Acquiring Real Estate in Hungary: What Should You Pay Attention To?

The purchase and sale of real estate in Hungary represents a significant market today for citizens of European Union Member States and of states party to the Agreement on the European Economic Area, as they are able to acquire real estate in Hungary with almost no restrictions.

Citizens of Member States may acquire land that is not classified as agricultural land, including residential buildings and commercial buildings, under the same conditions as Hungarian citizens. The legislature permits companies established in Hungary and wholly or partly foreign-owned to acquire land not classified as agricultural land without restriction.

The acquisition of ownership of real estate located in Hungary is generally governed by Hungarian law. Under the Hungarian legal system, the transfer of ownership of real estate requires the parties to conclude a written sale and purchase agreement, countersigned by an attorney admitted in Hungary. In addition, the transfer of ownership must be registered in the land register.

Classification as agricultural or forestry land is not based on the actual use of the land, but depends on the designation recorded in the land register. Since 1 May 2014, under Act CXXII of 2013 on transactions in agricultural and forestry land, citizens of European Union Member States may acquire ownership of agricultural land under the same conditions as Hungarian citizens. However, the Act also sets out various restrictions. Legal persons are excluded from acquiring ownership of agricultural land. A citizen of a Member State who does not qualify as a farmer may acquire ownership of land only if the total area of land already owned by that person, together with the area of the land to be acquired, does not exceed 1 hectare. An exception applies where the transferor is a close relative of the domestic natural person or Member State citizen who does not qualify as a farmer. In that case, the land acquisition limit is 300 hectares. A farmer may acquire ownership of land up to a maximum of 300 hectares, including land already owned and land held under usufruct.

Mandatory registration in the land register:

The buyer acquires ownership of the real estate upon registration in the land register. The application must be submitted to the land registry authority within 30 days of the date of the contract or legal declaration on which the registration is based. If the deadline for submitting the registration application is missed, an administrative fine must be paid.

Duties:

Similarly to the German rules, real estate transfer duty must be paid when ownership of real estate is transferred. The general rate of transfer duty for consideration is 4% up to a market value of HUF 1 billion per property, and 2% on the part of the market value exceeding that amount, subject to a maximum duty of HUF 200 million per property. The acquisition of real estate is exempt from transfer duty if the acquirer builds a residential building on the property within four years from the date on which the contract is submitted for duty assessment. Depending on the location of the property, the owner is also required to pay annual property tax at varying rates.

Payment methods:

When the contract is concluded, the buyer usually pays 20% of the purchase price as an advance payment, and pays the remaining part of the purchase price if the contract is duly performed. In the event of the buyer’s breach of contract, the advance payment is generally retained by the seller. If the seller acts in breach of contract, the seller must pay twice the amount of the advance payment to the buyer.

The purchase price, including the advance payment, is usually deposited with the attorney until registration has been completed.

Acting through a representative:

If you do not wish to conclude the sale and purchase agreement in person in Hungary, you may act through an authorised representative. The content of the power of attorney must also comply with Hungarian law. Accordingly, the power of attorney signed by you must either be countersigned by a notary abroad and furnished with an apostille, certified by the Hungarian embassy or consulate, or countersigned by an attorney registered in Hungary.

In summary, it can be stated that the assistance of an attorney registered in Hungary is the most appropriate solution when acquiring real estate in Hungary. Please feel free to contact us with confidence.