Although the law does not stipulate as a condition to include information about real estate brokerage insurance in the contract, it is a good business practice to include a relevant statement in the text of the contract, or to attach the insurance policy as a proof of having taken out the prescribed insurance. In the event that the prospective buyer requests the real estate agent to provide the insurance policy, it is again advisable to document the transfer properly and confirm it with the signature of the prospective buyer.
Exclusive real estate brokerage
Exclusive real estate brokerage is defined in the RBA as an arrangement between a real estate broker and a prospective buyer in respect of a specific property consisting in limiting the prospective buyer’s right to conclude a real estate brokerage contract for the same property with another real estate broker, as well as limiting the prospective buyer’s right to conclude a real estate contract without the real estate broker’s assistance.
However, according to the RBA, an exclusive real estate brokerage arrangement may take effect on the date of conclusion of the real estate brokerage contract at the earliest. It is irrelevant whether the arrangement is made directly in the text of the real estate agency contract or in a separate document concluded between the parties.
Specific obligations in relation to the consumer
The RBA also provides an increased level of protection for consumers in real estate brokerage relationships. If the prospective buyer is a consumer, it is prohibited for a real estate contract to contain an obligation on the buyer to enter a real estate contract or a future real estate contract (e.g., a purchase, lease or tenancy agreement) . Interestingly, the law only explicitly refers to the consumer, however, the current interpretation tends to apply the same prohibition even if the interested party is an entrepreneur.[7]
It is also expressly prohibited that any debt under a real estate agency contract is secured by a promissory note or cheque if the interested party is a consumer (Section 16 RBA). Logically, the legislator wanted to prevent interested parties in the position of a consumer from being forced by the real estate agent to issue these security instruments (typically payment of the real estate agent’s commission). However, the current statutory wording is rather unfortunately formulated much more broadly and, if strictly interpreted, effectively excludes the opposite situation, i.e., that the real estate agent himself secures his own debt to the interested party who is a consumer by means of a promissory note or cheque – i.e., we have doubts whether this may have been the intention of the legislator, but we rather believe that it is the result of a clumsy wording of the law.
Where an exclusive real estate brokerage is negotiated with a prospective consumer, it can only be for a fixed term, and for a maximum of 6 months. This period may be repeatedly extended. However, an extension may be agreed no earlier than 30 days before the expiry of the agreed period (Section 17(4) RBA). If the real estate brokerage that is agreed with the interested party as a consumer is a non-exclusive one, it may be concluded for an indefinite period, however, the notice period may not exceed 1 month (Section 18 RBA).
If an advance payment of the real estate agent’s commission is agreed between the real estate agent and the prospective consumer, it may not exceed 2/3 of the agreed commission (Section 19(3) RBA). It also applies that if the real estate contract, to the conclusion of which the real estate broker ‘s right to a commission was related, was concluded due to inactivity, fault or failure to provide adequate cooperation of the real estate broker after the termination of the obligation under the real estate brokerage contract, the real estate broker has no right to demand a commission from the prospective consumer.
Finally, other limitations and conditions in relation to contractual relations with consumers arising from other legal regulations, in particular from the Civil Code and the Consumer Protection Act, remain valid for real estate brokerage contracts.[8]
Conclusion
The legal regulations introduced by the Real Estate Brokerage Act impose a number of conditions and restrictions on real estate brokers which must be reflected and complied with in relation to the real estate brokerage contract. It is by consistently complying with these legal requirements, typically with regard to the information and documentary obligations of the real estate broker towards the prospective client, that relatively significant negative consequences can be avoided, in particular the possibility of unilateral termination of the contract by the prospective client, and thus the potential loss of the real estate broker’s prospects of obtaining a commission.
Unfortunately, the law itself does not make the situation much easier for real estate brokers, as it is written in a rather unclear and imprecise manner with regard to certain obligations. Another potential criticism of the law can be found in the perhaps overly broad increased protection of the interested party, which the law in some places rather inappropriately grants not only to consumers, for whom such protection can in principle be understood, but also in general, i.e., in relations between entrepreneurs. In our opinion, the increased protection of the interested party in these relationships, on the contrary, seems to be rather artificially imposed and disrespectful of the nature of the business environment – a typical example is the obligation to inform the interested party about an additional commission that the real estate agent has previously negotiated with another person for the property in question.
As a result, it may be quite difficult for a real estate broker to properly comply with all legal requirements in connection with negotiating a real estate brokerage contract with its clients, which certainly cannot be perceived too positively in terms of the practical impact of the subject legal regulation.
Therefore, it will be interesting to see how the gradually emerging case law will approach the interpretation of the problematic provisions of the RBA.
In case of any questions regarding real estate brokerage, real estate law or civil law in general, we are fully at your disposal. Please do not hesitate to contact us at any time.
[1] Act No. 39/2020 Coll., on Real Estate Brokerage and on Amendments to Related Acts (Act on Real Estate Brokerage), as amended.
[2] We therefore logically leave aside the actual legal requirements imposed by the Real Estate Brokerage Act on the performance of real estate brokerage activities.
[3] Act No. 89/2012 Coll., the Civil Code, as amended; in particular Sections 2445 et seq.
[4] See e.g., the judgment of the Municipal Court in Prague of 10 September 2024, No. 54 Co 217/2024-259, or our article: PEYTON legal | Acceptability of simple electronic signatures for legal actions.
[5] At least CZK 1,750,000 for a single insured event and at least CZK 3,500,000 for the concurrence of multiple insured events in one year. If the real estate agent carries out real estate activities only under another real estate agent, the insurance limits are reduced by 50%. Violations of the law at the level of prescribed insurance can be sanctioned as an offence under the RBA with a fine of up to CZK 1,000,000.
[6] At the same time, the real estate broker is obliged to present to the interested party, upon request, also a contract concluded with another real estate broker on whose behalf, or with the unmistakable use of its business name or trademark, the particular real estate broker is authorised to provide real estate brokerage activities.
[7] E.g., PHILIPPI, Tomas. § 14 [Prohibition against imposing an obligation to enter into a brokered contract]. In: PHILIPPI, Tomas. Real Estate Brokerage Act. 1st ed. Prague: C. H. Beck, 2020, p. 104; idem; also the Resolution of the Supreme Court of the Czech Republic of 10 June 2015, Case No. 33 Cdo 5143/2014.
[8] Act No. 634/1992 Coll., on Consumer Protection, as amended.
JUDr. Miloš Kulda, Ph.D., attorney at law – kulda@plegal.cz
Mgr. Karel Janeba, junior lawyer – janeba@plegal.cz
9. 7. 2025