Charge over a property

How does a charge arise?

By registration in the Land Registry (Cadastre), known as an entry. Signing the charge agreement is not enough; until it is registered, the charge doesn't exist.

The application for registration is filed either by the bank or by you, depending on what you agree. The Land Registry Office charges an administrative fee of CZK 2,000 for accepting the application, for each application filed.

That gives rise to something people underestimate about refinancing: you pay twice. Once to register the new bank's charge, and again to cancel the original one, because cancellation is also done by registration.

What am I allowed to do with the property?

Almost anything. A charge is not a restriction on ownership, it's security for a debt.

You can live in it, let it and sell it. On a sale, you just need to deal with the fact that the buyer doesn't want the property with a charge attached; we cover how this works in practice on the Selling a property with a mortgage page.

What banks ask about: registering a further charge in someone else's favour, an easement, or a long-term lease. All of these reduce the value of the security, so contracts usually make them conditional on the bank's consent.

When does it end?

On cancellation in the Land Registry, not on the final repayment. There is a step between the two that people forget.

Once you've repaid, the bank issues you a confirmation that the debt has ended, called a receipt. With it, you file an application for cancellation and pay the administrative fee. Until you do, the charge stays registered in the Land Registry, even though you owe nothing, and it will surface the first time you try to sell.

What may the bank do if you stop repaying?

Not what most people imagine. The route to selling the security is long, and the law bounds it on both ends.

Before the bank can call in the whole loan, it must ask you to pay the overdue instalment and give you at least thirty days to do so. And even once it does call it in, that only covers the unpaid principal, not interest for years you would no longer be repaying.

Then comes the key point: the bank may only sell the security at the earliest six months after notifying you that it has started to enforce the charge. And throughout that period it must not stop you selling the property yourself and repaying the debt from that.

That difference matters a lot in money terms. Selling it yourself usually brings in more than an auction, and any surplus after repaying the debt is yours. We've written this up on the I can't repay my mortgage page.

Can someone else's property stand as security?

Yes, and for a mortgage without savings it's one of the main routes. It doesn't have to be a relative.

But that person is committing their own property, not just signing for form's sake. If the loan isn't repaid, the bank can pursue both properties. So it's worth agreeing in advance what happens once LTV falls enough that the other property's charge is no longer needed: banks will release it on request, but won't offer to on their own.

What is a second-ranking charge?

A situation where more than one charge sits on the same property. What decides is the order of registration in the Land Registry.

On a sale, the proceeds first satisfy the first-ranking charge, and only the remainder goes to the second. That's why banks insist on first rank, and either won't accept second rank or do so on considerably worse terms. This mostly affects supplementary loans from building savings.