Real estate

A foreign legal or natural person may acquire ownership of real estate other than agricultural and forestry land with the permission of the competent metropolitan and county government office of the location of the real estate.

The permit is not required if the applicant is a 

- national of a Member State of the European Union (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Portugal, Slovakia), 

- a legal person or an organisation without legal personality, or a national of a State party to the Agreement on the European Economic Area (Norway, Liechtenstein, Iceland), a legal person or an organisation without legal personality, or 

- if the applicant is a Swiss national, and, if he(she is a dual national, if one of his nationalities is Hungarian or a national of a Member State, and

- Hungarian nationals living abroad, in the case of acquisition of immovable property and inheritance, and 

- British nationals who exercised their right of residence in Hungary before the end of the transitional period and who continue to reside here after that date are not covered by the definition of foreign natural persons, given that they are considered as nationals of a Member State of the European Union and of a State party to the Agreement on the European Economic Area under an international treaty. 

However, all other British citizens are considered foreign nationals and may acquire real estate in Hungary on the basis of a permit.

To obtain a permit, an application in the form specified in the relevant government decree must be submitted to the government office of the capital and county in which the property is located.
If the applicant is not acting in person, a power of attorney given to a legal representative or other natural person acting on his/her behalf must be attached. 

The power of attorney must state that the power of attorney also applies to the procedure for obtaining a foreign real estate acquisition permit before the Government Office.

The applicant's legal representative is required to use electronic means and must submit the application by e-filing.

The administrative service fee for the procedure will be HUF 65 000 per property in 2025. A foreign natural person who is a person with the right of free movement and residence or long-term residence and has applied for Hungarian citizenship will have to pay an administrative service fee of HUF 13 000 for the procedure for obtaining a permit for the acquisition of his/her residential property.

The acquisition of real estate must be authorised in the default case if the identity of the foreign natural person or the identity of the branch or commercial representation of the foreign legal person can be established with reasonable certainty.

The application must be accompanied by a copy of the applicant's identity card, passport or driving licence certified by a legal representative or notary. In the case of a legal person, the application must be accompanied by a certified or notarised company certificate not more than 21 days old. It must also be accompanied by a certified contract or deed (contract of sale or gift) for the acquisition of the property, which establishes the intention to transfer ownership of the property. In all cases, the contract must comply with the requirements of the new Land Registry Act.

If the applicant is a foreign natural person who has had a registered place of residence, domicile or accommodation in Hungary for at least 5 years continuously and has been employed for at least 3 years in total during this period, a certificate of employment issued by the state tax authority must also be enclosed.

The administrative deadline for the procedure for the acquisition of real estate by foreigners is 45 days. During the approval procedure, the Government Office will check whether the annexes to the application have been submitted. If necessary, the Government Office will invite the applicant to submit a single request for completeness.

The Government Office will obtain a declaration from the municipality in which the property is located as to whether the acquisition of the property is in the interest of the municipality. The Government Office also contacts the National Directorate General for Aliens and the National Police Headquarters to investigate any possible harm to the public interest (deportation, entry and residence ban, arrest warrant) in relation to the foreign natural person.

In addition, in connection with the question of public interest, the Government Office obtains ex officio data on the foreign natural person's criminal record. Once the replies to the requests have been received, the Government Office will decide whether or not to authorise the acquisition of the property.

If the statutory conditions are met, the Government Office will grant the application for acquisition by decision. If the acquisition of the property is contrary to the public interest or the interests of the municipality, the application for the acquisition of the property must be rejected. Administrative proceedings may be brought against the decision within 30 days.

If you have any further questions regarding the acquisition of real estate by foreigners, please contact Ecovis Zalavári Legal Hungary.

This blog article is for information purposes only and does not constitute an official legal opinion or legal position applicable to an individual case. Ecovis Hungary Legal disclaims any legal liability for the use of this blog article in an individual case.

 In real estate transactions, the parties to the contract must agree on the payment schedule for the purchase price. This means that the seller and the buyer must agree on the instalments and the dates on which the buyer must pay the purchase price. They must also specify whether each instalment will be paid in cash or by bank transfer. It is not inconceivable that payment may be made by offsetting the outstanding receivables without any actual cash flow.

In addition to defining the amount of the instalments, the time limit and the form in which the buyer is obliged to pay them, the seller and the buyer must also define the legal title to each instalment.

The  differences between the two types of legal instruments determined in the title can have a significant impact on the legal options available for the performance of a contract. The most common legal titles worth mentioning are down payment and prepayment. 

The simplest task in the explanation is to define the prepayment, because it is nothing more than an instalment of the purchase price, which is not subject to any additional rules compared with the rules on the purchase price. The prepayment and the purchase price instalment therefore mean the same thing. 

However, the rules of the law about the down payment are more detailed and may be more complex. A down payment is a sum of money paid to the seller when it is paid as confirmation of the buyer's obligations under the contract of sale. This amount is normally included in the purchase price and forms part of it, i.e. it is a deduction from the purchase price.

The old rule, which is no longer applicable, is that the deposit must be paid at the time of signing the contract. This is no longer the case. It may be paid as the third or fourth instalment and as an amount to cover the purchase price. Logic dictates that the down payment should be paid by the obliging party in the shortest period following the conclusion of the contract. Only then can the legal consequences of the deposit be applied in the event of a breach of contract If the party responsible for the breach or default forfeits the down payment, if he has given it, he forfeits it, and if he has received it, he must repay twice the amount received 

The most common cases for the loss of a down payment: 

The most common case of a breach of contract on the buyer's side leading to the loss of the down payment is when the buyer fails to pay the purchase price. 

In particular, the question often arises in the context of purchase price payments planned with the use of credit : will the buyer lose the deposit if he is unable to pay the purchase price because the bank has not accepted his application for credit and he is unable to meet his obligation to pay the purchase price due to the lack of bank financing?

The answer to this question is that it is up to the buyer to decide from which financial sources he wishes to finance the purchase price. The loss of access to finance is normally a default by the buyer, i.e. the buyer loses the deposit. 

However If the selling party is cooperative and sufficiently generous, the parties may derogate from this in the contract. It is also clear that neither party is liable for this default. The amount of the down payment will be returned to the buyer at the termination of the contract.

However, a more straightforward way to obtain bank financing is to ask for a preliminary credit assessment from several banks. You can do this before you choose the property you want to buy. 

You will not only find out how much money you have available to buy a home, but you will also be able to compete with cash buyers with this information - that you are creditworthy for the amount you have in hand. 

On the other side of the coin, the reason for a contract to fail can be a lack of information provided tot he buyer about the essential characteristics of the property or even a failure to take possession. 

A common occurrence is the seller's failure to inform the buyer that the property is being built or the construction has been carried out without the appropriate building permit or a permit for use. These can also lead to the buyer being able to withdraw on the grounds of breach of contract by the seller and to the seller being subject to the consequences of a down payment. 

It is also possible that a sale and purchase agreement may be impossible to conclude because of a cause for which neither party is responsible. An example might be if an earthquake causes the property which is the subject of the sale to collapse. The transfer of the property is therefore unfeasible in this case. Thus, the seller cannot be held liable. If the contract is terminated, the buyer will only be refunded the down payment when the contract is settled in this situation. 

If the contract is not performed for reasons for which neither party is responsible or both parties are responsible, the down payment is returned. 

The amount of the down payment is typically 10 percent of the purchase price, but this is not fixed anywhere in law. This may vary depending on the size of the purchase price. It can be 5 or even 30 percent of the agreed purchase price. However, the important to note that if the amount of a down payment set at an excessively high rate, known as an excessive deposit, may be reduced by the court on application by the party liable, i.e. the contracting party who is obliged to pay the deposit. Such a case If the court orders the down payment, it to be paid only in a lower amount. In the case of a down payment paid, only the lower amount is subject to any legal consequences.

The down payment can be seen as a significant sanction in the event that a transaction does not take place due to the fault of one of the parties. 

However, this does not mean that the defaulting party should only have to pay this amount for the damages suffered by the other party. The amount of the down payment reduces the amount of any damages or compensation, but the additional damages or compensation that can be claimed from the at-fault party remain. It may be fixed, that the loss or double payment of the down payment does not relieve you from other consequences of the breach of contract, which may still be enforced against the at-fault party. 

The payment for a waiver (or regret) (in Hungarian „bánatpénz”) means something else The payment for a waiver It is a common mistake when the parties thinks that with the payment or loss of the down payment any party is entitled to rescind from the contract any time. It is a false presumption. Without a proper reason none of the parties can withdraw unilaterally from the agreement. The only chance to terminate without a reason if the contract contains a  payment for a waiver clause which provide an opportunity to rescind unilaterally in case the affected party pays the payment of waiver (or payment of regret).

 If you plan to purchase a real estate in Hungary, contact Dr György Zalavári, lawyer and partner of Ecovis Zalavári Legal Hungary. 

Dr. György Zalavári LL.M.
Ecovis Zalavári Legal Hungary
Lawyer | Mediator | Corporate Law and Data Protection Specialist
gyorgy.zalavari@ecovis.hu

Hungary, with its rich history, vibrant culture, and strategic location in Central Europe, has become an increasingly attractive destination for real estate investors. Whether you are looking for a cozy apartment in Budapest, a picturesque countryside home, or a commercial property, the Hungarian real estate market offers diverse opportunities. This guide will walk you through the essential steps and considerations for purchasing real estate in Hungary.

Understanding the Market 

Before diving into the buying process, it's crucial to understand the Hungarian real estate market. Budapest, the capital, is the most popular area for property investment due to its economic significance and cultural appeal. Other regions, such as the Balaton Lake area and cities like Debrecen and Szeged, also offer promising investment opportunities. 

Legal Regulations for Foreign Ownership 

Foreigners can purchase real estate in Hungary, but there are some restrictions. Non-EU citizens need to obtain a permit from the local government office, which usually takes a few weeks. EU citizens face fewer restrictions and can buy property under similar conditions as Hungarian citizens. You can also buy property via a Hungarian company. Purchasing arable land for a foreigner citizen is strictly limited in several cases and a complicated procedure is required. 

Property Ownership

Hungary recognizes various forms of property ownership, including exclusive, common ownership and condominiums as a mixed type. Exclusive ownership is the most common and provides the buyer with complete ownership of the property and the land it stands on. 

Finding a Property

Several online listings and property portals provide advertisements for real estates in Hungary. Websites like ingatlan.com, otpotthon.hu, realtorlawyers.hu and realestatehungary.hu are popular and provide extensive listings of residential and commercial properties. 

Legal Due Diligence, Technical Property Inspection

Before making an offer, it’s essential to inspect the property thoroughly. Ensure that the property has a clear title and is free from any encumbrances. This step typically involves checking the Land Registry and obtaining a certificate of ownership. It is crucial to engage a real estate lawyer who can check the legal background of the real property and ensure all legal aspects are covered, and represent you in the complete procedure. Make sure to choose an lawyer who is fluent in your in English. Also consider hiring a professional surveyor and architect to assess the property's condition and identify any potential issues. 

Financing the Purchase

Both Hungarian and international banks offer mortgages to foreign buyers. The terms and conditions vary, so it's advisable to compare different offers. Non-residents may face stricter lending criteria and higher interest rates. 

Currency Considerations

Since Hungary uses the Hungarian Forint (HUF), currency exchange rates can impact the purchase cost. It’s wise to monitor exchange rates and consider using a foreign exchange service to lock in favourable rates. 

The Buying Process Once you find a suitable property, you can make an offer. If the seller accepts, a preliminary agreement is signed, and a deposit (usually 10% of the purchase price) is paid when you signed at least a preliminary contract. 

Be careful with the realtors!

  Be aware of signing any documents offered by realtors, they are not entitled to formulate legal documents. Numerous legal cases generated by their false, incorrect or invalid documentation prepared without legal education and right to practice law. Also, realtors’ agreement are often very tricky in Hungary, they often use conditions advantages just for themself and the state attorney office challenges continuously such invalid, abusive realtor engagement agreements in the representation of the public. The big realtor networks are not exceptions, their franchise members are usual defendants in such litigations. 

Instead, contact your lawyer as a first step, they are legally educated and allowed to elaborate legal documents, and it is advised to check with them the realtor’s contract. 

Signing the Contract

The final purchase contract is drafted and countersigned by a lawyer. This contract outlines all terms of the sale, including the purchase price, payment schedule, and transfer date. 

Registration

After signing the contract, the property must be registered with the Land Registry with the assistance of a lawyer. This step officially transfers ownership to the buyer and typically takes a few weeks. 

Costs and Taxes

In addition to the property price, buyers should budget for additional costs, including: - Legal fees: 1-2% of the purchase price - Registration fees: Approximately HUF 6,600 (from the end of July 2024 it is HUF 10,600) - Real estate agent fees: 2-5% of the purchase price  

Duties, taxes

The basic transactional duty associated with real property purchase is 4% of the market value.  The tax authority may alter from the purchase price if it considers it less that the real market value. There may also be other local taxes and fees. 

Renovations and Maintenance If the property requires renovations, hiring local contractors and obtaining necessary permits will be essential. Regular maintenance is also crucial to preserve the property's value. 

Property Management

For investors who do not plan to reside in Hungary, hiring a property management company can be beneficial. These companies handle tenant issues, maintenance, and ensure the property is well-kept. 

Conclusion

Buying real estate in Hungary can be a rewarding investment, offering opportunities in a diverse and growing market. By understanding the local market, navigating the legal landscape, and conducting thorough due diligence, you can make a successful and informed purchase. Whether you're seeking a permanent residence, a vacation home, or an investment property, Hungary's real estate market has something to offer. 

If you plan to purchase a real estate in Hungary, contact Dr György Zalavári, lawyerand partner of Ecovis Zalavári Legal  Hungary. 

Dr. György Zalavári LL.M.
Ecovis Zalavári Legal Hungary
 Lawyer | Mediator | Corporate Law and Data Protection Specialist
gyorgy.zalavari@ecovis.hu