How to buy a House in Hungary - Juridical Information of Magyar Kúria

About the purchase of real estate in Hungary there are a lot of remarkable tales. The most important first: we only offer real estates that may be bought by foreign private persons. Further we will give you some legal advises about the financial circumstances, because they are also part of the legal purchase.

Will this information only be valid until Hungary joins the European Union?

When Hungary joins the European Union the rules about purchase of real estate will not be changed. It is not possible to say when the market will be liberalised completely, because this is depending on the development of the market. The date for complete liberalisation should be May 1st 2014, but the Hungarian government passed a law, that does not obey this European rule. However, EEA* citizens don't need a permit for purchasing real estate any more since 2009, just in case of agricultural ground there is a permit needed.

May foreigners by real estates in Hungary?

Yes! Already in the beginning of the 90´s foreigners were allowed to purchase real estate with governmental permission. This permission was given according tot difficult comprehensive rules and there was no juridical review. This changed already 1996, when a law passed that allowed foreign private persons to buy real estates and also regulated the procedure and the legal rights about it

May a foreigner buy all real estates?

"Everything, with the exception of" is the answer. The forbidden and limited real estates are:

Buying agricultural real estates is nearly impossible, it is not important whether the entire estate has an agricultural zoning or only a part. Without being a farmer the maximal surface is limited to 1 ha (2 1/2 acres). This limit is not ment for one single estate, but foor entire Hungary. There are exceptions for registered farmes living in Hungary. In all cases you need a permit to buy and quite a list of persons and institutions have the right of first refusal - in all cases determined by law. Being foreigner in Hungary you better don't even try to buy agricultural estates.

So you can buy everything in the "inner area" of a community what does not qualify as agricultural ground, as well as houses in the "outer area" can be excepted from the list of forbidden real estate. In the "inner area" is no limitation of the surface.

How does the Hungarian State control these rules?

In 2009 and 2014 there took place important changes in law regulating foreign purchase of real estate:

Foreigners with the nationality of an EEA* member state do not need a permit to purchase a property anymore, except for buying agricultural ground.. That does not mean that EEA-citizens may buy all kinds of real estate, even this is unfortunately reported from time to time. The restrictions you find here above remain unchanged. Instead of a formal permission the land registration offices will take care of the restrictions. Already since 2004 EEA-citizens were allowed to buy without permission along this regulation if they wanted to immigrate to Hungary. Restrictions will remain after 2014 as well, although the EU contract doesn't allow any limitation after April 30th 2014. Our experience with the land registration offices are that they are stricter in interpretation of the law and thus buying of a few properties will be impossible, which were previously permitted. This leads to the distorted situation that non-EEA-citizens are able to purchase these certain real estates by getting permission, while these estates are de facto for EEA-citizens no longer available.

For foreigners with other nationalities nothing will change, all their purchases need permission. First of all the responsible community will be asked to agree with the transaction. We don't want to tell you all the bureaucratic circumstances, so we only tell you the essentials. Also here we find a difference between the inner and outer area. For the inner area the community needs an important reason to object the permission. In the outer area every reason is enough to object. In the next step the komitat (county) has to give permission. First the komitat checks the documents of the community. Then the pure legal circumstances are verified. Important is here not only to verify the legal possibility to purchase the property, but also the possible objection of the community. When the community agreed is this won't be checked, because the komitat has not to take over the controlling task of the community. But if the community objected the komitat has to verify the reasons for objection and is allowed to permit when the community's reasons are not legal. Citizens of these states are not allowed to buy any agricultural ground except a tanya (isolated farmhouse) with less than 1 hectare (2 1/2 ares) ground.

Last but not least is the judge can review the objection of the komitat.

How and when my property will be registered?

Every property in Hungary is registered by the state. Directly after the completion of the purchase contract one of its copies will be sent to the land registration office and the contract will be remarked on top of the deed. Everyone has access to this information and so a second sale is impossible. According to the contract's conditions the purchase price - possibly after deducting an already paid deposit - will be paid to the seller, who signs a receipt, which also includes a written note that there are no longer any reasons not to transfer the ownership of the property. In case a permission is needed the (rest of the) purchase price will only be paid after issue of the permission. All documents are handed over to the land and ownership of the property will be changed into the buyer's name. This usually takes several weeks. .

What are the practical consequences of the permission procedure?

First of all every contract about real estates - as long as not permission free - is not valid! For becoming valid the permissions are needed. So the price - except the pre-payment of course - is paid only when the komitat agreed and also the use of the real estate will be handed over after all permissions are available. That also means that nobody but the buyer has any rights on payment or house, when the permissions are objected and the pre-payment has to be handed back.

Pre-contract or sales and purchase contract?

First of all, both contracts must be certified, a simple sheet of paper or even an oral preliminary contract is invalid! The situation is completely different to contracts with real estate agents, which are always valid - even if the buyer should change his mind later.

Generally pre-contracts are completely unnecessary. Exceptions prove the rule: if there is a need of changing the registration of a property Property (eg a newly built house still needs to be registered in the deed) or there are problems in the person of the buyer (eg the company that will be the buyer, is not yet registered in the company register), then a pre-contract makes sense. Thus, the parties are at least financially bound by the deposit (see also the chapter on your money) and the obstacles that stand in the way of a sales and purchase contract, can be eliminated.

The sales and purchase contract is the central document. Only with this property may be sold and purchased. Only in his payments, payment terms, delivery date and many others can be finally agreed. Only with a sales and purchase contract, the lawyer may apply for blocking the land register against further transactions. Along with the receipt of the purchase price is the sales and purchase contract valid proof of transfer of ownership, which is required by the land registry office for the registration of the new owner. Transactions requiring approval the sales and purchase contract is a y to apply for the permission and thereafter the permission must be submitted to the land registry office.

The roles of notary and lawyer

The responsibilities of the notary and a lawyer in Hungary are regulated very differently than you might know from home. The notary only plays a role in case of applying permission and performs a single act; he makes copies of the passport of the buyer and certifies being a true copy. The sales and purchase contract - and also the eventual pre-contract - has to be certified by the lawyer.

Everybody who does not certify any contract about a property by a lawyer is acting unlawfully and may be fined. However, there is an entirely legal possibility to be represented at the moment of signing of a contract, but this requires also a notarized power of attorney. As long as there are no important reasons, we advise you to sign any contracts personally.

Notaries can further take part in case of sellers who are limited in regulating their personal affairs by law or other kinds of purchase, for example in case of an inheritance.

What happens with my money?

It is very important to pay everything along the deposit account of the lawyer's office. Only using this way you know that the lawyer spreads all the money according to the contract, when you pay to the seller you never know who has the right to get which amount at that moment and you don't know what is happening with your money. Never pay anything to any real estate agent - except the fees for their services of course.

Pre-payment or full of the purchase price? Most sales do not require a permission. In these cases the entire purchase price can be paid in a lump sum without any problems. This shortens the process and saves bank charges. The situation is different when a purchase requires permission. Especially when talking about agricultural ground, the the approval is completely uncertain, while the purchase of a residential building or a building plot by non-EEA national is unproblematic. In any case, only a small fraction of the price should be paid before getting permission. Of course the buyer is completely free to send all of the money to the lawyer, who will manage the further details - the benefits already mentioned can be realised this way. Of course, in practice there are cases that the buyer hasn't liquid money before when signing the contract and cannot transfer the entire purchase price at once. In this case a prepayment is also advisable, even if it is only for financial reasons and not for legal reasons.

Eventually the first will be a pre-payment handed over to the seller. Because contracts in Hungary may be ended without limitation are financial consequences very important. The Hungarian law takes therefore the pre-payment. However, an exception to this arbitrariness is the sale and purchase of real estate. It can be sued out of to comply. Often it is not worth the effort and the case will result in the penalty. The choice is to the loyal party. This amount the seller may keep when the buyer doesn't go on buying. There against the pre-payment has to be handed back twice when the seller ends the contract. For a less responsible contractual partner the pre-payment should be chosen higher. However, you can also have dissolving conditions in the contract, then a contract end without penalty or possible juridical action, as soon as this condition occurs. Think for instance about a clause on a bank financing and no bank finances.

*EEA: European Economic Area with as members Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and United Kingdom



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