Refusal of a mortgage does not by itself cancel an agreement you have signed. You may withdraw from an agreement only where the law allows it or where you have agreed it, so what matters is whether the agreement contains a financing condition or a right to withdraw if the loan is refused. If it does not, you remain bound, and the seller may demand performance, an agreed contractual penalty or compensation for loss. The sooner you raise the situation with the seller and with other banks, the more options remain.
A buyer signs a reservation agreement, an agreement to conclude a future agreement, or the purchase agreement itself in good faith that the loan will come through, and the bank then refuses the application or approves a lower sum. The seller has meanwhile turned other interested parties away and is waiting for the money. Legally, what matters is exactly what you signed and whether the agreement anticipates such a situation.
The agreement stands even without the loan
The loan is a matter between you and the bank; the agreement with the seller does not automatically depend on it. You may terminate it unilaterally only in the cases the law or the agreement allows:
A party may withdraw from a contract only where this is provided for in this or another act or agreed by the parties.
— Section 48(1) of Act No. 40/1964 Coll. (unofficial English translation)
The first step is therefore to read the agreement and look for two things. A financing condition, that is, a stipulation that the agreement takes effect only if the bank approves the loan; the law calls this a condition precedent (Section 36(2)). Or a right to withdraw if the loan is not approved, often with a time limit and a duty to produce the bank’s refusal. If the agreement contains one of these, follow it exactly, including the time limits and the form of notice.
If you signed an agreement to conclude a future purchase agreement
Under an agreement to conclude a future agreement, you undertook to enter into the purchase agreement within an agreed period. If you do not, the seller may within one year apply to the court for your expression of will to be replaced by a court decision, and may claim compensation for loss alongside that (Section 50a(2)). The obligation does cease if the circumstances on which the parties based it at the time it arose have changed to such an extent that the conclusion of the agreement can no longer fairly be required (subsection (3)). Whether that rule can be applied to a refused loan depends on the circumstances of the particular case, and we do not recommend relying on it without an assessment. If you signed only a reservation agreement, its wording is decisive; what is usually agreed there about the fee is discussed in reservation agreements and reservation fees.
If the purchase agreement has already been signed
If you do not pay the purchase price on time, you are in default, and once an additional reasonable period has expired in vain the seller may withdraw from the agreement (Section 517(1)). If the agreement contains a contractual penalty, it is payable regardless of whether the seller suffered any loss (Section 544(1)); only a party who did not cause the breach is released from the duty to pay it, and then only if the agreement does not provide otherwise (Section 545(3)). Withdrawal cancels the agreement from the outset (Section 48(2)) and the parties return to each other what they received under it (Section 457). If a party withdraws before the decision on registration, the cadastre discontinues the proceedings (Section 31b(1)(b) of the Cadastral Act).
What to do now
Tell the seller without delay what has happened and produce the bank’s position. Check offers from other banks or the possibility of funding the shortfall from your own resources; if the agreement sets a payment date, agree to move it by a written amendment before it passes. If the transaction cannot be saved, it is usually cheaper for both sides to agree on cancelling the agreement and on the fate of the deposit than to litigate.
On your next purchase, agree the financing condition in the very first agreement you sign, including the time limit and what happens to the deposit. We align the purchase agreement with the bank’s conditions as part of our buying a property with a mortgage service, and we prepare a reservation with a financing condition as a reservation agreement.
This answer provides general information on the law as at 12 September 2026. It does not constitute legal services or replace an assessment of an individual case. The details of your situation may differ. Book a consultation to discuss them.
