General provisions for the purchase and sale of immoveable property

Under Hungarian law, the purchase and sale contract necessary for the acquisition of immoveable property has to be drawn up in writing and the change of ownership has to be registered in the land register.

 

Nationals of an EU Member State may acquire ownership of immoveable property under the same conditions as Hungarian citizens.

Kulcsszavak: immoveable property, purchase and sale, real register, seller, buyer, foreign, compulsory representation, lawyer, notary public, written documentation, breach

A contract for the purchase and sale of  immoveable property may be concluded for any individual immoveable property. The ownership of apartments, detached houses, holiday homes, farm buildings, and garages can all be acquired in this manner.

 

A purchase offer is not required when purchasing and selling immoveable property. However, if the buyer expresses his/her intent to conclude the contract and also declares his/her position regarding important issues (the amount offered for the property, how payment will be provided), the offer will be considered binding. The party may determine the term for which the offer is binding; in the absence of such provision, the offer will no longer be binding if the other party does not accept the offer. The contract may be concluded once the seller has accepted the offer.

 

The contract for purchase and sale shall include the persons entering into the contract, their intent to transfer ownership, the immoveable property being purchased, and the purchase price.

 

For the ownership to be registered in the land register, the appropriate document has to be drawn up in accordance with the applicable formal and substantive requirements. Among others, the contract shall include, in the case of natural persons, identity information, home address, the exact identification of the immoveable property to be purchased (name of settlement, lot number), the ownership ratio, the exact identification of the right or fact under which the record is created, the legal title of the change, and statements of the parties pertaining to citizenship. The document shall also specify the place and date of execution.

 

Registration in the land register is possible on the basis of a private document countersigned by a lawyer or legal counsel registered with the bar association. The contract for the purchase and sale can also be drawn up by a notary in the form of a public document.

 

Additional special rules are in place for acquiring ownership of land. In this case, a public document drawn up by a notary or the countersignature of a lawyer (legal counsel registered with the bar association) are not enough. The contract for the acquisition of ownership of land has to be drawn up as a document with the separate elements specified in separate legislation, and the contract also has to be approved by the authorities (it has to be endorsed by the agricultural administrative body).

 

The seller may retain ownership until the entire purchase price has been paid in full, which acts as a security for payment. The contract to this effect has to be drawn up in writing and the person of the buyer has to be registered in the land register. In this case, the buyer’s ownership will be registered in the land register only after the purchase price has been paid in full.

 

The payment of a down payment also acts as security. The down payment is the security provided by the buyer in support of the fact that he will pay the entire purchase price by the deadline agreed upon, and binds the seller to refrain from selling the immoveable property to any other interested parties.

 

Special rules may also apply to the registration of ownership by way of purchase and sale, as a right of pre-emption, buyback, or purchase option based on the provisions of a contract or law may restrict this, and negative pledge clauses may restrict the acquisition of immovable immoveable property. For example, if another person has the right of pre-emption over the immoveable property, the purchase and sale agreement shall include the beneficiary’s statement renouncing such right. If a part of the purchase price is financed from a bank loan, the contract for the purchase and sale shall include the parties’ agreement pertaining to the fact that they may cancel the contract only with the written consent of the creditor.

 

A foreign natural person who is not a national of an EU Member State or a foreign legal entity that is not registered in any EU Member State may acquire the ownership of immoveable property only if certain legally specified conditions are met and after an authorisation procedure. Foreign nationals may not acquire ownership of arable land.

A condition for the validity of the purchase and sale agreement is that it be drawn up in writing: the buyer may not acquire ownership on the basis of a verbal agreement.

 

Failure of the party to (adequately) perform the contract constitutes a breach; the breaching party must bear the consequences of its wrongful conduct. Typical breaches of contract by the seller include a refusal to issue the licence for registration, not fulfilling the transfer of immoveable property or not fulfilling such transfer in time, the failure to adequately perform the contract (e.g. failing to vacate the immoveable property), and failing to pay public utility fees. Typical breaches of contract by the buyer include failing to pay instalments of the purchase price or the fees to be borne by the buyer (lawyers’ fees, administrative service fee).

 

If the buyer defaults on any instalment or the entirety of the purchase price (i.e. fails to provide payment by the deadline set out in the contract), the buyer shall be obligated to pay the default interest specified by law (even if the debt was interest-free). The default interest is equal to the base rate on the first day of the given calendar half-year; i.e. currently 0.6 %. Therefore, if a debtor is required to pay its debt by 12 November 2020, it must pay the amount of the debt plus the base rate as of 1 July 2020 as default interest. If the entitled party receives interest under the contract, then in addition to the interest specified in the contract, the default interest amounts to a third of the base rate on the first day of the given calendar half-year.

 

Under the legal nature of the down payment, if the buyer does not buy the immoveable property and does not pay the purchase price, he will lose the entire amount of the down payment. However, if the owner rescinds the contract for any reason, he shall be obligated to pay twice the amount of the down payment to the buyer.

 

Under the act on the order of taxation, a penalty shall be payable for failing to submit the request for registration by the specified deadline.

The request for registration in the land register has to be submitted to the land registry authority (land register department of the district office or, in Budapest, the district land register office) within 30 days of the date of the contract on which the registration is based.

If the consent of a third person or official approval is required for the validity of the contract, the request has to be submitted to the land registry authority within 30 days of such consent or approval having been given.

The land registry authority will not register the buyer’s ownership until the buyer receives the entire amount of the purchase price and the seller has granted its consent for registering the buyer’s ownership.

Legal representation is mandatory in the land register procedure. The lawyer, law firms, legal counsel registered with the bar association, and notary proceeding in representation of the parties are considered legal representatives.

 

The transfer of ownership is recorded on the basis of the request submitted on a form.

 

The request has to be submitted to the land registry authority with competence at the location of the immoveable property.

 

The document that forms the basis of the registration has to be attached to the request in two originals and one copy. In the case of acquisition of the ownership of land, the document endorsed by the agricultural administrative body also has to be attached.

 

As a general rule, the registration has to be requested by the party who gains entitlement as a result (i.e. the buyer).

A fee of HUF 6600 is payable for the land register procedure (for each immoveable property affected by change).

 

The procedural fee for registering mortgages and amending any records is HUF 12 600 (for each immoveable property affected by change).

 

The urgency fee is HUF 10 000 for each immoveable property.

 

In the case of the acquisition of immoveable property by a foreign national, the procedure shall be subject to duty. The fee is equal to HUF 50 000 per immoveable property to be purchased.

 

A fee is payable if the immoveable property is acquired via the payment of a purchase price (duty for the onerous transfer of assets). The payment obligation is incurred on the day of the conclusion of the contract. In general, the rate of the fee is 4 % of the market value of the immoveable property (as unencumbered). If, at the time of purchasing a residence, the buyer sells another residence within the three years prior to the purchase or within one year following the purchase, the basis of the fee is the difference in the values of the purchased and the sold residences.

No appeal may be submitted against the decisions of the land registry authority.

The land registry authority is entitled to correct, supplement, modify, or withdraw its decisions at its own discretion.

Administrative proceedings may be launched against the final decisions of the land registry authority.

In the course of the land registry procedure, the file number of the request for registration (submission) has to be entered on the title deed as at the day of submission; the fact that this has taken place has to be recorded in the submission: this is called the marginal note. The marginal note indicated on the title deed certifies that the land register procedure for registration has been started. The marginal note will be deleted from the title deed upon the transfer of the change in ownership.

 

In the interest of ensuring that the buyer is able to ascertain whether the immoveable property’s ownership is in order, a certified copy of the title deed may be requested from the land register system (Takarnet) in return for an administrative fee. The title deed records the owners, the percentages they own, whether any encumbrances are registered for the immoveable property (e.g. mortgage), and whether there are any legal titles giving rise to claims by any parties.

 

 

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