Real estate acquisition in Hungary
The acquisition of real estate by EU-citizens and citizens of the European Economic Area (EEA) is an important market in Hungary, and is possible to do with a few restrictions. But which restrictions do still apply?
EU-citizens can purchase non-agricultural real estate (residential and commercial) under the same conditions as Hungarian nationals. For legal entities who are registered in Hungary, whether owned partially or in full by foreign or Hungarian parties, the purchase of non-agricultural real estates is possible without obtaining permission, and has no restrictions. The same rules apply for companies from another EU country.
Hungarian law is generally applicable to purchases of Hungarian property, which requires that the transfer of real estate ownership by a written contract, which must be notarized by a lawyer registered in Hungary (so-called “Lawyer’s countersignature”). This means that the Hungarian lawyer must draw up the text of the contract himself and certify the signature himself. However, a signature on the contract can also be certified by another lawyer. A lawyer is also required to appear before the land registrar which is responsible for the registration. Such registration is always required for the transfer of ownership in real estate.
For the classification of any real estate as agricultural or forest land, use of the land for such purpose is not required, but the legal registration is decisive. As of the 1 May 2014, EU citizens can acquire “fertile land” (i.e. agricultural and forestry properties) under the same conditions as Hungarian citizens under the provisions of the so-called “Land Act” (Law No. CXXII of 2013). However, the Land Act contains various restrictions, such as that in principle, legal entities cannot acquire ownership of “fertile land.” Natural persons who are not registered as farmers may only acquire such property up to a maximum area of one hectare (except when the acquiree and transferee are close relatives, as in this case a maximum of 300 hectares of land may be acquired), and registered farmers may only acquire up to an area of 300 hectares.
Mandatory registry by the land registry:
The buyer of real estate obtains the right of ownership after registration in the land registry. The application for registration must be filed within 30 days after conclusion of the contract of sale, otherwise a fine will be imposed. Registration usually takes one to three weeks. A foreigner who is not domiciled in Hungary needs an authorized representative in Hungary, which is often the buyer’s lawyer.
Comparable with the German real estate transfer tax, a so-called “property transfer tax” must be paid on property purchases. In principle, the property transfer tax is up to 4% of the market value, which is not identical to the purchase price of the property. The market value is determined by the tax office and can deviate from the purchase price. If a house is built within 4 years of the purchase of a plot of land, the tax on the acquisition of land may not apply.
The purchase of a real estate is taxed wit 27%; this does not apply, however, between private individuals or in particular exceptions. The annual land tax is determined by each municipality.
The buyer usually pays a sum of up to 20% of the purchase price as a down payment (security) as insurance of his obligation to conclude the contract. If the contract is properly fulfilled, the sum will be deducted from the purchase price. In case of the failure of the contract due to the fault of the buyer, the sum is to be kept by the seller. If the contract fails due to the fault of the seller, the seller may reimburse the buyer double the amount. The purchase price (minus down-payment) is usually deposited with a lawyer until the “marginal note” is registered or the buyer’s registration is approved.
Possibility of representation:
If you intend to purchase a property in Hungary through an authorized representative rather than in person, you will need a power of attorney which is accepted by the Hungarian authorities. The power of attorney signed by you must either be certified by a notary public in your home country and provided with an Apostille, or certified by the Hungarian embassy or consulate, or countersigned by a Hungarian lawyer (even abroad).
In summary, the purchase of a property in Hungary in most of the cases requires a lawyer registered in Hungary.
We are authorized to notarize all documents for the acquisition of a real estate in Hungary for you, even from Germany or any other part of the worldd.
We will be happy to advise you!
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