Key Changes Introduced by Hungary’s New Land Registry Act

The greatest change affecting the Hungarian real estate market is the entry into force in 2024 of the new Act on the Land Registry (New Land Registry Act). The New Land Registry Act will replace the currently effective Act on the Land Registry and, at the same time, amend the provisions of the Civil Code relating to the land registry. The question therefore arises as to what innovations, not previously applied in real estate law, will be introduced by the provisions entering into force, according to the current position, on 1 February 2024.

The objectives behind the adoption of the New Land Registry Act include, among others, making the former land registry system more competitive through digitalisation. The legislature intends to achieve this by replacing the current paper-based administration with a faster electronic procedure. The expanded institution of automated decision-making serves to support this wider digitalisation; until now, this procedural mechanism had only been applied in connection with the provision of title deed copies. Following the entry into force of the new act, however, the New Land Registry Act will be connected to other authentic electronic public registers, meaning that in certain cases all information required for an automated decision will be available. Based on the general rule of the Act on General Public Administration Procedures, the authority will have no more than 24 hours to issue such a decision.

In the handling of legal transactions, the new act favours the use of electronic powers of attorney — our law firm also uses such an electronic signature programme, as a pioneer in e-lawyer services in Hungary — since applications submitted with an electronic power of attorney may be assessed more quickly, without human case-handling activity, within the framework of the automated decision-making procedure concerning the content of the land registry application. In order to speed up administration and make the process as convenient as possible — clients do not need to leave their homes, as they can sign contracts electronically from home — we also make available to our clients the software used by us that is capable of generating qualified electronic signatures.

Under the provisions of the currently effective Hungarian Civil Code, it was not possible to establish separate and independent prohibitions on alienation and encumbrance over real property; only a prohibition on alienation could be established. Among the many further novelties, the draft legislation introduces as a new feature that, upon the entry into force of the provisions of the New Land Registry Act, the Civil Code will be amended so that from 2024 such rights may also be recorded independently of one another, while retaining the possibility of establishing them jointly. Accordingly, a prohibition on encumbrance may newly be recorded on its own, meaning that the transfer of the property will not be prevented, but any encumbrance of the property will be subject to the consent of the holder of the prohibition.

As a result of the legislative amendment, the institution of retention of title will also be supplemented. Previously, it only reflected the seller’s right to retain ownership until the purchase price has been paid in full. Following the amendment of this section, however, the protection of the buyer’s right will also receive particular emphasis. According to the statutory wording, during the period of retention of title, the seller may not impair the buyer’s right to acquire ownership without the buyer’s consent. Thus, while the seller retains ownership until the purchase price has been paid in full, the seller’s ability to dispose of the retained ownership will be limited, and the seller may not infringe the buyer’s right without the buyer’s consent.

Should you have any questions regarding real estate matters or require assistance, please feel free to contact NZP NAGY LEGAL law firm through any of the contact details provided on our website.