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Eversheds Global Estate Management

Hungary

Real Estate Guide

Principles of ownership

Principles of ownership

Freehold/Ownership - real estate ownership is governed by the Hungarian Civil Code and the Act on Land Registry. In order to acquire real estate under Hungarian law a sale and purchase agreement is entered into by the seller and the purchaser and the ownership title of the purchaser is registered by the competent Land Registry.

Leasehold - not applicable.

Common hold/Usufruct - not applicable.

Condominium ownership - not applicable.

Utilisation right - not applicable.

Joint/Co-ownership - not applicable.

Registration - in order to acquire ownership of a real estate located in Hungary, the ownership title is to be registered by the Land Registry.

 

Restrictions on foreign ownership

Restrictions on foreign ownership

Acquisition of real estate by foreigners (non-EU natural persons and legal entities) is subject to approval by the Hungarian authorities. This restriction does not apply if the foreigner establishes a company under the Hungarian Companies Act and such company acquires the real estate. EU nationals and legal persons registered in the EU may acquire the ownership of real estate in Hungary under the same conditions applicable to resident persons (without specific permission). Acquisition of agricultural land is prohibited for foreign natural persons and legal entities. In specific cases, the citizens of EU member states may acquire agricultural land in Hungary.

 

Title to real estate

Title to real estate

Investigation of title - is undertaken by the purchaser’s lawyer. If needed, the seller may provide assistance as to the clarification of certain issues that arise during such investigation. In addition to the title investigation a technical survey or an environmental survey is often undertaken by the purchaser.

Transfer of title - not applicable.

Registration - in order to acquire ownership of a real estate located in Hungary, the ownership title is to be registered by the Land Registry.

Information on the Register - the Land Registry is public and provides evidence of title. It contains information regarding the property such as its address, size, property lot number, the name of owners, encumbrances and pending filings concerning the property.

Commercial leases - not applicable.

 

Structure of a real estate transaction

Structure of a real estate transaction

Negotiation of terms/agreement - sale and purchase agreements relating to property are usually negotiated by the sellers’ and the purchasers’ legal advisers, their real estate agents or sometimes the parties themselves.

Heads of terms – not applicable.

Investigation of title - is undertaken by the purchaser’s lawyer. If needed, the seller may provide assistance as to the clarification of certain issues that arise during such investigation. In addition to the title investigation a technical survey or an environmental survey is often undertaken by the purchaser.

Purchase deed - not applicable.

Contracts - real estate sale and purchase agreements are usually prepared by the lawyers of the purchaser and reviewed by the lawyers of the seller. The most often negotiated terms are the timing of the payment of the purchase price by the purchaser, the date when the purchaser may take possession and when the seller issues its permission regarding the registration of the ownership title as well as representations and warranties to be given by the seller. If the acquisition of property takes place through the acquisition of a company owning property, the contract is a share or quota sale and the purchase agreement and the representations and warranties refer not only to the property but to other issues relating to the target company.

Completion/closing - the real estate transaction is completed when the parties have executed the sale agreement, the purchaser has paid the purchase price, has taken possession of the property, the seller has given its permission regarding the registration of the purchaser’s ownership title and the application regarding the registration of the ownership title has been filed with the Land Registry. In cases when the real estate transaction takes place through the acquisition of a company owning property, the transaction completes when the purchaser pays the purchase price for the shares or quotas of the target company and the seller transfers ownership of the shares or quotas to the purchaser.

Post completion - after completion if the property is acquired, stamp duty is to be paid by the purchaser (if the acquisition takes place through the acquisition of a company this payment obligation exists only subject to specific conditions), and the Land Registry registers the ownership title of the purchaser.

Leases - not applicable.

Transfer of ownership of lease property (alienation) - under the Civil Code the tenant may sublease the property unless the landlord prohibits such sublease in the lease agreement.

Language requirement – not applicable.

Governance of lease signature/administration – not applicable.

 

Usual commercial lease terms

Usual commercial lease terms

Summary of available lease types - not applicable.

Alterations/modifications - the lease agreement usually contains provisions regarding what alterations the tenant may make and whether at the end of the lease the property should be returned with or without such alterations.

Assignment and sub/under letting - not applicable.

Destruction/reinstatement - under the Civil Code the tenant may sublease the property unless the landlord prohibits such sublease in the lease agreement.

Duration of lease - the lease agreement may be concluded for a definite or indefinite term. In case of definite term lease agreements, the length of the commercial lease term is to be agreed by the parties. Hungarian law does not contain any restrictions regarding the length of the term.

Forfeiture/irritancy - not applicable.

Insurance - the lease agreement usually requires the tenant to purchase insurance covering the main risks to the property. The tenant is also usually obliged under the lease agreement to prove to the landlord that the insurance is being properly paid and maintained.

Rent review - the rent is usually indexed to Hungarian inflation rates published by the Hungarian Statistical Office or set in Euros or other stable foreign currencies.

Repair/decoration/furnishing - it is the landlord's obligation to ensure that the leased property may be used by the tenant as agreed in the lease agreement.

Service charges - the lease agreement stipulates what services the rental fee covers and what other services, if any, may be used by the tenant for a service charge payable to the landlord.

Tenant’s duties - not applicable.

Termination/break clauses - lease agreements are either for a definite or indefinite term. Definite term lease agreements may usually only be terminated for breach of contract. Indefinite term lease agreements usually have termination clauses giving the right to both parties to terminate the lease agreement with an agreed notice period.

 

Increasing covenant strength

Increasing covenant strength

Lease deposit - lease agreements often require a deposit of three to six months rent to be paid by the tenant as a security for the landlord in case any breach of contract by the tenant causes loss to the landlord.

Surety - sureties are not used very often in commercial lease agreements.

Warranty - not applicable.

Rent deposit/bank guarantee - lease agreements often require a deposit of three to six months rent to be paid by the tenant as a security for the landlord in case breach of contract by the tenant causes loss to the landlord. The bank guarantee is also used as a security instead of a deposit in commercial lease agreements.

 

Security of tenure

Security of tenure

The lease agreement may give the right to the tenant to extend the lease agreement for an additional agreed term by sending a notice to the landlord to this effect by a deadline set by the parties.

 

Taxes

Taxes

On sale/acquisition of real estate - the acquisition of real estate is subject to VAT. The acquisition of residential buildings is subject to VAT only at the first sale after construction.

Immovable property tax - not applicable.

Income tax - not applicable.

Land tax - not applicable.

Lease tax - not applicable.

Local tax - not applicable.

Mortgage - not applicable.

Other taxes - not applicable.

Property lease tax - not applicable.

Value added tax - see above regarding acquisitions

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